Tag Archive | Costs. hidden cost

What is true cost accounting?

Image from 3bl media

True cost accounting (also called Environmental Full Cost Accounting) is a process which tries to identify all costs associated with a product or service. This includes not only the normal costs we would associate with a product or service, bit also social and environmental costs. It attempts include what economists call externalities – something which affects society or the environment  but is not included in the market price of the product. Rather than me continue, here is a short YouTube video which explains the concept in a very clear way.

The costs we don’t capture

Image from wikipedia

I recently attended the 11th ACMAR conference in WHU, Vallendar, Germany. A presenter was reminding us of how we often forget about opportunity costs. This made me think of a recent hotel reservation I made, and how many costs go unrecorded.

I had booked a hotel in Montreal for a few days in April. The hotel emailed me to say that a due to a refurbishment programme, they would not open until May – a delay of 4 weeks. The Canadian winter delayed the refurbishment work it seemed. I was offered alternative accommodation, which was fine.

There is of course a loss of revenue to the hotel use to the delay. I would guess that the cost of lost revenue was included as part of the refurbishment, but I wonder will the revenue lost due to the delay ever be recorded or noted. Somehow I doubt it. Either way, such “costs” never make it to the accounting records.

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