Accountancy

Does IT strategy of your company influence your career ?

accountant — Sat, 04 Oct 2008 06:04:00 +0000

Management Accountants are known for strategic accounting rather than doing mundane things. The Canadian Management Accountants recognise themselves as “Creative Accountants”. Yes, internal accounting is like that. A product may show profit by applying overheads in the traditional way but may go into loss when applied the concepts of ABC.

Do you feel advances in Information Technology has direct influence on Management Accounting ?

I have posted the point on http://cmaindia.informe.com forum and views of members are as follows:

Rajendra Patil of Appsconsulting

My primary answer would be ‘YES”.

In various areas of management accounting, it is ‘essential’ to collect, calculate and present the data to the users. The advancement in the field of harware and software solutions has helped management accountant in a great way.

First example would be the ERPs. The regular job of the management accountants in manufacturing industries is to calculate the cost of the inventories. This has become very simple (or fully automated). So the professional can look into the other areas.

With the development of various tools to generate cubes, we can now ’slice and dice’ the data very easily and can use the tool to generate views to find the possible reasons for the business pains. Using the Business Intelligence (BI) solutions we can now use the information of profitability in other areas of Customer Intelligence solutions like Customer Segmentation, Cross Sell-Up Sell, Campaign management, Customer Life cycle costs etc.

B V Prabhakar also shared the same view

IT , has no doubt, revolutionised the Management Accounting.

ERP , such as SAP helps Management Accountant to prepare separate Financial Statements for Tax laws under Local GAAP and also under International Standards such as IAS/IFRS/US GAAP. The time taken by Accounting Groups for Monthly Closing Process such as Bank reconciliation, Inter-company reconciliation, FOREX Payables/Receivables reinstatements and Consolidation, is considerably reduced.

Ashutosh Gupta had concerns

With the advancements of IT in day to day life of management accountants whether the role of Accountant has been secondary to IT professionals ?

Management Accountants roles has gone a drastic change over the years. The role of accountants has enhanced with these IT tools where we have to work with operations and business. Our role is understanding the requirements of the business and designing the solutions that would help them in decision making. ABM, EVA is a good examples.where you require details for analysis.

This leads to another question:

As Management Accounting is directly influenced by technology, does IT strategy of the company influence your career ?

I feel it does. Just like how a company scans you by looking at your CV of your achievements in past, you should review the history of the company on how it has progressed till now. A general drive in improvement of the system indicates that you will be able to demonstrate your role as a Management Accountant.

E.g. long time back, I had a interview call from a large MNC in Hyderabad where they needed Business Analyst. I went through the interview process where they told me they were using SAP 3.1h when the world had moved to 4.6C. On enquiry about the upgrade, they said, it was not on their agenda in the near future. I had terminate the interview process since I did not feel that I would be able to progress over there with the ancient technology.

Exchange your thoughts and share your experiences on

Whether IT strategy of the company influence you as a Management Accountant? Should you continue with a company or look for another opportunity ?

Regards,

Santosh Puthran

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Management Accountant moves to www.managementaccountant.in

accountant — Tue, 30 Sep 2008 06:08:00 +0000

Management Accountant which was earlier http://managementaccountant.blogspot.com has moved to its own domain www.managementaccountant.in . You will be able to access the blog same as before.

The technical changeover is seamless since Management Accountant blogs on the blogger. I had moments of challenge when I had changed the setting in the domain name control panel. Now I am delighted with the new home www.managementaccountant.in.

The first post was published in Management Accountant on 25th Nov 2006 “Best Practice Managerial Accounting with MySAP ERP Financials“. Then there has been series of articles published that would help the Management Accountants and the aspiring ones.

Few statistics I would like to share with you (readers) about the Management Accountant Blog.

Top 10: Most Read pages on The Management Accountant Blog

Top 10 key words search that leads to The Management Accountant Blog

Top 5 countries where readers of the Management Accountant reside

United States
India
United Kingdom
Australia
Canada

Top 10 My Favourites

Quite often I have received emails from the readers of the Management Accountant blog, about what accounting qualification they should pursue, where to do SAP training and certification and how to set up a website or a blog. Some of the topics are based on the questions posed to me by the readers. Keep writing to me so that I can help you.

The more you participate in various forums, the more you know about the needs and requirements of the professionals. CMA India Portal is one of the outcome of such endeavour where the ideas were discussed with management accountants and portal has been designed to fulfill the networking needs. This portal helps in sharing experiences and exchanging ideas.

Management Accountant Blog has achieved a google page rank of 4/10. All the credit goes to the readers of the Management Accountant blog. On my New Year Resolution, there is a quote

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…

With Regards,

Santosh Puthran

Cost of buying information

accountant — Tue, 23 Sep 2008 20:57:00 +0000

In the Information Technology age, we have wide sources available for information that would help in decision making. A skilled user of internet will gather information free on internet and the lesser ones will seek advice from their friends or colleagues or buy information in the form of journals, magazines or library subscription.

What will you rely on when you make decisions in your company ?

Harvard Business School’s Francesca Gino published a working paper, “Getting Advice from the Same Source but at a Different Cost: Do We Over weigh Information Just Because We Paid for It?”

Gino’s results are based upon an experiment where subjects were asked to answer different sets of questions about American history and were provided the opportunity to receive free advice as well as costly advice—the same advice, as it turned out.

Gino’s conclusion: When the advice is costly, subjects are more inclined to take it into consideration and use it. And that conclusion can have profound consequences for consumers, managers, and organizations in their decision making, she says.

Click here to read More - Interview with Sean Silverthorne

Are you going to hire Management Consultants for a business process change in your company or rely on your own employees to initiate a change ?

Regards,

Santosh Puthran

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Financial Accounting e-book project - Dr D V Ramana & Team

accountant — Thu, 18 Sep 2008 10:10:00 +0000

Dr D V Ramana Ph.D, Professor, Accounting, Xavier Institute of Management, Bhubaneswar.

Dr. D V Ramana has converted his teaching notes into an e-book. This is opened for the students on a pilot basis to get their feedback and suggestions for improvement.

Visit http://www.accounting-ebook.com/

Unable to see the video. Click here

The e-book contains videos on various topics on finance. Dr D V Ramana would like inputs from you on this project. You will be glad to know that he is also working on IFRS e-book project.

I congratulate him for his efforts on Financial Accounting e-book and wish him All the best for his future projects.

PS: Dr Ramana is a subscriber of Management Accountant Blog. If you are interested to make a guest post on the projects you have undertaken or your article on specific topic that would help the readers, I would be happy to post the same on the blog. Please contact me.

Regards,

Santosh Puthran

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Beyond Budgeting - A radical proposition

accountant — Tue, 16 Sep 2008 14:51:00 +0000

A radical proposition? - From The Beyond Budgeting Round Table (BBRT)

Budgeting, as most corporations practice it, should be abolished. That may sound like a radical proposition, but it is merely the final (and decisive) action in a long running battle to change organizations from centralized hierarchies to devolved networks. Most of the other building blocks are in place. Firms have invested huge sums in quality programs, IT networks, process reengineering, and a range of management tools including EVA, balanced scorecards, and activity accounting. But they are unable to establish the new order because the budget, and the command and control culture it supports, remains predominant.

10 reasons why budgets cause problems:

Budgets are time consuming and expensive.
Budgets provide poor value to users.
Budgets fail to focus on shareholder value.
Budgets are too rigid and prevent fast response.
Budgets protect rather than reduce costs.
Budgets stifle product and strategy innovation.
Budgets focus on sales targets rather than customer satisfaction.
Budgets are divorced from strategy.
Budgets reinforce a dependency culture.
Budgets lead to unethical behaviour.

There are twelve principles (two sets of six) that govern the Beyond Budgeting Model. One set relates to adaptive management processes and the other set relates to a devolved leadership.

Process Principles

The six principles of managing with adaptive processes are as follows:

Goals - set aspirational relative goals for continuous improvement, don’t negotiate fixed contracts
Rewards - reward shared success based on relative performance, not on fixed targets
Planning - make planning a continuous and inclusive process, not an annual event
Controls - base controls on relative KPIs and performance trends, not on variances against plan
Resources - make resources available as needed, not through annual budget allocations
Coordination - coordinate interactions dynamically, not through annual planning cycles

The results of applying these principles include setting aspirational goals, reducing gaming, encouraging ambitious strategies and fast response, reducing waste, improving customer service, and promoting learning and ethical behaviour.

Leadership Principles

The evidence from our cases is that there are six principles that leaders should adopt:

Outcomes - focus everyone on the outcomes, not on hierarchical realtionships
Processes - organize as a lean network of accountatble teams, not as centralized functions
Autonomy - give teams the freedom and capability to act, don’t micro-manage them
Responsibility - create a high responsibility culture at every level, not just at the centre
Transparency - promote open information for self-management, don’t restrict it hierarchically
Governance - Adopt a few clear values, goals and boundaries, not detailed regulations

The effects of these principles include: a clear governance framework leads to the acceptance of local decision making by front-line teams throughout the organization; a high-performance climate leads to sustained competitive success; the freedom to decide fosters innovation and responsiveness; team-based responsibility results in a greater focus on creating value and reducing waste; customer accountability builds more commitment to satisfying customers profitably; and finally, an information culture based on openness and “one truth” promotes ethical behaviour.

SAS can assist with the implementation of these principles as follows:

Target setting - obtain information on competitor activity and link to external databases
Strategy - make the update and maintenance of objectives and targets an easy process
Growth and improvement - build hypotheses and scenarios and test against capabilities
Resource management - track the life time cost and value of resources
Coordination - search for and use cause and effect relationships across business units and processes
Cost management - identify areas of cost which need attention through analysis (eg. Activity Based Costing) and data mining
Forecasting - create and maintain rolling forecasts
Measurement and control - implement a balanced scorecard with leading and lagging indicators
Rewards - track actual performance against targets
Delegation - maintain personal information portals.

SAS is the only software supplier that is capable of collecting, transforming, modelling, analysing and supporting the complex information needs of organisations. Our flexible framework adapts technology to the management processes - not the other way around.

Sources:

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Guy Kawasaki presents "The Art of the Start"

accountant — Sun, 07 Sep 2008 21:23:00 +0000

“The Art of of Start” is an excellent presentation on what you should do when are a start-up business. The presentation has tips and is with humour. Highly recommended video to watch.

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Regards,

Santosh Puthran

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Google’s Chrome - A new starter in the Internet browser market

accountant — Fri, 05 Sep 2008 18:42:00 +0000

Rumors were put to rest when the Google launched its new browser “Chrome“. The beta version claims

“Google Chrome is a browser that combines a minimal design with sophisticated technology to make the web faster, safer, and easier.”

Most of the products that google launches are in beta and they allow the public to test their products till they finally graduate. Gmail which was launched in 2004 is still at beta stage !!!

Source: www.gizmodo.com

The new starter Chrome is a new starter in the browser market which is largely dominated by Internet Explorer. Firefox is becoming a popular open source and has made a dent in the market. With “Enter the Chrome” will the browser users be split in three or one of the browser is going to die.

In my earlier post, “How does Firefox make money ?”, I found that Firefox makes money from Google Search and other affiliate programs. So if there is shift by users to Chrome browser then it would ultimately affect funding of Firefox. This could jeopardize the development efforts of Firefox - an open source browser - since the competitor is google who has now its own browser.

Source: www.dailygalaxy.com

Firefox 3 had over 8 million download in a single day and it has set a world record. It would interesting to see whether google publishes the number of downloads of Chrome browser. This would be indication which way the wind would blow.

Personally I would prefer to use Firefox now and use Chrome for casual browsing. The download size of Chrome is 475kb as opposed to Firefox (7.8mb) and Opera (9 mb). So I am not sure whether it is a secured browser for transacting on the Internet.

Anyway, welcome aboard “New Starter - Chrome”. Your induction in the market is welcomed.

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Regards,

Santosh Puthran

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Customer Loyalty cards

accountant — Mon, 01 Sep 2008 18:33:00 +0000

Year 1998: Our company was selling merchandise directly to the end customer. The customer were small corner shops who were buying worth £ 100 worth products in mix and match. Our finance director insisted that when recording the sales in the computer system, the sale should be recorded customer wise instead of lumping it under miscellaneous customer.

The volume of sales was small in comparison to overall sales, but our finance director insisted on getting customer on the database.

Year 2008: Now when I go to any supermarket or a petrol pump, I have got loyalty cards for each of them. I prefer to go to a particular supermarket, since I get loyalty points and rebate coupon. Buying from a particular pump, I earn “free air miles”. Each time you checkout, you offer your loyalty card be swiped.

Has the shopping experience changed in last 10 years ?
Has the data gathering techniques about the customer preferences changed ?

According to article “The card up their sleeve” published in the Guardian, UK

Enter the loyalty scheme, beginning with the Tesco Clubcard introduced in 1995. One year later, Clubcard holders were spending 28% more at Tesco and 16% less in arch-rival Sainsbury’s. The latter soon followed suit with its Reward card, launched the same year and with a membership of 10m by 1998. Safeway introduced its version, the ABC card, in 1995 - although this was ditched in 2000 - and Boots rolled out the Advantage card in 1997. Scores of other operators - Barclaycard, BP, Shell, WHSmith - developed similar schemes and then, in September 2002, Air Miles founder Keith Mills introduced the consortium concept that is the Nectar card. With heavyweight companies such as Sainsbury’s, BP, Debenhams and Barclaycard among its members, the Nectar scheme was thrust upon us with the biggest advertising campaign since the National Lottery, costing a reported £50m. By February this year, Nectar had signed up 11m UK households (out of a total of 22m). Today, the Tesco Clubcard has 10m active households, while the Boots Advantage scheme, current favourite in the card-pack, claims 15m members.

Consider the detailed information that every loyalty card user volunteers to the store. Each swipe of the card sends your spend - what you bought, where and how you paid for it - into a databank profile of your purchase history, along with the personal information you gave when you signed up for the card.

Loyalty Cards: Reward or Threat? By Martin H. Bosworth makes an interesting point

Details of loyalty points and the point-gaining transactions are being captured by a stand-alone card terminal and transferred to a PC or a back-end server for further analysis. The loyalty software maintains a complete database of all customer rewards and reward suppliers.

And, just as data brokers like ChoicePoint collect personal data and use it to build an aggregate “profile” of individual consumers, supermarket chains use their stored data to target buyers with “special” offers and “preferred” advertisements from their marketing partners.

The problem that we faced as business for collecting data has been quite easily solved by technology - the loyalty cards program. So business not only gets the data about the customer but also gets information about the customer profile so that they can target the any business segment.

Companies analyze the data by data warehousing solutions and convert it to information. Slice and dice sales with product / product group / customer / customer group or region or any geography.

With the added information, the business can manage their supply chain better. The business that has information is the king.

Do you have loyalty cards ? What do think about it from a customer point of view ?

Regards,

Santosh Puthran

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Infosys to buy UK consultancy Axon in £407m deal

accountant — Thu, 28 Aug 2008 10:39:00 +0000

Infosys to buy UK consultancy Axon in £407m deal

The headline Infosys acquiring AxonGlobal came as a surprise to when I read the news on Timesonline. Indian companies are cash rich and they are taking over other companies in the world to improve the line of business and service offerings.

“Mr Gopalakrishnan of Infosys insisted that there was still strong demand for SAP systems, with Infosys registering a 62 per cent increase in orders in the past year. He added that the deal would allow Infosys to compete more effectively on the international stage with rivals such as Accenture, Oracle and Cap Gemini. Around half of Axon’s revenue comes from the United States. “Our rationale was that with this acquisition, our global reach, scale and our ability to participate in large transformational deals would be significantly enhanced,” he said. “

This is a good example of Porter’s Five Forces Model for assessing Assessing the Balance of Power in a Business Situation. Buying one of the competitors means “Eliminating a threat “. This will further the business objective in an intense competitive environment.

Infosys in India (images)

Source: Spinellis

Going back to origins of Axon Global:

Axon was set up by Mr Hunter in 1994 after he left his job with SAP to create a team of IT specialists. The company floated in 1999 and today generates more than £200 million a year from its base in Egham, Surrey. Its customer base includes Kraft Foods, BP and Microsoft, as well as public sector clients such as Transport for London and Wolverhampton City Council.

Now Mr. Hunter and his team will be richer by £ 407 million for the enterprising decision they took way back in 1994.

Every takeover brings about a cultural change in the acquired organisation. Scenario

Pre-acquisition:

Axon Global business is primarily SAP and the consultants (employees) would have enjoyed a growth in salaries with the growth in market.
Management takes decisions quickly since they are focussed in one line of business. Moreover the profitability were not much of concern since the projects were either less profitable or more profitable.

Post Acquisition

Infosys will be able to knock on the doors of their customers with Axon expertise on SAP solutions. This would generate more revenue overall
Infosys is a large organisation with many lines of business. So policy decision will be made taking into all the line of business into account.
The name Axon may disappear from the market place with SAP offerings will be one of the line of business.

I am not sure whether Axon employees will be benefited by the takeover since Infosys is quite conservative in salaries and but focusses more on benefits. Infosys has a socialist culture. So it would be interesting to watch how Infosys retains the Axon employees who were accustomed to get good salary rises every year.

Congratulation Mr. Hunter on the deal. You should have good holidays in Bahamas.

Regards,

Santosh Puthran

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Sustainable Development

accountant — Mon, 25 Aug 2008 15:04:00 +0000

Sustainable development is a pattern of resource use that aims to meet human needs while preserving the environment so that these needs can be met not only in the present, but in the indefinite future. The term was used by the Brundtland Commission which coined what has become the most often-quoted definition of sustainable development as development that “meets the needs of the present without compromising the ability of future generations to meet their own needs.”

The field of sustainable development can be conceptually broken into three constituent parts:

environmental sustainability,
economic sustainability and
sociopolitical sustainability.

UK priorities

In terms of focusing our efforts, the UK has identified four priority areas for immediate action, shared across the UK, these are:

Source: http://www.sustainable-development.gov.uk/index.asp

Source: www.geographyalltheway.com

India’s Initiative at glance

The Centre is thinking of eco-friendly ways to deal with the power shortage situation. It has come up with a plan to develop 60 cities as “Solar Cities”. This will be achieved through energy-efficiency steps and power generation from renewable-energy installations.

The Indian National CDM Authority has accorded host country approval to 753 projects, facilitating investment of more than US$ 16 billion, in areas of energy efficiency, fuel switching, industrial processes, municipal solid waste and renewable energy and has the potential to generate 421 million CERs by 2012. India has registered the largest number of Clean Development Mechanism (CDM) projects in the world. The World Bank has said that the carbon trade market, which is set to grow from the present level of US$ 30 billion annually to US$ 100 billion, can prove to be another IT sector for India. CERs are set to rise by 75 per cent in 2008 and India accounts for 43 per cent of emission reductions. The carbon market size, which was US$ 62 billion in 2007, is likely to grow up to US$ 94–100 billion in 2008.

Green buildings are constructions in which resources like energy, water, and materials are used efficiently, through better design, construction, operation, maintenance, and removal of waste, reducing negative impacts on human health and the environment.

Green fuel or Biofuel can be broadly defined as solid, liquid, or gas fuel consisting of, or derived from biological material, mostly plants. It is now emerging as an eco-friendly option as compared to fossil fuels. India will replace 10 per cent of its transport fuels with biofuels like ethanol and jatropha in the next 10 years to cut carbon emissions.

Tata Motors and space agency ISRO are likely to launch the prototype of the world’s cleanest vehicle that will run on hydrogen and leave behind nothing more than a trail of water vapour, in 2008.
Bajaj Auto, Ashok Leyland, Tata Motors, Mahindra & Mahindra and Eicher Motors have come together to develop hydrogen-blended compressed natural gas (HCNG)-run vehicles.

Efforts for making farming more eco-friendly are on.

A team of biochemists at the Indian Institute of Science (IISc) in Bangalore, has discovered a new microorganism that can produce large quantities of a popular bio-insecticide to fight pests. The Kerala government will execute a broad organic vegetables farming programme targetted at making the State self-sufficient in vegetables production. The programme will be launched in 2008 and it envisages bringing in 5,000 hectares of land, extended over 1,000 villages, under vegetable cultivation.

CSR: From Awareness to Achievement

Over 80 per cent corporates in India are involved in corporate social responsibility, according to a detailed survey about CSR in India by Partners in Change, an agency set up by the NGO ActionAid. Out of the 536 companies surveyed, various categories of CSR undertaken included: health (66 per cent) followed by education (56 per cent), natural resource management 38 per cent, infrastructure development (per cent), community support (28 per cent), livelihood non-farm based development (20 per cent) and livelihood farm-based development (12 per cent).

Notable companies include Coca-Cola, Lenova, Cisco, ArcelorMittal, Intel and HCL.

Source: www.ibef.org

UK initiatives explains how you can as an individual make a difference to your community.

Whether you are a resident’s group, sports club, neighbourhood group, faith group or an other kind of community group, there are lots of practical actions you can take which will make a big difference locally, nationally and even globally. By working together it can be much easier and lots of fun too. Here are five ways any community group can make a big difference.

Reality Check: Did you contribute towards sustainable development to your neighbourhood or community ?

If yes, please share your experiences by commenting on this post.

Regards,

Santosh Puthran

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