What are the best practices for allocating costs to products or services using Pastel Accounting?

1 Why use Pastel Accounting for cost allocation?

Pastel Accounting is a software that simplifies and automates many accounting tasks, such as invoicing, inventory, payroll, tax, and reporting. One of the features of Pastel Accounting is that it allows you to create and manage cost codes for your products or services. Cost codes are labels that you assign to your income and expense accounts to track and allocate your costs to different categories, such as departments, projects, locations, or customers. By using cost codes, you can generate reports and analyses that show you how much each product or service costs to produce or deliver, and how much revenue and profit it generates.

2 How to set up cost codes in Pastel Accounting?

For setting up cost codes in Pastel Accounting, you need to go to Setup > Cost Codes and click on New. Provide a name and description for your cost code, such as "Products" for cost allocation. You should then select the relevant income and expense accounts, like sales and cost of sales. Once saved, you can create multiple cost codes depending on the level of detail and analysis required for your business.

3 How to assign cost codes to transactions in Pastel Accounting?

To assign cost codes to transactions in Pastel Accounting, you must first go to Process > Customers or Suppliers, depending on the type of transaction. Then, select the customer or supplier account and enter the details of the transaction. In the Cost Code column, select the cost code that you want to assign to the transaction. For instance, if you want to allocate costs to different products, choose the product name from the cost code list. Lastly, click on Update. Any income or expense transaction that you record in Pastel Accounting can be assigned with a cost code, such as invoices, receipts, payments, journals, and adjustments.

4 How to generate reports and analyses using cost codes in Pastel Accounting?

To generate reports and analyses using cost codes in Pastel Accounting, you need to go to Reports > Cost Codes and select the type of report or analysis you want to generate, such as an income statement, balance sheet, budget variance, or profitability. Then choose the cost code you want to use for the report or analysis. For example, if you are generating a profitability report for different products, select the cost code "Products". After that, select the date range and the level of detail needed for the report or analysis. Lastly, click on Preview or Print. You can generate various reports and analyses with cost codes in Pastel Accounting, such as an income statement by cost code (showing income and expenses for each category, and net profit/loss), a balance sheet by cost code (assets, liabilities, equity for each category, and net worth), a budget variance by cost code (actual and budgeted income/expenses for each category, and variance), and a profitability by cost code (revenue, cost, gross profit/margin for each category, and percentage of total revenue/profit).

5 What are the benefits of using cost codes in Pastel Accounting?

Utilizing cost codes in Pastel Accounting can help you to make better decisions, optimize resource allocation, and enhance performance measurement. You can see how each product or service contributes to your overall income and expenses, allowing you to adjust pricing, marketing, production, and distribution accordingly. Additionally, you will be able to identify areas that generate the most or the least revenue and profit and allocate resources accordingly. Finally, you can set financial goals and targets for each product or service and compare your actual results with your budgeted or expected results. This will help you evaluate your performance, identify your strengths and weaknesses, and take corrective actions if needed.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?