The document provides an overview of cost management and accounting systems. It discusses:
1. How the contemporary business environment has changed due to factors like globalization, new technologies, and a focus on customers.
2. The strategic focus of cost management is identifying critical success factors rather than just cost control.
3. Cost management is integrated with general management strategies and involves decisions that increase customer value and lower costs.
4. Accounting systems evolve along with organizations' strategies and architectures in response to changes in the business environment. Systems are designed to support both internal decision-making and external reporting needs.
Table of Contents
0. What is financial management?
1. Policy & Procedures Manual
2. Accounting Policies
3. Summary of Procedures
4. General Ledger
5. Cash Management and Disbursements
6. Budgeting and Budgetary Control
7A. Cost Allocation
7B. Fixed Assets
8. Travel
9. Procurement of Goods and Services
10. Reporting Requirements
11. Payroll
12. Computer Information Systems (CIS)
Table of Contents
0. What is financial management?
1. Policy & Procedures Manual
2. Accounting Policies
3. Summary of Procedures
4. General Ledger
5. Cash Management and Disbursements
6. Budgeting and Budgetary Control
7A. Cost Allocation
7B. Fixed Assets
8. Travel
9. Procurement of Goods and Services
10. Reporting Requirements
11. Payroll
12. Computer Information Systems (CIS)
digitalization to solve these critical issues. If you wish to clearly understand how the food and beverage industry can transform digitally.
You need to download this free copy to learn more: https://www.bluemailmedia.com/digital-transformation-in-the-food-beverage-industry.php
Strategic Plan Part 3
By: Christopher Gilbert
BUS/475
Instructor: Dr. Steve Verrone
June 20, 2016
STRATEGIC PLAN PART 3
STRATEGIC PLAN PART 3
1
STRATEGIC OBJECTIVES SUMMARY (BALANCED SCORECARD).
STRATEGY
GOAL- What we want to accomplish
OBJECTIVES- How we are going to accomplish the goal
MEASURE
TARGET
SHAREHOLDER VALUE OR FINANCIAL PERSPECTIVE
Ensure financial benefits are maximized through smart and transparent financial systems.
Allocate budget to support business goals and objectives.
Provide investors with value- relevant information.
Increase market share which will improve our competitive position which will lead to sustainable profitability.
Stay relevant through innovation, respond to customers fast enough and use their ideas, buy off competitors and increase flexibility in operations.
Percentage of total market in the business printing sector
70%
Demonstrate cost savings in the organization as a result of business processes being streamlined.
Use process value analysis on all change initiatives in the organization.
Percentage of change initiatives that produced cost savings in the organization.
75%
PROCESS OR INTERNAL OPERATIONS PERSPECTIVE
Implement strategies to maximize resources and infrastructure present in Neon Software, Inc.’s facilities.
Make use of creativity and innovation in order to improve internal processes and keeps the business progressing.
Ensure high utilization of company facilities.
Improve process delivery
Create business project management process
The process is implemented in full.
PASS/ FAIL
Ensure effective implementation of initiatives
Initiative delivered project goals
Percentage of goals met
90%
Initiative delivered on time
Percentage of initiatives delivered on time
90%
Initiative delivered on budget
Percentage of initiatives delivered on budget
90%
CUSTOMER VALUE PERSPECTIVE
Maximize customer collaboration in order to identify and understand customer needs and expectations.
Deliver timely, accurate, and high-quality services and products to increase value and achieve customer satisfaction.
Products offered by Neon Software, Inc. to be affordable with the firm acting as a market leader.
Identify customer needs and inefficiencies and implement relevant solutions.
Map existing business processes
Number of business processes mapped
4
Facilitate the management of change in the company.
Change management plan implemented
PASS/ FAIL
Build effective customer relationships
Increase customer contacts
Number of new customer contacts per week
4
Learn and apply communication techniques
Number of feedback sessions
2 per person
LEARNING AND GROWTH (EMPLOYEE) PERSPECTIVE
Promote a culture and working environment that embraces growth and development.
Meet the needs of each of our employees which will more often than not result in employee engagement and employee satisfaction in general.
Ensure that employees are compensated sufficiently which will help with retention.
Case study on Strategic Leadership and Business Transformation”.docxtidwellveronique
Case study on “Strategic Leadership and Business Transformation”
Business transformation is a key management personnel of the management initiatives, brainstorming, trying, process and technology initiatives in an organization with business strategy and vision to support the more attention and help innovative new business strategies and meet short and long term objectives. Through the business transformation effort is made from the same people, process and technology to achieve the ultimate results-based state, such as income increase of 50% or 25% customer satisfaction.
It can be defined as:
• Transformation - by improving customer service
• change the shape - by the review and reassessment of how to do business, through better use of partners and use of the resources
• Changing the form - through improved business methods and includes a new organizational structure, technology, processes and technology. [1]
Can achieve business transformation through new technologies, business models and management methods. Business transformation is now considered competitive an important part of the business cycle.
Enterprise restructuring should be a continuous process, must implement its business strategy for any organization to achieve its vision. This is an ongoing requirement, because the strategies and vision will always need to adapt to the changing and refining the impact of the economic impact. Business agility, and to achieve business transformation, therefore, the management and the real measure of business success.
Disciplines involved in business transformation
and Conwell mixed consultants help companies adapt to the management capacity, through these technologies development. We in the public and private sector clients a lot of experience enables us to identify the key components necessary to ensure successful business transformation:
• Alignment of activities and changes in business strategy.
• Avoid dispersion, transformation activities, bottom-up elements.
• Managing the planning and improvement of management disciplines.
• clear what can be achieved, and its cost.
• careful analysis of all the necessary changes made and the impact of these changes, interdependent activities.
• Treatment of staff as agents of change, rather than an obstacle.
• assess how changes will be considered with customers to explain, suppliers and other external parties.
Business transformation seems to have started as a label used by IT companies re-brand consultancy process to information systems integration sales more effective.
Now, the business transformation means more work. It means that a cross-business integrated approach to change, also shows that this is only effective in achieving your business vision or direction of the strategic process.
Many organizations and consultants seem to have lost chasing growth and change.
In the first phase of IT enabled business transformation
As information technology (IT) the arrival of the concept of innovation ...
In their efforts to decrease costs, improve customer loyalty and extend brand reputation, organizations need a holistic, long-term view of enterprise quality management systems.
digitalization to solve these critical issues. If you wish to clearly understand how the food and beverage industry can transform digitally.
You need to download this free copy to learn more: https://www.bluemailmedia.com/digital-transformation-in-the-food-beverage-industry.php
Strategic Plan Part 3
By: Christopher Gilbert
BUS/475
Instructor: Dr. Steve Verrone
June 20, 2016
STRATEGIC PLAN PART 3
STRATEGIC PLAN PART 3
1
STRATEGIC OBJECTIVES SUMMARY (BALANCED SCORECARD).
STRATEGY
GOAL- What we want to accomplish
OBJECTIVES- How we are going to accomplish the goal
MEASURE
TARGET
SHAREHOLDER VALUE OR FINANCIAL PERSPECTIVE
Ensure financial benefits are maximized through smart and transparent financial systems.
Allocate budget to support business goals and objectives.
Provide investors with value- relevant information.
Increase market share which will improve our competitive position which will lead to sustainable profitability.
Stay relevant through innovation, respond to customers fast enough and use their ideas, buy off competitors and increase flexibility in operations.
Percentage of total market in the business printing sector
70%
Demonstrate cost savings in the organization as a result of business processes being streamlined.
Use process value analysis on all change initiatives in the organization.
Percentage of change initiatives that produced cost savings in the organization.
75%
PROCESS OR INTERNAL OPERATIONS PERSPECTIVE
Implement strategies to maximize resources and infrastructure present in Neon Software, Inc.’s facilities.
Make use of creativity and innovation in order to improve internal processes and keeps the business progressing.
Ensure high utilization of company facilities.
Improve process delivery
Create business project management process
The process is implemented in full.
PASS/ FAIL
Ensure effective implementation of initiatives
Initiative delivered project goals
Percentage of goals met
90%
Initiative delivered on time
Percentage of initiatives delivered on time
90%
Initiative delivered on budget
Percentage of initiatives delivered on budget
90%
CUSTOMER VALUE PERSPECTIVE
Maximize customer collaboration in order to identify and understand customer needs and expectations.
Deliver timely, accurate, and high-quality services and products to increase value and achieve customer satisfaction.
Products offered by Neon Software, Inc. to be affordable with the firm acting as a market leader.
Identify customer needs and inefficiencies and implement relevant solutions.
Map existing business processes
Number of business processes mapped
4
Facilitate the management of change in the company.
Change management plan implemented
PASS/ FAIL
Build effective customer relationships
Increase customer contacts
Number of new customer contacts per week
4
Learn and apply communication techniques
Number of feedback sessions
2 per person
LEARNING AND GROWTH (EMPLOYEE) PERSPECTIVE
Promote a culture and working environment that embraces growth and development.
Meet the needs of each of our employees which will more often than not result in employee engagement and employee satisfaction in general.
Ensure that employees are compensated sufficiently which will help with retention.
Case study on Strategic Leadership and Business Transformation”.docxtidwellveronique
Case study on “Strategic Leadership and Business Transformation”
Business transformation is a key management personnel of the management initiatives, brainstorming, trying, process and technology initiatives in an organization with business strategy and vision to support the more attention and help innovative new business strategies and meet short and long term objectives. Through the business transformation effort is made from the same people, process and technology to achieve the ultimate results-based state, such as income increase of 50% or 25% customer satisfaction.
It can be defined as:
• Transformation - by improving customer service
• change the shape - by the review and reassessment of how to do business, through better use of partners and use of the resources
• Changing the form - through improved business methods and includes a new organizational structure, technology, processes and technology. [1]
Can achieve business transformation through new technologies, business models and management methods. Business transformation is now considered competitive an important part of the business cycle.
Enterprise restructuring should be a continuous process, must implement its business strategy for any organization to achieve its vision. This is an ongoing requirement, because the strategies and vision will always need to adapt to the changing and refining the impact of the economic impact. Business agility, and to achieve business transformation, therefore, the management and the real measure of business success.
Disciplines involved in business transformation
and Conwell mixed consultants help companies adapt to the management capacity, through these technologies development. We in the public and private sector clients a lot of experience enables us to identify the key components necessary to ensure successful business transformation:
• Alignment of activities and changes in business strategy.
• Avoid dispersion, transformation activities, bottom-up elements.
• Managing the planning and improvement of management disciplines.
• clear what can be achieved, and its cost.
• careful analysis of all the necessary changes made and the impact of these changes, interdependent activities.
• Treatment of staff as agents of change, rather than an obstacle.
• assess how changes will be considered with customers to explain, suppliers and other external parties.
Business transformation seems to have started as a label used by IT companies re-brand consultancy process to information systems integration sales more effective.
Now, the business transformation means more work. It means that a cross-business integrated approach to change, also shows that this is only effective in achieving your business vision or direction of the strategic process.
Many organizations and consultants seem to have lost chasing growth and change.
In the first phase of IT enabled business transformation
As information technology (IT) the arrival of the concept of innovation ...
In their efforts to decrease costs, improve customer loyalty and extend brand reputation, organizations need a holistic, long-term view of enterprise quality management systems.
Business excellence is not about getting an assessment score by following a model, its about achieving tangible, intangible results of what matters, here is presenting BMGI's approach to Business Excellence. Reach out : prashantj@bmgindia.com for more details
Quality and EthicsQuality appears to be good business. Quality i.docxamrit47
Quality and Ethics
Quality appears to be good business. Quality is also good ethics. It is unethical to ship defective products knowingly to a customer. Reliable products and low defect rates reflect an ethical approach of management’s care for its customers. This ethic is stated in the well-known mission statement of a New Bedford, Massachusetts, shipbuilder; “We build good ships. At a profit if we can, at a loss if we must. But, we build good ships.”
Quality Highlight 4-1: Solectron Corporation
www.solectron.com
Solectron Corporation is an independent producer of high-tech manufacturing services. This manufacturing includes the assembly of printed circuit boards and subsystems for computer makers and electronics product producers. In addition, Solectron provides system-level assembly services, such as assembly of PCs and mainframe computers. Activities performed by Solectron include design, production, assembly, consultation, and testing. Solectron has achieved outstanding results because of its strategic planning system and the personal leadership provided by its management.
By focusing on customer satisfaction, exploiting advanced manufacturing technology, and stressing continuous improvement in operations and service, the company has reached high levels of quality and efficiency, making it best-in-class and a world leader in production. Solectron is an American company that has competed successfully in international markets. Many competitors of Solectron are now customers because they found it was better to outsource to Solectron than to produce many products in-house. In addition, about 90% of all new work comes from returning satisfied customers.
Assessing Customer Needs
Solectron focused its planning processes on the customer. Solectron does not compete with its customers in designing and marketing products. Although it offers an original equipment manufacturers (OEM) design service, usually the company produces to its customers’ specifications and designs. As a result of understanding its customers, the company develops strategies to meet its customers’ requirements in the areas of service, quality, and cost. Solectron continually monitors customer satisfaction levels and conducts exhaustive research on competitors and markets.
Surveys of customers are conducted on a weekly basis. The results of these surveys go directly to the CEO, who reviews the information with top management in one of three weekly meetings on quality-related issues. The survey information is used to grade the performance of each of Solectron’s nine divisions.
Culture of Continuous Improvement
Solectron has developed a culture that reinforces continuous improvement. Developing this culture has required arduous strategic planning. A top management team is involved in a crusade to revitalize American manufacturing through quality. This team sets corporate targets and then works with teams to set supporting goals in functional areas. The company has pursued several ...
Activity Based Profitability ManagementMiguel Garcia
Activity Based Profitability Management (ABPM) and Activity Based Budgeting (ABB) offers organizations a complete tool to gain a competitive advantage and provides crucial information to support the process of making strategic and operational decisions in the current business environment. It might seem that having this type of information for the management of profits, costs and budgets is not necessary to implement Digital Transformation solutions because the implementation of new technologies does not require an evaluation of this type, and it is assumed that it must be implemented independently of what it implies and at any cost, but this is an error because it will always require business processes, products or services, customers or users, service channels, etc. that must be evaluated from the financial and business process point of view, implemented, measured and improved within a competitive and market environment. In this sense, the profitablitiy, cost and budget information provided by the approach of ABPM and ABB will lead to better business decisions that significantly increase the performance and profits of the companies.
Importance of practicing lean management concepts in multinational companies Charm Rammandala
The purpose of this article is to investigate through a literature review, to determine the importance of implementing and practicing lean management in multi-national companies. It is well understood that the market conditions highly volatile due to the increased competition from the traditional brick and mortar retailers as well as on-line retailers. In order to retain the current market segment and to possibly increase it, it is vital to maintain the competitive pricing strategy and high quality standards. During the essay it will be discussed how introducing lean principles and concepts, multi-national companies could achieve this objective
Manufacturing is a major contributor to GDP and employment provider in many countries. Both large and MSME are facing effects of global downturn which has made survival a test for many. With customer gains becoming far and few many companies worried about growth and profitability. Browne & Mohan consultants in this paper present the approach manufacturing companies should use to turn around profitability and survival.
Francesca Gottschalk - How can education support child empowerment.pptxEduSkills OECD
Francesca Gottschalk from the OECD’s Centre for Educational Research and Innovation presents at the Ask an Expert Webinar: How can education support child empowerment?
Synthetic Fiber Construction in lab .pptxPavel ( NSTU)
Synthetic fiber production is a fascinating and complex field that blends chemistry, engineering, and environmental science. By understanding these aspects, students can gain a comprehensive view of synthetic fiber production, its impact on society and the environment, and the potential for future innovations. Synthetic fibers play a crucial role in modern society, impacting various aspects of daily life, industry, and the environment. ynthetic fibers are integral to modern life, offering a range of benefits from cost-effectiveness and versatility to innovative applications and performance characteristics. While they pose environmental challenges, ongoing research and development aim to create more sustainable and eco-friendly alternatives. Understanding the importance of synthetic fibers helps in appreciating their role in the economy, industry, and daily life, while also emphasizing the need for sustainable practices and innovation.
Read| The latest issue of The Challenger is here! We are thrilled to announce that our school paper has qualified for the NATIONAL SCHOOLS PRESS CONFERENCE (NSPC) 2024. Thank you for your unwavering support and trust. Dive into the stories that made us stand out!
A Strategic Approach: GenAI in EducationPeter Windle
Artificial Intelligence (AI) technologies such as Generative AI, Image Generators and Large Language Models have had a dramatic impact on teaching, learning and assessment over the past 18 months. The most immediate threat AI posed was to Academic Integrity with Higher Education Institutes (HEIs) focusing their efforts on combating the use of GenAI in assessment. Guidelines were developed for staff and students, policies put in place too. Innovative educators have forged paths in the use of Generative AI for teaching, learning and assessments leading to pockets of transformation springing up across HEIs, often with little or no top-down guidance, support or direction.
This Gasta posits a strategic approach to integrating AI into HEIs to prepare staff, students and the curriculum for an evolving world and workplace. We will highlight the advantages of working with these technologies beyond the realm of teaching, learning and assessment by considering prompt engineering skills, industry impact, curriculum changes, and the need for staff upskilling. In contrast, not engaging strategically with Generative AI poses risks, including falling behind peers, missed opportunities and failing to ensure our graduates remain employable. The rapid evolution of AI technologies necessitates a proactive and strategic approach if we are to remain relevant.
Unit 8 - Information and Communication Technology (Paper I).pdfThiyagu K
This slides describes the basic concepts of ICT, basics of Email, Emerging Technology and Digital Initiatives in Education. This presentations aligns with the UGC Paper I syllabus.
1. CHAPTER 3:
CONTEMPORARY BUSINESS
ENVIRONMENT AND
STRATEGIC FOCUS OF COST
MANAGEMENT
Group 2:
Jake Laurence Magas
Aniza Chyll G. Abante
Maria Cleryen Sinfuego
Blessy Bernadith Boral
Erika Doro
Nathalie Merin Borbe
Noemi Villar
Melenio Zamora
2. EXPECTED LEARNING OUTCOMES
After studying this chapter, you should be able to...
1. Describe the more recent changes contemporary business environment
such as The Global Business Environment
• Advances in Manufacturing Techniques
• Advances in Information
• A greater focus on customers
• New forms of organization
• Changes in the Social, Political & Cultural Environment
2. Explain the strategic focus of cost management
3. Describe the relationship between cost management and the accounting
systems
4. Explain the concept of integrative framework on how the accounting
system is used in the firm's organizational architecture
3. CONTEMPORARY BUSINESS ENVIRONMENT AND STRATEGIC FOCUS OF
COST MANAGEMENT
CONTEMPORARY BUSINESS ENVIRONMENT
The business environment in recent years has been characterized by increasing
competition and relentless drive for continuous improvement. These changes
include
1) an increase in global competition;
2) advances in manufacturing technologies;
3) advances in information technologies, the Internet, and e- commerce;
4) a greater focus on the customer;
5) new forms of management organization; and
6) changes in the social, political, and cultural environment of business. As
businesses turned global and product lines expanded, operations have become
more complex, forward-looking companies saw a tremendous need for
management oriented data that was separate from financial-oriented data.
4. The Global Business Environment
The growth of international markets and trade are the key development
that drive the extensive changes in the contemporary business changes
in the contemporary business environment. Profit-oriented business
and not-for-profit organization, consumers and regulators are all
affected significantly by the rapid growth of economic independence
and increased competition from other continues. The growing number
of alliance among large multinational, the increasing trade agreements
among countries indicate clearly that the opportunities for growth and
profitability lie in global markets. As low-cost, high quality goods are
traded worldwide, most consumers are benefited. Manager, business
owners and investors benefit likewise when sales and production
activities are pursued in foreign countries.
Global business environment is very competitive and firms need cost
management information to sustain competitiveness. They also need
5. Advances in Manufacturing Technologies
Firms around the world adopt new manufacturing technologies
to remain competitive in the face of the increased global
competition. Many firms adopt methods applied in some
Japanese manufacturing firms that produced significant cost and
quality improvements using quality teams, and statistical quality
control. Some firms include just-in-time inventory method in
order to reduce the cost and waste of maintaining large levels of
raw materials and unfinished product. A key competitive edge
that forms have is the ability to deliver the product or service
faster than the competition. This is known as speed-to-market.
6. Advances in Information Technologies, The Internet and E-
Commerce
The increasing use of information technology, the internet and e-
commerce perhaps the most fundamental of all business changes in
recent years. This new economy is manifested in the rapid growth of
Internet-based firms (the dot-com's such as Amazon, eBay, and E-
trade) and the increased use of the Internet for business data
processing, communication, and sales. These have resulted in the
growing focus in cost management by reducing the time required to
process transactions, thereby expanding the individual's access to
information within the firm, the industry and the business
environment around the world.
7. A Greater Focus on Customers
To succeed in this era, customer value is the key focus that
businesses of all types must be concerned with. A key change
in increased customer demand for product functionality and
quality. As business firms seek to add new features and new
products as quickly as possible, shorter product life cycle
thereby increasing the overall intensity of competition. The
new business process focuses on customer satisfaction.
Producing value for the customer has changed the orientation
o. low-cost production of large quantities to quality, service,
faster delivery and ti ability to respond to the customer's
desire for specific feature. Today, many of the critical success
factors are customer oriented. Cost management practices are
also changing, cost management reports now include specific
8. The value of a product or service to the customer is affected by such diverse
attributes as product price, quality, functionality, user-friendliness, customer
service, warranty and maintenance costs. By managing activities that will
increase customer value, the firms can establish a competitive advantage by
creating better customer value for the same or lower cost than that of
competitors. Cost information plays an important part in the process called
strategic cost management. Generally, firms chose a strategic position
corresponding to one of two general strategies:
(a) cost leadership, and
(b) superior product through differentiation.
A focus on customer value means that the management accounting system
should produce information about both realization and sacrifice. The system
should be able to measure various attributes of customer value.
Successful pursuit of cost leadership and/or differentiation strategies requires
an understanding of a firm's value chain (internal) and supply chain (external).
9. New Forms of Management Organization
Management organization has changed in response to the changes in
marketing and manufacturing. Because of the focus on customer
satisfaction and value, the emphasis has shifted from financial and
profit-based measures of performance to customer-related,
nonfinancial performance measures such as quality, time to delivery
and, service. Similarly, the hierarchical command-and-control type of
organization is being replaced by a more flexible organizational from
that encourages teamwork and coordination among business
functions. Ins response to these changes, cost management practices
are also changing to include reports that are useful to cross-
functional teams of managers; the reports reflect the multinational
roles of these teams and include a variety of operating and financi
information: product quality, unit cost, customer satisfaction,
bottlenecks. The changes in management organization and n 5/12 n
10. Figure 3-1: Comparison of Prior and Contemporary Business
Environments
Prior Business
Invironment
Contemporary Business
Environment
Type of information
recorded and reported
Almost exclusively
financial data
Financial and operating
data, the firm's strategic
success factors.
Management
organizational structure
Hierarchical, command
and control
Network-based
organization forms,
teamwork focus-
employee has more
responsibility and
control, coaching rather
than command and
control.
Management focus Emphasis on the short
term, short-term
performance measures
and compensation,
concem for sustaining
the current stock price,
Emphasis on the long
term, focus on critical
success factors,
commitment to the long-
term success of the firm,
including adding
11. Manufacturing
Basis of compensation Standardization, economies of
scale
Quality, functionality, customer
satisfaction
Manufacturing process High volume, long production
runs, significant levels of in-
process and finished Inventory
Low volume, short production
runs, focus on reducing inventory
levels and other non-value-added
activities and costs
Manufacturing technology Assembly-line automation, isolated
technology applications
Robotics, flexible manufacturing
systems, integrated technology
applications connected by
networks
Required labor skills Machine-paced, low-level skills Individually and team- paced,
high-level skills.
Emphasis on quality Acceptance of a normal or usual
amount of waste
Goal of zero defects
Marketing
Products Relatively few variations, long
product life cycles
Large number of variations, short
product life cycles
12. Changes in the Social, Political, And Cultural Environment of
Business
Significant changes have taken place in the social, political, and
cultural environments that affect business. Although the nature
and extent of these changes vary a great deal from country to
country, they include a more ethically and racially diverse
workforce, a renewed sense of ethical responsibility among
managers and employees, and an increased deregulation of
business by the national government.
The new business environment requires firms to be flexible and
adaptable and to place greater responsibility in the hands of a
more highly skilled workforce. Additionally, the changes tend to
focus the firm factors outside the production of its product or
13. STRATEGIC FOCUS OF COST MANAGEMENT
A competitive firm incorporates the emerging and expected
change in the contemporary environment of business into its
business planning and practices. This firm is customer-driven,
uses advanced manufacturing technologies when appropriate,
anticipates the effect of changes in regulatory policies and
customer tastes, and recognizes its complex social, political and
cultural environment.
Guided by strategic or long-term thinking, the management
accountant focuses that make the company successful rather
than just focusing on cost control and other financial measure.
Cost management should focus not on the measurement per but
on the identification of those measures that are critical to the
14. Phases of the development of cost management systems should
consider the following:
Stage 1: Cost management systems are basic transaction reporting systems.
Stage 2:As they develop into the second stage, cost management systems focus on external
financial reporting. The objective is reliable financial reports; accordingly, the usefulness for
cost management is limited.
Stage 3: Cost management systems track key operating data and develop more accurate
and relevant cost information for decision making; cost management information is
developed.
Stage 4: Strategically relevant cost management information is an integral part of the
system.
Stages 1 and 2 of cost system development focus on the management accountant's
measurement and reporting role. Stage 3 shifts to operational control. Stage 4, the
management accountant becomes an integral part of management, not just a reporter but a
full business partner, with the skills of identifying, summarizing and reporting critical
factors necessary for the firm's success.
Critical Success Factors (CSFs) are measures of those aspects of the firm's performance
essential to its competitive advantage and, therefore, to its success. Many of these critical
15. COST MANAGEMENT AND ACCOUNTING SYSTEMS
The term cost management is widely used in businesses today.
Unfortunately, there is no uniform definition. We use cost
management to describe the approaches and activities of
managers in short-run and long-run planning and control
decisions that increase value for customers and lower costs of
products and services. For example, managers make decisions
regarding the amount and kind of material being used, changes
of plant processes, and changes in product designs. Information
from accounting systems helps managers make such decisions,
but the information and the accounting systems themselves are
not cost management.
16. Cost management has a broad focus. For example, it includes but it not confined
to the continuous reduction of costs. The planning and control of costs is usually
inextricably linked with revenue and profit planning. For instance, to enhance
revenues and profits, managers often deliberately incur additional costs for
advertising and product modifications.
Cost management is not practiced in isolation. It's an integral part of general
management strategies and their implementation. Examples include programs
that enhance customer satisfaction and quality, as well as programs that promote
"blockbuster" new product development.
WHEN SHOULD THE INTERNAL ACCOUNTING SYSTEM BE CHANGED?
The succeeding sections will analyze organizational innovations. These
innovations illustrate that internal accounting systems are an integral part of the
organization's architecture. When managers change the architecture of their
organization by decentralizing decision rights and empowering employees via
TQM programs because the firm's business strategy changes, accounting systems
are likewise modified. Similarly, when JIT production systems are installed,
accounting system changes follow. However, there were no organization changes
17. There is no such thing as the ideal management accounting
system. Each organization has different circumstances that lead
to different management accounting decisions. Also, accounting
must continually deal with trade-off's among external users
wanting information describing firm performance and internal
users wanting information for decision making and control.
Surviving organizations must meet the demands of changing
technologies and markets by revising their business structures
and organizational architectures. Because organizational
architectures are in a constant state of change, the accounting
system must regularly adapt.
18. INTEGRATIVE FRAMEWORK
Succeeding chapters of this book will describe and analyze cost management accounting
systems. Besides being used for both decision making and control, these accounting
systems support external reporting for shareholders, taxes, and government regulations.
Thus, one of the central themes of this text is that trade- offs arise when the accounting
system is designed for multiple purposes. In addition to providing a better
understanding of the internal uses of accounting system, this book reinforces the
importance of viewing the accounting system as part of the firm's organizational
architecture. This analytic structure will help readers better understand, use, and design
future accounting systems as well as other systems that evaluate and reward
performance and partition decision rights.
Figure 3-2 shows the integrative framework for understanding how the accounting
system is used in the firm's organizational architecture. Starting at the top, two external
factors (technological innovation and market conditions) affect the firm's business
strategy. The business strategy then interacts with the firm's organizational architecture
to provide incentives for managers and employees. These incentives affect the actions
taken, which in turn affect the value of the firm. Thus, Figure 3-2 emphasizes that
external factors like technology and market conditions affect investments,
organizational architecture, incentives, actions, and ultimately the value of the firm.
19. Figure 3-2 provides two important observations:
1. Changes in the accounting system rarely occur in a vacuum.
Accounting system changes generally occur at the same time as
changes in the firm's business strategy and other organizational
changes, particularly with regard to the partitioning of decision
rights and the performance evaluation and reward systems.
2. Alterations in the firm's organizational architecture, including
changes in the accounting system, are likely to occur in response to
changes in " firm's business strategy caused by external shocks fre
shifting market conditions.
20. Technological
innovation
Organizational architecture
Decision rights partitioning
Separation of decision management from decision
control
Centralization/decentralization
Performance evaluation system
Accounting system
Nonfinancial systems
Performance reward and punishment system
Compensation policy
Promotion policy
Business strategy
Asset structure
Customer base
Nature of knowledge creation
Firm value
Incentives and actions
Market
conditions
21. Three significant managerial implications are derived from
these two observations. First, before implementing an
accounting or other organizational change, it is important
to understand what is driving the change. Second, an
accounting system should not be adopted merely because
other firms are doing so, they may be reacting to a different
set of external shocks. Third, an accounting system should
not be changed without concurrent, consistent changes in
the way decision rights are partitioned as well as in the
performance reward systems. All three parts of the
organization's architecture must be internally consistent
and coordinated.