COST and MANAGEMENT ACCOUNTING as a key enabler of SUSTAINABLE COMPETITIVE BUSINESS A.N.Raman Member TCM Working Group Member PAIB Committee of the IFAC Past President South Asian Federation of Accountants

IFAC view of Sustainability Sustainable development and the sustainability of organizations have become mainstream issues for politicians, consumers, and business leaders. From an economic, as well as an environmental and social perspective, sustainability issues are transforming the competitive landscape, forcing organizations to change the way they think about products and services, technologies, processes, and business models.

Drivers of Sustainable Organizational Success Competent and Versatile Sustainable Organizational Success Customer and Stakeholder FocusEffective Leadership and StrategyIntegrated Governance, Risk and Control Innovation and Adaptability Financial ManagementPeople and Talent ManagementOperational ExcellenceEffective and Transparent Communication

TIME SLICES IN MA EVOLUTION Prior to 1825 Eye ball control Simple cost data on production Between 1825 to 1925 Scale advantages Capacity centric MA concepts Process cost per unit IE based standard costing Between 1925 to 1975 External reporting, Regulations, Income taxes, Levies, etc

TIME SLICES IN MA EVOLUTION After 1975 Value revolution Life cycle concept Strategy evaluation and control Brand management Distribution and channel management Service sector evolution Efficiency evaluation tools

A Battle on Two Fronts (1) Strategy choose the right ones ….. … and align the cost structure (2) Efficiency & Utilization take waste and unused capacity out of the organization ROI Value creation Management Accounting Operational MA Strategic MA

STRATEGIC TOOLS Balanced Scorecard, Strategic Cost management, Target Cost Analysis, Customer Profitability and Customer value Measurement. OPERATIONAL TOOLS Cost of Quality, Kaizen Costing, Parametric Cost Control Activity Based Costing and Budgeting, Activity Management Vendor Cost Analysis, Statistical Quality and Cost Control, Six sigma costing, Service Process Costing, Non Financial Performance Measures, Benchmarking, Process Mapping. THE ABOVE TO BE IT SUPPORTED OR EVEN WEB BASED STRATEGIC AND OPERATIONAL TOOLS

DIMENSIONS OF CHANGE IN MA OWNERSHIP CONTENT FREQUENCY OF USAGE LIFE CYCLE ORIENTATION PROCESS ORIENTATION NEW TOOLS AND TECHNIQUES INTEGRATION WITH IT

DIMENSIONS OF CHANGE IN MA INTEGRATION WITH IT No more close to the chest of few policy Need for disseminated information. Data warehousing and mining tools Data analyser and decision making tools Work flow alerts and On line controls Legacy and transactional systems ERP,CRM and SCM integration

STRATEGY REALIZATION CUSTOMERS, MARKETS SUPPLY CHAIN MANAGEMENT PRODUCTS, CHANNELS & CUSTOMERS ACTIVITIES (ABC/M) RESOURCES SHAREHOLDER WEALTH [VBM] PERFORMANCE MEASUREMENT SCORECARDS PROCESS MANAGEMENT General ledger PROJECT ACCOUNTING, PROGRAM MANAGEMENT STRATEGY DEFINITION METHODOLOGIES KEY PERFORMANCE INDICATORS (KPIs) versus ACTUALS PROFITABILITY ANALYSIS DEMAND STRATEGY Expenses TIME SUPPLY / INVEST STRATEGY PRODUCT & SERVICES DEMAND VOLUME & MIX FORECAST MAXIMIZE MINIMIZE OPERATIONAL PERFORMANCE - PRODUCTIVITY & EFFICIENCY - BENCHMARKING - UTILIZATION/YIELD - TOTAL QUALITY MANAGEMENT (Cost of Quality) UNUSED (AVAILABLE) CAPACITY Asset management ACTIVITY DRIVERS REVENUES $$shours Business Model FOR A MA ACCN MAXIMIZE Alignment of cost structure to strategy What-if Planning?

COST AND MANAGEMENT ACCOUNTING

CMA as a key enabler of Sustainable Organizational Success Competent and Versatile Customer and Stakeholder FocusEffective Leadership and StrategyIntegrated Governance, Risk and Control Innovation and Adaptability Financial ManagementPeople and Talent ManagementOperational ExcellenceEffective and Transparent Communication CP and LCC Cost Deployment Info Risk Mitigate Target Costing Product Profits Cost Competency Op cost manage Cost Reporting