Direct costs are costs that can be directly attributed to a product or service. These costs are directly related to the production of a specific product or the delivery of a specific service. Examples of direct costs include direct labor costs, for example hours, direct material costs, and direct production costs. Direct costs can be easily assigned to a specific product or service, unlike indirect costs.

Coverage is about covering your direct and indirect costs based on your cost price. The goal is to use a cost price that covers all incurred and future costs.

BCO helps you to increase your insight into the financial situation of your company and puts you in a better position to determine your cost price. Do you have knowledge of cost prices and do you know the BCO modules? In this article you will find a step-by-step plan to easily set up BCO.

Once BCO has been set up, you can start monitoring the budgets. The various BCO Dashboards serve this purpose. Budget control based on these dashboards is central to this article. In addition, a number of scenarios arising from the design of BCO are discussed.

Before you start with BCO, it is important to have the administration settings correct. On the Price Structure tab you will find the settings that are relevant for the BCO design. Of particular importance are the settings about Coverage and Operations.

BCO stands for Budgeting, Controlling, Optimizing. BCO helps you increase your insight into your company's financial situation and enables you to better determine your cost price. By budgeting your hours and costs now, you will fully cover your business expenses for the coming year with direct and indirect hours, and you will maintain the alignment between order result and business result.

Based on the allocated budgets for all employees and all operations, you fill in the Occupancy Plan, a matrix in which you indicate who is expected to do what for the coming year. You use the Coverage Plan to divide all costs, except labor costs, over the direct and indirect operations and to divide all indirect hours over the direct operations.

The standard dashboard 'BCO Coverage and Occupancy Monitoring' can be used to monitor the extent to which the set budgets correspond with the realized direct hours, the man-machine ratio, and the coverage. This also allows monitoring of the extent to which costs are covered by the realized direct hours. These are visible both graphically and in grids.

The purpose of the standard dashboard 'BCO Exploitation Plan' is to gain insight into the setup of budgeting for the operations in BCO. Based on the budgeted hours and the costs of the operations, the net price is compared with the price configured for the operation.