Flow Cost Accounting

This technique uses not only material flows but also the organisational structure.
It makes material flows transparent by looking at the physical quantities involved, their costs and their value.
It divides the material flows into three categories: material, system, and delivery and disposal.

The aim of flow cost accounting is to reduce the quantity of materials which, as well as having a positive effect on the environment, should have a positive effect on a business’ total costs in the long run.

It evaluates material losses in the company in monetary terms and thus points up the economic benefit of resource efficiency.

In a hotel group they could use flow cost accounting, they may find that it is energy, water and waste that they have to consider. They might identify that the improvements they need are to cut down energy consumption by shutting down lights, installing LED’s, adjusting the water flow in toilets and showers,

The system values and costs are the in-house handling costs which are incurred to maintain and support material throughput e.g. personnel costs and depreciation.

In summary:

The aim of flow cost accounting is to reduce the quantity of materials which should improve the business and environment.

Inflow / Outflow records material inflows and balances this with outflows on the basis that, what comes in, must go out.