A manufacturing company is a unique type of business
A manufacturing company is a unique type of business. The process of combining materials, labor, and subcontract services to produce products in a time-phased manner is incredibly complex.
You need our financial transfer capability because it gives you a unique set of accounting tools that fits the unique nature of your business and enables you to reach your full efficiency potential.
There are two sides to a manufacturing business
There are two sides to a manufacturing business – the manufacturing side and the administrative and financial side.
•The manufacturing side of your business incorporates all the activities involved in ordering, making, and shipping your products or those you make on behalf of others.
•The administrative and financial side of your business incorporates all your other activities, including marketing, office administration, R & D, and financial processes.
With DBA you use two accounting systems
With DBA you use two accounting systems, each running its own side of the business.
•DBA’s accounting system runs the manufacturing side of your business and accounts for all transactions related to inventory, purchasing, jobs, and sales orders.
•Your financial accounting system runs the administrative and financial side of your business and accounts for all transactions related to banking, receivables, payables, marketing, general, and administrative expenses, and payroll.
You get a “best of breed” solution
Each accounting system is ideally suited for managing its side of the business.
•DBA’s accounting system is highly specialized for manufacturing management. It includes features such as WIP accounting and absorption costing that are not available with general accounting systems.
•Any general accounting system can be used to manage administrative and financial functions. All the mainstream small business accounting packages are highly capable at handling financial processes and reporting.
The combined use of two accounting systems, each ideally suited to manage its own side of the business, gives you a “best of breed” solution with more capabilities than any single accounting system can offer.
WIP accounting and absorption costing are essential
DBA gives you WIP accounting and absorption costing, which are essential to a manufacturing business because it is the only way to achieve accurate product costs for manufactured items. This type of accounting can only be achieved using work centers with hourly rates for labor and overhead, routings, and jobs.
Work center hourly rates are applied to standard or actual job hours to calculate labor and manufacturing overhead costs. Those job costs, along with material and subcontract service costs, are incorporated into the cost of finished items and are thus “absorbed” into your inventory. The absorbed inventory cost is the cost basis for issues to other jobs or cost of goods sold.
Inventory is confined to the manufacturing accounting system
When you operate with two accounting systems, it is essential that there are no overlapping processes or duplication of function. The key to achieving this is to confine all inventory transactions and tables to the manufacturing accounting system.
Therefore, all inventory-related transactions, including order entry, purchasing, jobs, shipping, and invoicing, as well as all supporting tables such as part numbers, locations, lot/serial numbers, tax codes, prices, costs, and Sales/COGs account assignments are handled exclusively within DBA.
Tax detail is handled exclusively in DBA
Your sales order invoices and purchase order invoices will have detailed tax information. The AR and AP voucher value will be a single value that includes tax. You do not enter tax codes or tax detail in your financial accounting system
Each accounting system is self-contained
Because there are no overlapping processes or duplication of function, each accounting system functions independently as a self-contained system with its own general ledger. This means that each system can have its own technology platform and there is no need to coordinate product versions.
Three financial transfers update the financial accounting system
Only three financial transfers are required to update your financial accounting system to reflect the activities of the manufacturing system.
AR Voucher Transfer
Customer invoices are generated in DBA from shipments. A voucher style version of the invoice is transferred to your financial accounting system for AR processing purposes. Each voucher invoice includes header detail -- customer name, invoice number, invoice date, and due date – and a single line for the total invoice amount with sales tax included.
NOTE: Line item detail is not included in the voucher invoice because it has no relevance for AR processing. All sales order related activities, including invoicing, sales taxes, and sales analysis, are handled by the manufacturing accounting system.
AP Voucher Transfer
Supplier invoices are entered and matched against POs in DBA. A voucher style version of the invoice is transferred to your financial accounting system for AP processing purposes. Each voucher invoice includes header detail – supplier name, invoice number, invoice date, and due date – and a single line for the total invoice amount with purchase tax included.
NOTE: Line item detail is not included in the voucher invoice because it has no relevance for AP processing. All purchasing related activities, including supplier invoice entry and purchase taxes are handled by the manufacturing accounting system.
GL Summary Transfer
Daily summary entries comprising of a single debit and credit amount for each active account in DBA is cross-referenced and transferred to its corresponding account in your financial accounting system’s general ledger.
Each system maintains its own transaction detail
Each accounting system maintains its own transaction detail and audit trail.
•DBA has its own general ledger with complete transaction detail for all manufacturing system activities. Invoice detail provides sales and margin analysis in a variety of data views and reports.
•Your financial accounting system continues to store all transaction detail related to administrative and financial activities.
Additional benefits of the financial transfer design
Besides being a “best of breed” accounting solution for manufacturing businesses, the financial transfer design provides these additional benefits:
Simplifies manufacturing system implementation
The two accounting system design enables you to continue using your existing accounting system for the selling and administrative side of your business without interruption. This simplifies manufacturing system implementation because a financial accounting system conversion is not required.
Enables multiple operating entities
The financial transfer enables DBA to be used for managing multiple operating entities, which are factories or remote warehouse operations. Each operating entity is furnished with its own independent DBA system and the financial transfer is used to update your financial accounting system to reflect each entity’s activities. If any entity makes items for use by another entity, it is set up as a supplier to which POs are submitted as needed.
Provides local manufacturing solutions within large enterprises
The financial transfer enables departments, divisions, or subsidiaries within larger enterprises to use DBA as a local manufacturing solution with the ability to update the corporate ERP system to reflect its activities.
