Tuesday, July 28, 2015

NEW PARADIGM FOR THE COST ACCOUNTING PROFESSION AND PROFESSIONALS.

Well I am starting again one of the largest series of case studies of cost accounting under the new dimension standing as on 2015. This article is prelude to the same to give an idea why and what is the reason of the birth of this series. Gone are the days when cost accountants have to spend huge number of hours for extrapolating data from the various departments to derive various cost accounting analytical works. Technology has replaced the cumbersome process of taking data and roaming around the doors of the various department heads. Audit practices have also become radically changed where more focus are being given to give new directions to the company management. So where we are standing today among these so many changes and also competition form other profession. Cost Accounting is no longer that old traditional costing, its now decision making tool and improving and identifying the new opportunities and profitability form efficient implementation of resources.  

One must understand that cost accounting across the globe has changed its focus areas and we the newly passed cost accountants are far from that place. We need to develop decision making aspects of the profession the tools and its silent words of decision making. ABC, TQM, Budgeting etc all are now based on Technology and hence we need to create human interference where we will create new industries and opportunities. We must understand that Technology is replacing old industries and new industries are being created randomly across the globe. Traditional practices are being replaced with new ones and hence we cost accountants now need to focus on case studies so that we get an idea about every industry. Don’t make an understanding that cost accounting is only about cutting down cost. After the recession of 2008 there have been huge cost reduction activities across the globe. Hence we need cost increase process also since growth comes from re-alignment of resources and not from cutting down of resources.  Only cutting down cost and controlling excessive cost many time leads to death or closure of the industry.

The biggest challenge one will face is that how we can develop our decision making skill when we are just fresher’s. Experience comes form case studies and hence one needs first of all to read many industries case studies of cost management.  The more your study and read diverse industries their patterns, their reports of their supply chain management (which is key for cost management), sales process, and manufacturing process then only one will get an idea about its business process. When you get a conceptualised idea about every industry and you increase your cost accounting acumen then only you will get an opportunity to think and develop your own thoughts.

Every company has come up with its own CRM support system and also internal data driven process system.  Now as a cost accountant you only need to extrapolate the data and derive a new strategy for the company which will improve either its margins, profitability, cost efficiency or improve customer satisfaction. We are all aware of all the term but we are not ware about customer satisfaction. Today all companies are competing across all segments to improve customer satisfaction and hence your costing management decision making should be to improve the margins of the company. You have all the data of various departments but how you will improve the customer satisfaction through the data. Well use Balance score card to develop the decision making. Hence one needs to read and understand that how BSC could help you to develop customer satisfaction and minimize key areas of cost increase.


How the application of an costing tool will improve the efficiency or will create new channels are the key demand for the industries. Technology has replaced every segment of the industry and hence its process of reporting also needs to be changed. We need to understand that when a cost account is being hired then what is being expected by the company or the industry compared to the competition in the market from other profession in same lines.  Competition is fierce and hence we need to change our attitude towards the profession. It will time consuming about reading so many books and developing case studies but once the whole process is completed you are on the drivers seat.

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