High time for COST Audit and Cost Record Applicability

Its time to Fight back again for the profession since world economy provides the opportunity for Cost Records and Cost Audit implementation on the Small and Medium enterprise. I would love to the criticism for my subject but I hope it will be a eye opener now. We might be ignoring the current global economic turmoil and not taking advantage of the same to get back cost audit and cost record for the whole gamut of industries across the board.

SMEs accounted for 22% of the country’s GDP followed with an employment of   more than 60 million people. It’s a growing segment with huge upcoming entrepreneurs and innovation at large. Technology have amplified the speed of business formation and with FDI investments and foreign capital getting into Indian economy, A great Thanks to our Prime Minister for uplifting the image of Indian economy to the world ,India is all set for an huge growth. Skill development councils are working day and night to upgrade and uplift the skills of the Indian labor to match the upcoming demand. Cost management is important in this aspect and hence its value proposition cannot be explained in words since it’s infinite.

Surprisingly I found that cost audit which has been of great value proposition to the Indian economy over the last several years have been abolished from cost audit applicability.

Growth of the Indian economy cannot be achieved without cost estimation since that’s the core competency of the Indian economy. Now age inflation and rising labour cost followed with raw material cost as international commodity prices are increasing from the lower levels of 2014-15 the small and medium enterprise is now feeling the squeeze of profit margins.

Export markets are under doldrums as Brexit issues and US trade protections are being implemented hence more focus on new markets in global map and also towards domestic markets. Now in new markets price needs to competitive since buyers of those new countries cannot match the price of   US or European markets export markets. Domestic people also needs reasonable price within their budget kitty.

This is the place where efficient cost management, cost control and measurement gets into picture for the growing micro industries and medium industries. Now most of the companies under this segment don’t qualify within the following threshold:

·      Having overall annual turnover of Rs. 100 crores or more and the aggregate turnover of the individual products or services specified of Rs. 35 crores or more.

·        Regulated sectors having overall annual turnover of Rs.50 crores or more and the aggregate turnover of the individual product(s) or service(s) specified of Rs.25 crores or more

The point is clear whether it’s a regulated or non regulated industry falling under Small and Medium Enterprise needs to have cost audit since it’s a win- win proposition for the industry and government. Trade protectionism is damaging the growth prospect of the Indian economy. Export will be affected since there is no proper cost audit or cost measurement.  These companies are using the same traditional cost management process where the price used to pay for the end product by US and European buyers. Now, that same price is not feasible for current economic condition and while entering into new export markets.  This is the place where Indian Small and Medium enterprise needs to come up with cost audit adoption so as to get the expertise of the cost management. Resource allocation is one of the key important thing for the SME industry and hence cost management and cost audit reports will be beneficial.

Now under GST implementation many SME who are not under the cost audit ambit but proposes to go big with export will be affected as they don’t have any one to communicate to the government from their end . Cost Audit report and cost audit used to facilitate this segment.

If Indian economy wants to become the 2^nd largest economy over the next decade then how without proper cost estimation and management and how the government will come to know about the depth of the benefits required by the Industry. Its high time that we approach the government and explain the value proposition of the cost audit and cost audit report for the SME for making ne export markets to grow.