openerp-expert-accounting team mailing list archive

["Alain Rivet" <alain.rivet@xxxxxxxxxxx>]

Hi Davide,

It's standard in big packages. I can explain the methodology but it's a long
way to develop it !

Here, I will present the profitability point of view. It's part of your
problem. The other part is product costing what you partially described (I
can describe the technical point of view later if there is a need). 

>From my point of view, you are right, it's technically not possible, at the
moment, with the actual analytic way of working of OpenERP. 
The first step : it's mandatory to use a debit/credit posting in all
analytic postings & not unbalanced posting as done at the moment (timesheet
posting for example).
The second step is to have a completed product costing solution, what's not
the case what I saw (I'm still learning, sorry if I write something wrong). 

To tell it very simply, the profitability analysis methodology needs a very
completed cost/incomes follow up for all activities. 

Each time, you will sell something, you will post it in accounting, of
course, but in parallel, you will also fill a specific analytical database
structure (partially in BI) in with different information's.

The goals are to be able to define :
 
1. the brut margin in real time
2. the net margin at the closing time when you can distribute the real
indirect cost on each sales order (an approximation of the net margin in
real time is possible but I will stay on a simple description in a first
time)

>From a mathematical point of view it's very simple : 

 + sales price
 - Cost price of the sold material (production cost or purchase cost)
 - transport cost
 - commissions (perhaps)
 - Other possible identified direct costs 
 - (indirect possible ****)
 _______________________________

 = Brut margin

 - indirect cost (to distribute according rules when doing the closing****)
 _______________________________

 = Net Margin
 

**** It's possible to distribute a pre-calculate theoretical indirect cost
in real time (using overheads based on statistical figures) & to correct it
at the closing 

To be usefull for marketing & sales analysis, you will also need the
"non-valuable" caracteristics of your sales :
  
- product name / quantity / packaging/ Tax ...
- Customer name / country / category /
- Used price list
- Linked provider that realize some the operation (commissioner, carriers,
...)
- Who was actor of the sales in the company at different level ...

For example, I take an simplified example base on a standard flow currently
working in OpenERP : 

We sell only services, we use the flow "invoice on timesheet whith
contracts", it means that an employee should have a rate (what's defined in
the contract) but also a cost center from where you will take the cost (&
where all his HR costs will be post) to transfer it to the sales cost center
(linked to the project parent of the task).

1.  So each time he fill a task with time, he will take the cost from his HR
posting cost center to transfer it to the sales cost center.
2.a When you will invoice its activities, you will have the revenues & the
cost on the same cost center.
2.b You activate BI to register all the values & characteristics for further
analyses.
2.C The sales manager can verify/analyse the brut margin of the sale.
3.  At month end, when you pay his wages, you post its costs. You will be
able to see the difference between what he really costs & what was consumed
on tasks
4.  This difference ("non consumed time") becomes an "indirect costs". Asset
depreciation, Office hire or the top manager wages are also indirect costs 
5.A We will distribute the indirect cost on all the sales costs centers
according predefined rules.
5.B The BI structure is completed 
6.  Only the sales cost centers still have costs & revenues. All the other
cost centers are balanced.
7.  The management can have the final analysis on the full cost & revenues
of the closed period for each sale, they can verify & analyse profitability.

It's a very powerful profitability analysis & marketing tool. 

>From my belief en looking to the different ERP's, it's still one of the main
argument to buy SAP in big companies !  If we build that kind of tool in
OpenERP, it should be an accelerator to increase our market part.

Regards
Alain


Alain Rivet
Partner
High-SEA scrl
alain.rivet@xxxxxxxxxxx
+32 476 328 784

Av Voltaire, 3
1300 Wavre
Belgium
www.high-sea.be

-----Message d'origine-----
De :
openerp-expert-accounting-bounces+alain.rivet=high-sea.be@xxxxxxxxxxxxxxxxxx
t
[mailto:openerp-expert-accounting-bounces+alain.rivet=high-sea.be@xxxxxxxxxx
chpad.net] De la part de Davide Corio
Envoyé : samedi 10 avril 2010 13:05
À : openerp-expert-accounting@xxxxxxxxxxxxxxxxxxx
Objet : [Openerp-expert-accounting] Indirect costs

Hi experts,

IMO, one of the big lacks of openerp accounting is the absence of the
"Full Cost" management: 

http://en.wikipedia.org/wiki/Full_cost_accounting

We can compute administrative costs using analytic accounting, B.I. and
so on, but there's no way to split those costs and all of the indirect
costs on the final price of goods.

Big companies usually follow market trends to determine the price of a
product but... SMEs often try to sell their goods by splitting indirect
costs on the production costs in order to have a precise profit and to
be sure they have enough money to the pay the bills and salaries every
months.

Let me give you an example.

John produces screws.
It has a secretary, a phone line, a car, an office, etc etc...

His main goal is to give the secretary a salary, pay the office/car
rents, pay the bills...and finally buy a new gold ring for his wife.

He knows the production costs for a single screw is 0.1 USD and he wants
to make a profit of 0.05 USD for every screw.

So he can apply a mark-up on the production cost, but...

He doesn't know what's the real profit because he cannot split the
indirect costs (rents, bills, ...) on that 0.1 USD.

At the moment, IMO, there's no way to compute this value with OpenERP.
Every ERP or accounting software i tried before lets you compute the
list price of a product taking care of indirect costs.

Any ideas?
Did someone already thought about this problem?
 

-- 
Davide Corio
email: davide.corio<at>domsense.com
web: http://www.domsense.com


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