WEEK 1 Strategic Cost Management Involves the development of cost management information to facilitate the principal management function which is strategic management. Strategic Management Involves the development of a sustainable competitive position Cost management Practice of accounting in which the accountant develops and uses cost management information Adds value by helping a business to be more competitive Cost management information Information that the manager needs to effectively manage the firm, profit-oriented as well as not-forprofit organization. Includes both financial information about cost and revenues as well as relevant non-financial information about productivity, quality and other key success factors. Users of Cost Management Information ￮ Business firms ￮ Governmental Units ￮ Non-profit organizations Uses of Cost Management Information ￮ Strategic Management ￮ Planning and decision making ￮ Management and operational control ￮ Reportorial and Compliance to Legal Requirements Management Accountant’s Role in Strategic Cost ￮ Cost Management ￮ Practice of accounting in which the accountant develops and uses cost management information ￮ Management accounting ￮ Involves the application of appropriate techniques and concepts to economic data so as to assist management in establishing plans for reasonable economic objectives and making rational decisions ￮ Process of identification, measurement, accumulation, analysis, preparation, interpretation and communication of financial information which is used in planning, evaluating and controlling activities ￮ Scorekeeping or data accumulation ￮ Interpreting and reporting of information ￮ Problem solving Administrative functions ￮ Planning ￮ Involves setting of goals for the firm, evaluating various ways to meet the goals and picking out what appears to be the best way to meet the goals ￮ Controlling ￮ Involves the evaluation of whether actual performance conforms with planned goals ￮ Decision making ￮ Involves determination of predictive information (e.g. relevant costs) for making important business decisions Professional Environment of Cost Management Line vs Staff Authority Line Authority authority to command action r give orders to subordinates Line managers are directly responsible for attaining the objectives of the business. Staff authority Authority to advise but not command others,it is exercised upward. Staff managers give support, advise, and service to line departments. (personnel, purchasing, engineering and accounting) Controller and Controllership Controller (also called the chief accounting officer) is the financial executive primarily responsible for management accounting and financial accounting Controllership is the practice of the established science of control which is the process by which management assures itself that the resources are procured and utilized according to plans in order to achieve the company’s objectives. Basic functions of Controllership ￮ Planning ￮ Establish and maintain an integrated plan of operation consistent with the company’s goals and objectives ￮ Control ￮ Develop and revise against standards against which to measure performance and provide guidance and assistance to other members of management in ensuring conformance of actual results to standards ￮ Reporting ￮ Prepare, analyze and interpret financial results for utilization by management in the decision making process ￮ Accounting ￮ Design, establish and maintain general and cost accounting systems at all company levels ￮ Other Primary Responsibilities ￮ Manage and supervise functions such as taxes, maintain appropriate relationships with internal and external auditors, develop and maintain systems and procedures, develop accounting policies Qualifications of the Controller ￮ Excellent technical foundation in accounting and finance ￮ Understanding of the principles of planning, organizing and control ￮ General understanding of the industry in which the company competes and the social, economic and political forces involved ￮ Thorough understanding of the company, its technologies, products, policies, objectives, environment etc. ￮ Ability to communicate with all levels of management and basic understanding of other functional problems ￮ Ability to express ideas clearly in writing or in making informative presentations ￮ Ability to motivate others Treasurer and Treasurership Treasurer Has custody of cash and funds invested in various marketable securities. Generally responsible for maintaining relationships with banks and other creditors. Treasurership is concerned with the acquisition, financing and management of assets of a business concern to maximize the wealth of the firms for its owners Basic functions of Treasurership ￮ Funds procurement ￮ Raising of funds in accordance with the firms planned capital structure ￮ Banking and custody of funds ￮ Direct management of cash and cash equivalents and maintenance of good relations with banks and other non-bank institution ￮ Investment of funds ￮ Management of the Company’s placements and securities or purchase of debt or equity instruments ￮ Other functions ￮ Corporate pension and retirement fund ￮ Investor relations ￮ Compliance with legal and regulatory provisions relating to funds procurement, use and distribution as well as coordination of finance function with accounting function ￮
