DIf you do a search for “what are cost codes,” you’ll turn up descriptions from a dozen different companies ranging from accounting software (Oracle and Sage) to construction company blogs. So I think it’s time for a multiple-part series on cost codes. Cost codes are a tool for tracking costs within a company. As some people use Mint’s categories to track how much they spend on dining out or groceries, cost codes allow a company to track how much they spend on Modules or Inverters.
What Are They?
As a tool, cost codes are more than just seeing how much you spent on Modules last month or on each project. They allow you to see the trends within that category, compare and contrast between projects, and allocate costs in a budget for the team to compare to as the project progresses. An example of that last point: when the procurement department goes to purchase the modules for a project, they can review the module cost code under budget to see what pricing they have to work with.
Benefits and Pitfalls
Let’s first talk about the benefits and pitfalls. Then we can discuss how different software handles it. Soon, I’m going to tap into strategies for using cost codes. After this series, you will understand why cost codes are important. And, you’ll have strong direction for implementing cost codes in your own work. There are different ways to track cost codes too. The Wikipedia article about Job Costing sheds some good light on that. Cost codes are the buckets in which you capture costs from a job. Job Costing is the strategy.
I’ll see you next week to talk about the benefits and pitfalls of cost codes.
In the meantime, let me know what you think by dropping a comment in this post. Do you have a way of tracking costs that doesn’t involve cost codes? Also, if you found this post helpful, let me know. And, share it with someone else who might find it useful! See you next week!