This is a guest post by Mr. V R Kedia B.com FICWA. He is a practising Cost & Management Accountant from Mumbai
Shape of the things to come
- Effect of LPG – Liberalisation, Privatisation, and Globalisation – Global competition, Fittest will survive, sub – optimal units have to die.
- Size, strong balance sheets and a history of achievements are no longer guarantees of continued success.
- Global competition – strategic alliance networks and massive engineering efforts place new demand on all professionals.
- Many of old hierarchies will be replaced by flat structures.
- Every organisation is undergoing a process of internal churning.
- Employees will be judged by their delivery of agreed output and level of services, not on spending 8 hours a day attending their place of work.
- Financial information will be considered as only one portion of the balanced scorecard of measures used in organisational decision making.
- Knowledge will replace physical and financial capital as an organisations primary resource.
- Knowledge and application of knowledge will create competitive advantage.
- People will have to be accustomed to work in permanent stage of emergency.
- More empowerment at the individual level.
- Adoption of team based organisation.
- Internet is rapidly transitioning businesses into real time.
Present role of Management Accountants – Conceptions & Misconceptions
- Cost and Management accounting system had often become of little importance to managers. Many regarded them as minor routine belonging to the accountants, used to evaluate stocks and prepare monthly results speedily.
- There are all the obvious things to do: Statutory and Financial accounting, Taxation compliance, Funding, Management reporting and so on. All of this tends to be in the background; it just has to happen in any event. Management Accountants have not yet progressed more towards bridging the gap between managers and accountants and they have yet to concern more with looking towards the future – at where business is going and what is going to happen.
- Very few conceptual modifications have been brought in, in the cost and management accounting in the last 40 years.
- Cost is too important to be left to the cost and management accountant.
Futuristic role of Management Accountants
- Most of us will be doing the job, which we have never learnt and quite different from what we have been doing so far
- The illiterate of the 21st century will not be those who cannot read and write, but those who cannot learn, unlearn and relearn.
- We have to undergo the process of “Learning, Un-learning and re-learning” more frequently.
- Industry will be requiring “learning” professional rather than “learned” professional.
- Future will be “knowledge era”. So obsolesce of knowledge will be very fast and more visible among accounting professionals.
- Management Accountant must re-orient its capabilities, otherwise he will be overtaken by other professionals.
- Management Accountant has to be futuristic instead of provider of historic or current information. He should ask “how better” and help management in decision-making level and for performance improvement.
- ‘Imagination is more important than knowledge’. – Albert Einstein.
- The responsibility of the management accountant is less on forecasting the future and more on contributing to its creation.
- Management Accountant will more often play the role of a catalyst / changing agent rather than an accountant.
- Management accountant will have to be more adaptable to be a versatile professional rather than an accounting specialist.
- Quality of “leadership” will be more in demand than that of a “manager” or an accountant.
- Out –cost ascertainment, product costing and cost control. In –cost management, activity-costing etc.
- Re-positioning of the management accountant – make it more relevant and useful to the organisation.
- Management accountant to change the “Accountant” from their name to information manager/Cost manager.
- Shift from “informational” role to an “influential” role.
- To develop alliance with- finance, MIS/IT, industrial engineering, corporate planning.
- To actively participate along with managers in decision making and strategy implementation.
- Change in mind-set from product profitability to customer profitability analysis.
- No more a scorer of the cricket match – but to be manager advisor to develop appropriate strategy to win the match.
- Management accountant needs to lead the effort in training managers to use accounting information along with balancing it with other key data sources
- FOREX and Treasury function will be important profit centres.
- “If you want to remain employed, you have to remain employable” – Jack Welch, CEO-GE.
- Dilemma for the management accountant will be to either change or cease to exist.
- Management accountant must learn fast, forget even faster and focus on winning.
- Management accountant requires very different skills from those that accountants needed to fill the narrow role that has been adopted by many finance professionals over the last three decades.
- Continuing Professional Education (CPE) programme be made compulsory by the institute for skill upgradation and aquiring the latest technology.
- Able to work well under pressure.
- Development of multi-disciplinary skill.
- Good communication skill – oral, written and presentation and a team player.
- Ability and drive to work against strict deadlines and targets.
- Ability to work with minimum supervision and a busy and dynamic work environment.
- Ability to prioritise multiple urgent tasks.
- Possessing good public relations skill.
- Adding a new skill to executive skill-set, every few years.
- To develop expertise in new ‘Green Field’ projects like-
- Infrastructure sector (Energy, Transport etc.)
- Information and Communication sector
- Service sector
- Agro based industries
Changes in tools and techniques
- Target costing v/s. Historical costing.
- Life cycle costing.
- Activity Based Costing (ABC) – ABM.
- Total Cost Management (TCM)
- Business Process Re-engineering (BPR)
- Kaizen costing.
- EVA / CVA
- Total Quality Management / ISO.
- Cycle time reduction (time compression).
- Supply chain management (SCM).
- Just in time (JIT).
- Elimination of dysfunctional activities.
- Out sourcing and co-sourcing activities.
- Defect prevention v/s. fault rectification.
- Zero Based budgeting.
- Traditional budgeting v/s. New budgeting (comparative Table enclosed).
- Full year budget exercise v/s reactive rolling forecast (computer generated budgets are obsolete the minute they are printed).
- Dis-continuity of time cycle – month end and year end- and to invent information system to handle multiple time horizons simultaneously.
- Radical change in IT/MIS e.g.
- Integrated database that meet the total business requirements (like ERP Software
- MIS that is accessible and easy to use by all staff.
- Rich supply of information in the form of a variety of report.
- MIS for decision-making.
‘It is never safe to look into the future with eyes of fear’. – E. H. Harriman.‘My interest is in the future, because I am going to spend the rest of my life there.’ –
C. F. Kettering.
You can contact Mr V R Kedia on +9193241 80717 or email email@example.com
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