Wednesday, March 8, 2017

Cost Accountants Can save Bankruptcy .. Through LLP

Bankruptcy code has come up to save the minority share holders and other stake holders into the system. But it’s being found that this code will be misused by crony capitalist which will end up creating more pain and devastation for the society in the long term. Before the bell of bankruptcy comes into play we need Asset Reconstruction Management which will be lead by Cost Accountants, MBA and also those who have turnaround experts who are entrepreneurs at heart, managers by training and experience, and committed to make companies in distress to perform brilliantly  out of the blues. Cost Accountants know how to utilize resources and create turn around for sick industries. We need people who have strong vision of efficient utilization of resources. If we look towards history we find that in 1999 IBM made a turnaround and in 2015 Ford made a turnaround riding on the wheels of optimum resource utilization. Bankruptcy is nothing but wrong utilization of resources and mismanagement conducting deliberately or due to economic factors. . Bankruptcy will not save the economy neither the society over the long term. Those who will lose jobs will never get anything form Bankruptcy. Bankruptcy code is to protect banks, minority shareholders and creditors of the same.  Cost Accountants who are looking for practicing opportunity can easily come up with this diverse manpower and intellectual capital to create Asset management companies under LLP.

The devastation of Bankruptcy code is that many ancillary industries will come to an end. Lay off staff, and auction off saleable assets to pay off creditors who get peanuts against their elephant size investments. Bankruptcy code has been implemented but where we have failed is reviving the business before the bell goes for bankruptcy.  This Bankruptcy will finally make borrower richer since valuation of asset is always a gimmick and this gimmick loophole is being exploited.  Let me put an example. Say my asset are actual valued at Rs 100 cr where as its being inflated to Rs 300cr. Now I take a loan of Rs150 cr and later on files for Bankruptcy. Now my original assets is valued RS 100 cr and by the time I go for Bankruptcy my value comes down to Rs 80 cr, which gets sold at Rs.50 cr. Now who makes how much and what you get out of Bankruptcy code. Now you place a Asset Management heading by a team of people having entrepreneurial mindset with Cost accountants, and MBAs who will get into the business cut down non productive business and will make the company turnaround. This will save mass lay off and les damage to the ancillary industry segment associated with the same. Practicing cost accounts can come together to form this type of organizations.
The government is giving a opportunity of non accountable business process which will harm the society more than creating protection of the stake holders. Indian Post Office also has been one of the key segments for the turnaround where staff was trained to use digital technology and making every one accountable for their deliveries. This is one of the key areas where reduction of cost and making every department to be ABC and making Product pricing and Target Pricing and create market segmentation and tweaking process and products to increase revenue would be a game changing tool. We all know that company gets into Bankruptcy due to extravagant and wrong business strategies and uncontrolled fund management. This is very grey area and as a profession cost accountants can work stupendously top cut and lean the organization wastages of resources and improvise the organization.

. Further Balance Score card and Six Sigma strategies help to improve the quality of management and improves the business revival strategy within everyone in the organization. A strong entrepreneur mind followed with strong business and financial acumen from a Cost Accountant would create game changing tool for saving the organizations.  I find a group of professional should come up with Asset Management Banks who will work to save the society from Bankruptcy code segment.

Cost accounting profession has the necessary tools to develop and make turn around within an organization particularly the ones who are getting drowned. We as a profession have been working for the society and I find that we need to come forward with Asset Reconstruction Banks model where a team will revive the companies and save the society and taxpayers resources. Practicing cost accounts can come together to form this type of organizations. 

Tuesday, March 7, 2017

Digital Disruption and Cost Accountants Role Series One

Today’s article is more of question and less of new insight.  A question on which thought needs to be provoked and not to be answered to anyone, prior to that I will begin the introduction of this new series of my 2017 on cost accounting profession. I will start my article today with a question- Historically did we ever focus on corporate level or we kept focusing at govt level which has limited scope of employment and audit. If the answer is limited employment opportunity and audit compared to the number of students pass out then judge yourself where you need to focus.

 Digital disruption is happening at lightning speed and the whole trade and investments climate is changing dramatically. Cost is no longer a reason to worry since marginal cost of production is zero. We need to get into the depth of amplifying the returns of capital employed and hence we need to get into strategic management areas where revenues are capitalized not only for yourself but for the ones connected with you. Well traditional cost accounting practices are dead since cost measurement is mostly now automated and beyond excel the limitation of excel calculations.  Cost audit in the private sector is now not so highly required since cost negotiations have eliminated wastage and post 2008 the global climate and repeated aftershocks of 2010, 2011, 2013 have created enough cost consciousness. Employing cost accountants would turn out to be herculean task and also upgrading the pay scale is another mile stone. We need to get into those areas where other professionals are grappling up fats.

Well we achieved our target of building cost awareness and making every shareholder aware of the cost factors.  Hence we don’t need to hammer on cost measurement area we need to work on the new era of strategic growth areas where the private sector fights and we are employed after passing out. Digital disruption is eliminating cost and improving margins but we need to support them to build and amplify the ROE so that from Micro to Midcap space they can be grown.  We need cost accountants to come up.
The path of an entrepreneur is difficult and becoming a midcap is too challenging. This is the area where cost accountants need to get into the picture. But before that we need to understand the areas of digital disruptions and how client collaborative ROCE is being amplified. We need to understand big data analysis and their application where revenue for the organization and new strategic steps can be formulated to bring growth. Merchant banking is an area which has been dominated by Chartered Accountants and MBA. I find Cost accountants to get into that area since they can be a game changer in this strategic management segment. Merchant bankers enable a small company to become a giant in the long term. They take key decisions regarding financial management and strategic growth opportunities. They formulate exit strategies for the Private Equity Investors and get the SME listed.

 Enough and huge hard work have been done towards govt based areas but we are missing the mass of private sector since our self promotion towards closeness towards govt is not enough to employ us. All of the student who passes out will not get jobs in govt driven projects. Now the challenge and the thing which remain ignored that how much value the profession at corporate level is providing since that creates the demand for employment. 

I have few questions and I want my readers not to anwere me but Answere your mind.

Historically the profession has been doing MOU with govt and at various levels of govt, but the question is we are lacking highly in other areas particular the private sector. How many audits and how many cost accountants will be recruited in govt level projects? Did Our extensive thrust on govt level has moves us away from corporate level and that’s why a salaried person is ignored. 

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