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Financial Management for Rootstock

Financial Management Module

Manufacturing Cost Control

Rootstock Manufacturing Cost Control provides extensive Cost accounting capabilities required by companies that have a need to closely monitor and control manufacturing costs. The user may elect to use either standard costing or weighted average costing method for valuing inventory and computing cost of goods sold.

Eight (8) cost elements can be maintained using either a standard cost method or an average actual cost method. The method is set at the division level’ which means that in a multi-division installation, a company could have standard costs’ in one division and average actual costs’ in another division. Another item of note is that in a standard cost system these costs are maintained at an item level and in an weighted average cost system these costs are averaged’ at an item-project level.

Cost Elements

Up to eight cost elements can be tracked in inventory, work in process and finished goods. These cost elements are as follows:

  1. Material Cost – This is the purchased cost. In a standard cost environment, this is set as the standard material unit cost on the cost master file. In an average cost situation, this is a rolling weighted average whereby the purchase receipt’s purchase price will be averaged’ with the inventory’s current material cost.
  2. Material Overhead Cost – This is the material burden which is calculated using a Material Overhead Rate’ designated at the division level and applied to the material cost (or subcontract material cost) at the time of purchase order receipt. This rate is used in either a standard or actual cost environment.
  3. Direct Labor Cost – In an actual cost environment, this is the labor cost associated with the hours charged multiplied by a labor grade rate associated with the employee that is booking the labor at a work order operation. In a standard cost environment, this is derived in a standard cost’ calculation accumulating all of the item’s routing operations’ hour standards multiplied by a standard rate for the labor grade expected to perform the operation.
  4. Direct Labor Overhead Cost – There is a Direct Labor Overhead Rate associated with each Department and the Department is noted on each operation of the routing. In an actual cost environment, Direct Labor Costs extended by the Direct Labor Overhead Rate provides this Direct Labor Overhead cost. In a standard cost environment, when calculating the cost standard using the standard routing, this same rate is applied to the standard direct labor cost at each operation.
  5. Fringe Labor Overhead Cost – Similar to a Direct Labor Overhead Rate associated with each Department there is also a Fringe Labor Overhead Rate. Given the rising cost of Fringe (medical and taxes for example) it is often desirable to separate this cost out from Direct Labor Overhead. This is calculated in the same manner as the Direct Labor Overhead.
  6. Machine Overhead Cost – There is a Machine Overhead Rate associated with each machine and the machine can be specified on each operation of the routing where appropriate. In an actual cost environment, actual machine hours are extended by the Machine Overhead Rate providing this Machine Overhead Cost. In a standard cost environment, when calculating the cost standard using the standard routing, this same rate is applied to the standard machine hours at each operation.
  7. 7Subcontract Material Cost – This is the value added cost of the vendor for their manufacturing/assembly work associated with a subcontract purchase order. In a standard cost environment, this is set as the standard subcontract material unit cost on the cost master file. In an average cost situation, this is a rolling weighted average whereby the purchase receipt’s purchase price will be averaged’ with the inventory’s current subcontract material cost.
  8. Subcontract Labor Cost – This is the value added cost of the vendor for their manufacturing/assembly work associated with an outside operation’ of a work order. In a standard cost environment, this is set as the standard subcontract labor unit cost on the cost master file. In an average cost situation, this is a rolling weighted average whereby the purchase receipt’s purchase price will be averaged’ with the work orders’ subcontract labor cost.

Cost Rollups and Standards Revaluation in a Standard Cost Environment

Standard costs for purchased and subcontract items are maintained by the user on the item standard cost master file. The standard costs for labor and overhead are calculated by Rootstock using the bill of materials and routing for each item using the cost rollup process.

Variance Calculations in a Standard Cost Environment

In a standard cost environment, the costs on the item (or item-project) master files are maintained at standard. Standard cost variance calculations are done as follows on the following transactions:

  • Purchase Receipt – The difference between the purchase order price and the standard material cost (or subcontract material cost) will be calculated (and extended by the quantity) and will debit/credit a PPV (purchase price variance) account.
  • Work Order Close – The sum of actual component material charges (as determined at work order issuance) and the sum of all labor and associated overhead, machine overhead, and subcontract labor at actual are maintained on the work order. At work order close the difference between the work order receipts and scrap – at standard are compared to these actual costs and there will be a debit/credit to a Work Order Variance WIP account as appropriate.
  • Standards Redefinition- Whenever an item standard is redefined, all stock inventory and all WIP (work order) inventory is revalued at the new standard and a standards variance recalculation’ account is appropriately debited/credited.

Rootstock’s Manufacturing Accounts

Rootstock Manufacturing Cost Control maintains its own chart of manufacturing accounts which are then individually mapped to the General Ledger account. This permits the user to capture costs at one level of detail in manufacturing (e.g. multiple variance accounts), and then post these accounts to the same General Ledger account. The format of the costs to be posted to General Ledger is in the cumulative cost format and the eight cost components (whether in a standard or actual cost environment) are unitized’ as one cost for General Ledger purposes.

Financial Integration

As a result of the broad Best of Breed” offerings (both front and back office) contained on the Salesforce App Exchange, Rootstock has leveraged expertise and investments by financial software vendors. This has allowed Rootstock to quickly build the most complete suite of Manufacturing, Distribution and Supply Chain Applications (including powerful functionality such as Sales Order and Purchasing) available on the cloud. Alongside the robust Manufacturing, Distribution and Supply Chain Applications, Rootstock has built integrations to popular Accounting Applications both on and off the Cloud (listed below), with many others on the Rootstock product roadmap.

  • Although each Accounting System may differ in the depth and breadth of their offerings, ALL must offer the basic functionality of Accounts Receivable, Accounts Payable, Cash Management, General Ledger (Journals) and the ability to generate accurate Financial Statements. In addition, Rootstock has sought to integrate with Financial applications that support our multi-company, multi-division, multi-site, multi-national, multi-currency and a multi-dimensional Chart of Accounts (providing the ability to track and report financial results by Project, Department, Sales Region, etc. while at the same time retain a simple Chart of Accounts) capabilities.
  • To that end, Rootstock currently has built-in integration with the following Financial and Accounting Systems –

Financial Force​.com

FinancialForce is the Top Accounting App on the Salesforce Platform” and, because it is 100% Native to the platform, Rootstock has been able to seamlessly” integrate to their Accounting package.

  • FinancialForce is a comprehensive accounting application built on the force​.com Platform. It offers a full suite of Accounting features such as the ability to, in conjunction with Rootstock Manufacturing, have real-time visibility of your financial data, streamline your order to cash and procure to pay processes, allow for faster period closes (always in balance) and improved cash flow by providing the following key features…
  • Accounts Receivable – Customer related transactions
  • Accounts Payable – Vendor related transaction
  • Cash Management – post cash receipts and process payments
  • General Ledger and Budgeting – record transactions to the Accounting General Ledger reporting period-to-period financial results and against established budgets
  • Analysis Dimensions – optional elements of some accounting codes that form part of the Chart of Accounts enabling use to analyze business activity in additional ways such as by Cost Center, Projects, Sales Regions, etc., at the same time while retaining a simple Chart of Accounts
  • Budgeting – ability to track and report variances of actual period balances against budgeted amounts
  • Multi-Currency – transact and report across multiple currencies, including managing exchange rates and auto generated, periodic currency revaluations on defined General Ledger Accounts
  • Multi-Company – including Inter-company Transactions
  • Accounting Launchpads – provides a Workflow” like view of the various Accounting features with immediate access to the Application
  • SF Platform features •Create Profiles, Roles and user-based dashboards, with drilldown from dashboards to transactions instantly
  • Opportunities/Quotes – ability to create Sales Order and Sales Invoices automatically from existing Opportunities and Quotes
  • Reports – chose from a library of available Report Templates, or easily create your own across the multiple Applications on your Org.
  • Dashboards – as a Finance professional you can see a full picture of your Company’s financials through various dashboards. Either utilize a set of available Dashboards, or easily create your own. You can also drill-down into these reports for analysis if needed.

Intuit QuickBooks

Intuit offers an expansive list of popular Accounting products, both Online and Desktop, with varying levels of functionality. Rootstock has developed Integration” tools that facilitate the transfer of financial data across their product offerings.

  • QuickBooks Online – Rootstock utilizes QuickBooks API’s (Application Programming Interfaces) to automatically creates the appropriate recording of the related financial transactions in the accounting system from a click of a button, such as…
  • Journals to record all of the Cost Transactions
  • Customer Invoices to record Accounts Receivable and associate Revenue, and to which to record cash receipts
  • Vendor Bills (which have been matched valid Purchase Order (Price) and PO Receipt (Quantity) to record Accounts Payable and associated expenses and from which to pay vendors
  • QuickBooks Desktop – since there are no API’s available to automate the transfer to the QuickBooks Desktop products, Rootstock has developed the following series of Export Programs (utilizing Intuits’ IIF file format) to facilitate the export of financial data to be then imported in the Accounting System…
  • Export/Import of all Cost Transactions as Journals
  • Export/Import of Sales Order Invoices as Invoices to record Accounts Receivable and associated Revenue, and to which to record cash receipts
  • Export/Import PO Receipts to be recorded as Item Receipts in QuickBooks that can then be matched to a Vendor Bill, and then paid

Multi Site & Multi Company

Rootstock Multi Division, Multi Site, & Multi Company capability offers a sophisticated structure to support manufacturing and distribution companies that have multiple plants or distribution centers in various locations throughout the world. Rootstock provides comprehensive inter-division and inter-site capabilities throughout all applications.

Within Rootstock, multiple divisions may exist within a single company while multiple sites exist within a single division. Each site maintains its own inventory and a site in Rootstock is typically identified with a warehouse. Forecasting and MRP functions can also exist separately for each site (or across sites) to satisfy inter-site requirements. Each Division has a main site’ and it is that main site that does the manufacturing and purchasing while the other sites can be warehouses.

Inter-Site Requirements Planning allows a supply site to plan, acquire and transfer material to meet the needs of a requiring site. Materials that are manufactured, purchased or subcontracted at the main site can be transferred to the requiring site. A central sales site enters orders for products coming from other sites, such as warehouses and manufacturing plants.
Production Engineering can be centralized within a company as well as all of the divisions within a company. If the Engineering function is decentralized at the plant level, then each division will have its own Production Engineering Bill of Material and Change Order Process.

In a company that supports centralized Production Engineering and Product Management, each manufacturing division that maintains information such as product masters, item masters, and bills of materials (if applicable) may share the data, rather than duplicating it at each division. Work orders and other inventory functions can be validated against centralized master records at the inventory divisions. Each division can maintain their own sub ledger’ of cost accounts that can be rolled up into the main ledger for a company’s financial statements. The costs can then be identified and controlled at a division level from a general accounting perspective

Project Control

Rootstock Project Control provides an additional capability to the inventory control tracking, as well as planning and costing of items. In a project control environment not only does the manufacturer or distributor want to control and plan material purchases, manufacturing, and inventory for the division but also wants to additionally identify inventories and costs by project.

Project Workbench

The Rootstock Project Workbench is the focal point for Project information. The Project Workbench provides a real-time interactive access to all Project data including a snapshot of the actual costs to date compared to the Budget costs. This data also includes project inventory, PO requisitions, manufacturing work orders, forecasts, sales orders, and all transaction associated to the project.

In a discrete manufacturing operation where all planning, costing and tracking is item number’ based, there is typically an additional requirement in a manufacture to order, assemble to order, engineer to order or even contract manufacturer – and that is to plan, cost and track by item within a project’.

To meet these needs, Rootstock Project Control provides these additional capabilities of planning, tracking and costing within the Rootstock manufacturing modules of:

  • Inventory Control
  • Shop Floor Control
  • Material Requirements Planning (MRP)
  • Manufacturing Cost Control

The Project Control module also enables identification of a project to Purchase Order and Sales Order lines.

Rootstock Project Control therefore associates inventory items, sales orders, work orders, purchase requisitions, and purchase orders with a project. Material Requirements Planning (MRP) can plan either by a single project – or by all of the projects within a division. Usually in every project environment there are common parts across projects. These common parts can be identified as such on the inventory item master (or on the commodity code) as common parts (or other terms used in the industry include company inventory or global parts’ or home project parts’).

Rootstock Project Control not only allows users to determine how materials are allocated to specific projects but the cost method can be either standard or average costs. If the cost method is average cost then the cost is identified at the item-project level. If the cost method used is standard cost, then all projects within a division will share the same standard cost.

In a project control environment, cost accounts for inventory and cost of sales can be designated by project. This allows the business to look at financial reports with a project accountant’s view. For those firms that have few customers and large portions of their business are allocated to these few, then this capability is helpful. In the case of a job shop which may have hundreds of customers (and many one time only customers) yet function as a to order’ business, the cost accounts can be identified at the commodity code or item level and this delineation of project accounts is not necessary at the General Ledger.

With Rootstock, each manufacturing work order and purchase order line item is associated with an individual project. This allows a user to access online Project Status information at any point during the life cycle of a project. Entering a project, the user receives immediate online information in the Project Work Bench regarding purchase requisitions, purchase orders, work orders, sales order, cost transactions, and inventory.

Rootstock Modules

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