[I had to edit this post on April 01, 2008. And no, it’s not April Fool’s Prank]
Have you ever wondered how manufacturing scrap works? Or what it really is? It’s an interesting topic, and yet a very confusing one. It has caused so many headaches to the project team I worked on recently, because nobody really understood it. So, what is manufacturing scrap?
Due to fluctuations in market prices, purchase cost of goods may vary from one purchase to another. Also, you rarely just purchase goods and immediately sell them in the same quantity. What you usually do is that you purchase the goods, then let them sit in the inventory for a while, then you may sell five different purchases all at once, or you may sell goods from one purchase to five different customers.
All of these situations have different effects on your inventory value, because something else must be taken into account: cost flow. Regardless of the inventory valuation method you chose, whenever you take an item from the inventory, how do you know its cost? Without knowing its cost, you can’t know the cost of goods sold, so you better know your cost. Don’t tell me you stick the purchase price to each item, so that you can know exactly how much it cost whenever you are about to sell it, because accountants won’t subscribe to the idea.
When you buy a sheep, how much is it worth to you, what is its value? For starters, its value is at least what you paid for it, but that’s not quite it. Say you paid a hundred dollars for it. If you want to sell it now, how do you determine your selling price? A hundred-twenty? A hundred-fifty? Obviously, you need to increase the price by some percentage over whatever you paid initially, but regardless of what you increase your price, if you don’t know your true costs, you might be at loss.
Unless you are a non-profit, the point of the business is making money. It is surprising how many different ways of making money there are out there, but if you are in business, it is extremely likely that you make the money the easiest and the most common way around: by selling goods.
There are many ways goods come to be, but from perspective of a single business goods can be either purchased, or manufactured. But even companies manufacturing the goods they sell have to somehow get hold of the raw materials used to produce their goods. The most common way to get the raw materials for your manufactured goods is to purchase them. So in the end of the day it comes down to the simple fact that the most common way of making money is by purchasing and selling goods.
There is really nothing special with this post. I just wanted to let you know that I updated my About page, and I added some more information to the sidebar to the right. Nothing spectacular, but I hope all of this would both help you know me better, and also help you get in touch with me otherwise than posting comments here.
While I must admit I seem somewhat lazy lately, with no relevant posts whatsoever, there is some real stuff coming soon. For now, I’m finished with face-lifting, and nothing serious is going to happen to this blog from presentation perspective, at least not until I move it to its own domain, which is something I plan to do soon. See you later!
I decided to upgrade the look and feel of this blog, so I start with the new header picture. I am not a designer, and I don’t have a clue about why graphics are good or bad, I just have a gut feeling which tells me what is nice, and what is not. This one looks nicer to me, and leaves some room at the bottom to implement page navigation later on. If you think the old one was better, please let me know, I value your opinion as much as my own 🙂
This is just a first step in facelifting this blog with new look and feel, new navigation, new information, etc. As most of other things here, neither will this come all at once, but please be patient, and stop by frequently.
And last but not least, thank you all for making this blog alive, for reading it, commenting on it, giving suggestions and opinions. I’ve never thought this blog would live long enough to see this kind of traffic and interest, so this blog is what it is as much because of you, as it is because of me!
Last time, I gave you a recipe on how to do a bad thing. If you really need to do something bad, I figure it’s better to do it the way that would hurt the least, or the way that isn’t so bad after all. I wouldn’t have dreamt of a comment on that blog post, but Ian came, and gave the perfect example which really explains why things like that *ARE* bad. Funny thing is, how many customers really go for such a requirement, and even funnier, how many consultancies give in. I gave in once, most of you probably did. But, why are mandatory fields so bad after all?
Microsoft Dynamics NAV has a very consistent user interface, that helps user get used to it pretty fast. Yet it has its own ways, that aren’t so intuitive to most of typical business application users. There is one specific feature which causes a lot of confusion, especially with those users only starting to use NAV. It’s the data persistence: as soon as you enter something in a form, it is automatically saved, you don’t need to press any Save button. Nor is there any Cancel button to forget the changes entered.
Running a business using only accounting data can be pretty much the same as driving a car using rear-view mirror only. The purpose of accounting is to provide accurate and reliable overview of financial situation to interested parties. What this financial overview consists of is the stuff that has happened in the past, in other words: history. However, there are many drivers of business success other than just history of events that contributed to wherever you are at the moment.
When referring to their ERP systems, it is pretty common that customers refer to it as accounting software. While it is true that every ERP system embeds some accounting functionality, there is a major difference between these two categories of software. It starts with two things: what computers are good at, and the goal of accounting as a discipline.