ACCOUNTING for the
“NON-ACCOUNTING
PROFESSIONALS”
By:
Tom Dlugopolski-President
Thomas Business Solutions, Inc.
Presented To:
Membership and Guests
Building a Business Cass for all
Quality Initiatives
A.
Do we have knowledge of the Business Units
Major Problems or Opportunities?
1.
2.
3.
4.
5.
Capital Utilization Costs
Finished Goods Inventory
Improvement in throughput postpones
improvement in capacity
Reduce downtime of production equipment and
eliminate late shipments
Warranty Costs
Building a Business Cass for all
Quality Initiatives
B.
Financial Ratios Analysis
(Does the Company have problems &/or opportunities? If so, where?
1.
Net Working Capital
(Current assets less Current liabilities)
2.
Accounts Receivable Turnover
(Net Sales divided by average Accounts Receivable)
3.
Average Collection Period
(365 days divided by accounts receivable turnover)
Building a Business Cass for all
Quality Initiatives
B.
Financial Ratios Analysis (cont.)
(Does the Company have problems &/or opportunities? If so, where?
4.
Inventory Turnover Rate
(cost of goods sold divided by Av. Inv.)
5.
Gross Profit Margin
(gross profit divided by net sales)
6.
Return on Total Assets
(net income divided by Average total assets)
7.
Earnings per Share
(net income divided by number common stock shares outstanding)
Building a Business Cass for all
Quality Initiatives
C.
How is the Accounting Dept. interacting with
other functions within the Business?
ACCOUNTING
PlantMgt.
-Budgets
-Lead Teams
-Mat’ls.
-Internal Audit
Quality
-Dept.Budget
-Cust.Compla.
ACCOUNTING
Research & Development
-Cost Analysis of Product
Administrative Svs.
-Customer Serv.
-Scheduling
-Human Resour.
Manufacturing
-Production
-Process Engrg.
-Shipping & Rec.
Facilities
-Engineering
-Maintenance
Cost of Quality (COQ) Definitions
A.
Price of Conformance (POC)
(e.g.) inspection, calibration certs, gage R&R
(Reproducibility & Repeatability)
B.
Price of Nonconformance (PONC)
(e.g.) scrap, rework, delivery delays, etc.
Cost of Quality Categories
A. Preventive Costs
1.
Marketing Research
2.
Customer & user perception surveys/clinics
3.
Contract & Document review
4.
Purchasing
5.
Operations
Cost of Quality Categories (cont.)
B. Appraisal Costs
1.
External
2.
Purchasing
3.
Operations
Cost of Quality Categories (cont.)
C. Internal Failure Costs
1.
Purchasing
2.
Operations
Cost of Quality Categories (cont.)
D. External Failure Costs
1.
Customer Complaints
2.
Returned Goods
3.
Recalls
4.
Liability
COQ Collection
& Implementation-Plan
A. Reference Activity Based Accounting (ABCM)
1. Highly effective management tool for accurate process costing
as well as identifying the quantifying improvement
opportunities.
2. Starts from the premise, as individuals, we make choices.
3. Choices create or eliminate activities that consume resources.
4. Resources cost time & money can be tracked to activities
through processes.
5. ABCM-change the way you do business, helps you to indentify
costs of quality items and cost reduction opportunities as well
as actually do something about them.
COQ Collection
& Implementation Plan (cont.)
B. Traditional Collection System Design
1. Measurement of quality costs an accounting
function.
2. Development of the collection system requires
close interaction of the Quality & Accounting
departments.
COQ Collection
& Implementation Plan (cont.)
C. Development of the System
–
–
–
Estimates used to allocate the proportion of an
activity charged to a particular quality cost
element.
Controllers office must be directly involved in the
design of the collection system.
Quality costs should be collected by product line,
projects, departments, operators, nonconformity
classification, & work centers.
Don’t Be Defensive About The COQ
A. If in Doubt Put It In
B. Develop trends
C. Quality Profession opportunity
D. Eliminate Costs
End of Presentation


Q&A
Contact Information
Tom Dlugopolski
email:
TomD@tbsinc.biz
Phone:
540-798-3515