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Emerging role of Management Accountants in the New Economy

Friday, July 25th, 2008

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.

Source: Megapixel

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 21^st 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.

Training needs

“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

Source: National Geographic

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)
Benchmarking.
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 vrkedia@vsnl.com

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Profession versus Professionalism

Monday, June 30th, 2008

I was trying to analyze the definition of words Profession, Professional Body and Professionalism on www.reference.com. (These words are interchangeable used when the Accountants discuss among themselves.)

Profession:

A profession is an occupation, vocation or career where specialized knowledge of a subject, field, or science is applied. It is usually applied to occupations that involve prolonged academic training and a formal qualification. It is axiomatic that "professional activity involves systematic knowledge and proficiency." Professions are usually regulated by professional bodies that may set examinations of competence, act as a licensing authority for practitioners, and enforce adherence to an ethical code of practice.

Professional Body:

A professional body or professional organization, also known as a professional association or professional society, is an organization, usually non-profit, that exists to further a particular profession, to protect both the public interest and the interests of professionals. The balance between these two may be a matter of opinion. On the one hand, professional bodies may act to protect the public by maintaining and enforcing standards of training and ethics in their profession. On the other hand, they may also act like a cartel or a labor union (trade union) for the members of the profession, though this description is commonly rejected by the body concerned.

Many professional bodies perform professional certification to indicate a person possesses qualifications in the subject area, and sometimes membership in a professional body is synonymous with certification, but not always. Sometimes membership in a professional body is required for one to be legally able to practice the profession; see licensure.

Professionalism

Oxford Dictionary: the competence or skill expected of a professional.

Graham Ward in IFAC website: Professionalism, is about individual modes of behaviour that command respect and build trust. It is about excellence in service as measured by recognised standards.It is about delivering services or working to standards that meet the needs of and are expected by our clients.

Such behaviours are indeed a necessary part of belonging to a profession but almost any trade could be described as professional in these terms!

As any of us here knows, what separates the professionalism of members of a professional body from the behaviours of other types of so-named professionals, is the requirement to continually reinforce and demonstrate our professionalism, not merely assert it through a one-off qualification. And it is our membership of a professional body – one which embodies the distinguishing features I have defined – that confers on us the obligation to abide by professional standards and regulation.

It is therefore no longer enough for professions to say to the public ‘you must trust me’, today we must earn that trust and demonstrate: clearly, openly and often, why that trust should be given.

Source: Formula One Cars

Of the above three words, I had to search a lot on the word "Professionalism" to find a true meaning to suit accountancy profession. Members of accountancy profession will be normally be expected to take actions that contribute to the public interest.

The Principle of Professional Conduct on AICPA, US website summarizes Professionalism in a precise manner.

Section 51: These Principles of the Code of Professional Conduct of the American Institute of Certified Public Accountants express the profession’s recognition of its responsibilities to the public, to clients, and to colleagues. They guide members in the performance of their professional responsibilities and express the basic tenets of ethical and professional conduct. The Principles call for an unswerving commitment to honorable behavior, even at the sacrifice of personal advantage.

Section 52: In carrying out their responsibilities as professionals, members should
exercise sensitive professional and moral judgments in all their activities.

Section 53: Members should accept the obligation to act in a way that will serve the public interest, honor the public trust, and demonstrate commitment to professionalism.

Section 54: To maintain and broaden public confidence, members should perform
all professional responsibilities with the highest sense of integrity.

Section 55: A member should maintain objectivity and be free of conflicts of interest in discharging professional responsibilities. A member in public practice should be independent in fact and appearance when providing auditing and other attestation services.

Section 56: A member should observe the profession’s technical and ethical standards, strive continually to improve competence and the quality of services, and discharge professional responsibility to the best of the member’s ability.

Section 57: A member in public practice should observe the Principles of the Code of Professional Conduct in determining the scope and nature of services to be provided.

I would like to see your comments and views on this topic. Please feel free to comment on the blog post.

Regards,

Santosh Puthran

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Poll : Does CIMA, UK qualification add value

Sunday, April 13th, 2008

Poll : Does pursuing CIMA, UK qualification add value to a member of ICWAI, India ? Vote on the poll and share your thoughts by commenting the blog.

Poll: Vote here

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Membership of Accounting Body - Value Proposition

Friday, March 21st, 2008

ACCA, UK claims “The world largest and fastest growing global accountancy body.”

CIMA UK - “is a leading membership body that offers an internationally recognised professional qualification in management accountancy, which focuses on accounting for business.”

ICAEW, UK - “As a world leading professional accountancy body, the Institute of Chartered Accountants in England and Wales (ICAEW) provides leadership and practical support to over 130,000 members in more then 160 countries, working with government, regulators and industry in order to maintain the highest standards.”

Source : Australian Superbikes

ICAI, India - “The Institute of Chartered Accountants of India (ICAI) is a statutory body established under the Chartered Accountants Act, 1949 (Act No. XXXVIII of 1949) for the regulation of the profession of Chartered Accountants in India. During its more than five decades of existence, ICAI has achieved recognition as a premier accounting body not only in the country but also globally, for its contribution in the fields of education,….

ICWAI, India: “We are a premier, dynamic, vibrant professional institution actively associating itself in the industrial and economic development of the nation. The profession places itself at the service of the nation, government, industry, and the society to realise the objectives of a welfare state resulting in the prosperity and the well being of its people - a fact increasingly realised with the opening up of the country’s economy and change in the economic scenario of the world.”

The real test lies is “What is the benefit of being a member of a particular accounting body ?” Or to rephrase “What is the added value of being a member of premier accounting body ?”

I looked at the membership section on the website of each of the professional body and analysed what each institute offers their members in promoting the profession. Of course, it is difficult to make a judgement looking at the website but it gives a fair view what an Institute can do for its members and profession.

ACCA, UK : Offers CPD, learning opportunities and Job portal for members. Access to publication, booklet and fact sheet for the members. Online resource providing free access to UK and international Accounting and Auditing Standards. Global support to the members who are spread across 80 countries.

CIMA, UK: The members section does not have much details. The section which states, “As a student, member or one of our business partners, you will already have a unique Contact ID. You can use this to create your own My CIMA sign in and access our wide range of personalised services and resources that are all tailored to your needs.”

ICAEW, UK: The member section has a wealth of information. This ranges from Members News and Event, Branding the Profession, Online library with collection of over 40,000 books, Business Essentials, Practise Information, Resources and Support, Products and Services, Special Interest Groups and much more. The Institute also has Press and Policy comments. Also see Service Standards.

ICAI, India: Members section focussed on what services Chartered Accountant can provide rather what the institute can offer. However Resource section is very impressive with list of Accounting Standards, Guidelines and circular which is useful for the members as well as the general public.

ICWAI, India: Membership section has resources and download section with Cost Accounting Standards and few other items.

The best institute to reckon is ICAEW, UK with maturity it displays on the website in all matters concerning the profession. The depth of information contained in the website demonstrates its leadership in the profession and the other accounting bodies are bound to follow. The cross recognition with the other accounting bodies will help the mobility of members globally. The service standard section acknowledges the Institute has a strong infrastructure to respond.

ICAI, India website is not focussed for its members but the contents are available to general public, which is really a plus. Although ICAI is the only accounting body (without any parallel in India), it has made a lot of progress in past one year. Thanks to Mr. Sunil Talati. The members of ICAI are bound to gain from the statutory protection for assignments in the country and as professionals they will never be out of work. Outside the country…. they will face a uphill task.

ACCA, UK has been forefront in promoting itself globally with a membership base in 80 countries. They have recognition arrangements with lot of accounting bodies in the world and actively pursing to cover all the accounting bodies in the world. The reason ACCA, UK does not have full recognition arrangements with the other Chartered bodies (recognised under Royal Charter) primarily they have recognition arrangement with ICAEW, UK.

CIMA, UK has been promoting as ‘Accountant for the Business’. Practise areas very limited but their members are positioned as backbone of business. Competing with MBAs.

So far the best value for membership is : - ICAEW, UK. Share your thoughts and comments on this topic.

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Regards,

Santosh Puthran

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Free Laptop with AOL Broadband

Saturday, January 19th, 2008

Has the world started rotating the other way round “Free Laptop with AOL Broadband at Carphone Warehouse” !!! or Free Laptop when you subscribe for mobile phone contract.

I did not believe when these offers came the first time.

The mobile phone offer reads:

Our best offer yet! Connect selected mobile phones to selected monthly contracts this month and get a free laptop!

That’s right a Free Dell Inspiron 1520 laptop is yours on many £35 a month tariffs this winter when you connect to an 18 month contract. There are no catches or small print, we’ll simply send out your free laptop as soon as we’ve confirmed you’ve paid your first month’s mobile bill.

The laptop retails at £ 380 to £ 489. And the total commitment on mobile phone contract is £ 630. So you can guess where the margins come from when the buying is wholesale.

The other product that amazes me is Gillette Shaving Razor. Every year they add extra blade on the razor and the product sells. Currently it has 5 blades - Retails at £ 21.99 and cartridges of 8 at £ 14.99. In year 2010, it may have 10 blades. Will you consider them expensive or cheap ?

With the change in technology, the rules of the business change. Tata’s recently came up with Nano, a cheapest car on the planet !!! Now the role of management accountants in the industry has become more wider than ever.

In my SAP implementations, Financial Controllers have been more interested in Management Accounting Reports viz. Contribution/Margin reports, product group/ product wise. They want sliced and diced reports region-wise/customer group wise. The driver to these reports are the business managers who want it for decision making. SAP is encouraging the use of Business Intelligence for reporting.

The world is also spinning the other way round in Accounting. As the rules of business are changing, so is the role of management accountants and management accounting.

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Santosh Puthran

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Networking and how to use Social Networking sites

Sunday, January 13th, 2008

I have been stumbling upon good sites for the benefit of the readers of Management Accountant Blog. I happened to meet Mr. Murthy from Rajahmundry, AP. I liked the websites he had stumbledupon and submitted reviews on a couple of posts and so I spoke to him.

To my surprise, he volunteered to help me and provide me with a couple of tips for my blog. We chatted on messenger for more than 2 hours and his tips were very helpful. I hope this helps you too.

Layout of the Blog should be simple. Fonts matter!!! Accountants like reading small fonts (may be because we are interested in details and numbers.)
Create and promote your profile on http://www.linkedin.com/ , http://www.spock.com/ and http://www.stumbledupon.com/ The profiles will help you network with right people and build up your network. Professional networking sites like linkedin help you immensely.
Search Optimisation Tips: Use search optimization to drive internet traffic to your website. Read more

His advice was very helpful and you must have noticed the change on my blog. Currently I am working my profile on http://www.spock.com/Santosh-Puthran-jKkU14H and sending invites to people who are in my address book.

Spock is a very powerful internet tool. Even if you have not created your profile on spock, it will recognise you from bio pages, social networks, news sites, blogs or directories. Take for e.g. Bill Gates, Ratan Tata, Tony Blair, Hillary Clinton, Barack Obama or Manmohan Singh.

Spock lets you determine where people can find you on the internet. When you sign up for Spock you can claim your search results and shape what information people see. Plus, when there is new information about you on the internet, Spock sends you an alert so you are always up to date. Signing up is free and easy - just click here.

How do I claim a search result?

To claim a search result on Spock, click “Claim Your Search Result” on the page. When you have successfully claimed your search result on Spock, it will be merged with your current search result, and will be tied to your Spock account.

I was pleasantly surprised when I saw my profile on Spock and I claimed it.

As a professional, how should I use professional networking tools?

Linkedin and Spock will help you build up your professional network. Companies are reluctant to spend on advertising for any vacancies or professional work. Virtual networking will help you to progress in your career by connecting to the right people. Spock will help you link all your profiles and websites together. This will help people know you and your work.
Plaxo : http://www.plaxo.com/ is a contact address management tool which is integrated with Outlook and Linkedin. You update your info, your friends update theirs, and everyone stays in touch! You should sync your mobile phone with Outlook to have your contacts handy. You never know when opportunities strike.
StumbleUpon: Use stumbleupon to review good sites on the internet. You will always find people to subscribe to your feeds on stumbleupon if you are stumbling on good sites. Search your name on http://www.google.com/ and see the results. This will give an indication whether you are known on the internet. Then check whether you are linked to the professional network.
Google Reader: I have found www.google.com/reader very useful to keep myself updated when I subscribe to feeds of good websites. You will always notice the word “RSS” or “Atom” on a website. Click it and subscribe to the updates from the website.
Blog: I would always recommend you have your own blog to share professional updates or participate by commenting on websites or blogs. This will help people in your profession to know about you. The accountants who are in practise should always have their website and should blog or comment on important updates in business or taxation. This will help them to be known in business circles in the industry.

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Santosh Puthran

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New Year Resolutions - Year 2008

Tuesday, January 1st, 2008

I got a very thoughtful greeting on the New Year. I would like to share it with you:

Life is like having a cup of tea.
You sit by the side of the window, lift the cup and take a careless sip,
Only to realize, somebody forgot to put the sugar.
Too lazy to go for it you somehow struggle through the sugarless cup.
Until you discover un-dissolved sugar crystals sitting at the bottom…

The last line really stirred me. My new year resolutions would be to

Stir Management Accountants to aspire like Dr D K Sarraf
Stir Management Accountants to participate in discussions and share their knowledge on their blogs.
Stir Management Accountants in practice to their own website.
Stir Management Accountants to become IT savvy - organise their calendar, address book, google reader, stumbleupon and bookmarks on the internet.
Stir Management Accountants to plan and travel around the globe for business and pleasure.

Is there anything more? Then I would like you to stir me up! You know where to post your comments .

Wish You and Your Family a Very Happy and Prosperous New Year 2008

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Santosh Puthran

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Choosing an Accounting Qualification - My first video message

Saturday, December 29th, 2007

I have been writing on the blog for quite sometime. So I decided to attempt on first video message. The message is more relevant who wants to make his career globally.

Watch me http://accountant.blip.tv. The above video link in large picture

Regards,

Santosh Puthran

“Some people look for things that went wrong and try to fix them. I look for things that went right and try to build on them.” - From the book “Re-Image - Tom Peters“

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CIMA ‘not happy’ with financial statements

Sunday, December 2nd, 2007

The Chartered Institute of Management Accountants (CIMA) has expressed a number of concerns over the complexity of financial statements.

Reported in Accountancy Age, Charles Tilley, chief executive of CIMA, claims that companies are not putting 80 per cent of their assets on balance sheets and that there is not enough disclosure on cash flow.

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Regards,

Santosh Puthran

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From accountant to business partner

Monday, October 8th, 2007

When are management accountants more than just management accountants? When they transform into business partners, according to the Chartered Institute of Management Accountants, in a report that seeks to set the benchmark for how top companies treat their finance functions henceforth.

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Regards,

Santosh Puthran

http://www.managementaccountant.in/

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Archive for the ‘CIMA’ Category

Shape of the things to come

Present role of Management Accountants – Conceptions & Misconceptions

Futuristic role of Management Accountants

Training needs

Changes in tools and techniques