COST and MANAGEMENT ACCOUNTING
as a key enabler of
SUSTAINABLE COMPETITIVE BUSINESS
A.N.Raman
Member TCM Working Group
Member PAIB Committee of the IFAC
Past President South Asian Federation of Accountants
IFAC view of Sustainability
Sustainable
development
and
the
sustainability of organizations have become
mainstream issues for politicians, consumers,
and business leaders. From an economic, as
well as an environmental and social
perspective,
sustainability
issues
are
transforming the competitive landscape,
forcing organizations to change the way they
think
about
products
and
services,
technologies, processes, and business models.
Competent and Versatile
Drivers of Sustainable
Organizational Success
Effective Leadership and Strategy
Integrated Governance, Risk and Control
Innovation and Adaptability
Financial Management
People and Talent Management
Operational Excellence
Effective and Transparent Communication
Sustainable Organizational Success
Customer and Stakeholder Focus
TIME SLICES IN MA EVOLUTION
Eye ball control
Prior to 1825
Simple cost data on production
Scale advantages
Between 1825 to 1925
Capacity centric MA concepts
Process cost per unit
IE based standard costing
Between 1925 to 1975
External reporting, Regulations,
Income taxes, Levies, etc
TIME SLICES IN MA EVOLUTION
After 1975
Value revolution
Life cycle concept
Strategy evaluation and control
Brand management
Distribution and channel management
Service sector evolution
Efficiency evaluation tools
A Battle on Two Fronts
ROI
(1) Strategy
choose the right ones …..
… and align the cost structure
Strategic
MA
(2) Efficiency & Utilization
Operational
take waste and unused capacity
MA
out of the organization
Management Accounting
STRATEGIC AND OPERATIONAL TOOLS
STRATEGIC TOOLS
Balanced Scorecard, Strategic Cost management, Target Cost Analysis, Customer
Profitability and Customer value Measurement.
OPERATIONAL TOOLS
Cost of Quality, Kaizen Costing, Parametric Cost Control
Activity Based Costing and Budgeting, Activity Management
Vendor Cost Analysis, Statistical Quality and Cost Control,
Six sigma costing, Service Process Costing, Non Financial Performance Measures,
Benchmarking, Process Mapping.
THE ABOVE TO BE IT SUPPORTED OR EVEN WEB BASED
DIMENSIONS OF CHANGE IN MA
•
•
•
•
•
•
•
OWNERSHIP
CONTENT
FREQUENCY OF USAGE
LIFE CYCLE ORIENTATION
PROCESS ORIENTATION
NEW TOOLS AND TECHNIQUES
INTEGRATION WITH IT
STRATEGY DEFINITION
METHODOLOGIES
TIME
PROJECT
Expenses
Business Model
FOR A MA ACCN
ACCOUNTING,
General
ledger
PROGRAM
MANAGEMENT
$$s
hours
MINIMIZE
UNUSED
(AVAILABLE)
CAPACITY
OPERATIONAL PERFORMANCE
CUSTOMERS,
MARKETS
STRATEGY
REALIZATION
SUPPLY / INVEST
STRATEGY
SUPPLY CHAIN
MANAGEMENT
RESOURCES
ACTIVITIES
(ABC/M)
ACTIVITY
DRIVERS
MAXIMIZE
Alignment of cost
structure to strategy
DEMAND STRATEGY
What-if Planning?
PRODUCT &
SERVICES
- PRODUCTIVITY & EFFICIENCY
- BENCHMARKING
- UTILIZATION/YIELD
- TOTAL QUALITY MANAGEMENT
(Cost of Quality)
PROCESS
MANAGEMENT
DEMAND
VOLUME & MIX
FORECAST
PRODUCTS,
CHANNELS &
CUSTOMERS
Asset
management
PROFITABILITY
ANALYSIS
REVENUES
SHAREHOLDER
WEALTH
PERFORMANCE
MEASUREMENT
[VBM]
SCORECARDS
KEY PERFORMANCE INDICATORS (KPIs) versus ACTUALS
MAXIMIZE
Competent and Versatile
CMA as a key enabler of Sustainable
Organizational Success
Customer and Stakeholder Focus
CP and LCC
Effective Leadership and Strategy
Cost Deployment
Integrated Governance, Risk and Control
Info Risk Mitigate
Innovation and Adaptability
Target Costing
Financial Management
Product Profits
People and Talent Management
Operational Excellence
Effective and Transparent Communication
Cost Competency
Op cost manage
Cost Reporting