The End of Management Accounting as We Know ItHow the changing technological environment will shape management accounting practices over the next 10 years

Chris Catto - Director Putney Breeze Business Advisors - Filemaker Certified Developer

BCom MBA CGMA CPA MIPA

Left to Right: C Catto, Prof Susumu Ueno APMAA Board Chairman, Stan Shih Chairman & Founder Acer Inc, Nora Omar, Grahita Chandrarin 2016 APMAA President, Hsuan-Lien Chu 2016 APMAA Chair. (APMAA - Asia Pacific Management Accounting Association)

We’ve come a long way

Why will Management Accounting face a Fundamental Change?

Let’s Define Management Accounting

According to the Chartered Institute of Management Accountants (CIMA), Management Accounting is "the process of identification, measurement, accumulation, analysis, preparation, interpretation and communication of information used by management to plan, evaluate and control within an entity and to assure appropriate use of and accountability for its resources. Management accounting also comprises the preparation of financial reports for non-management groups such as shareholders, creditors, regulatory agencies and tax authorities"(CIMA Official Terminology).

Business Unit01-

Branch202-

Division354-

Cost/Profit Centre551-

Account Code4055

Income Statement

Statement of Financial Position

What is in Play?

• 1. The Change in Management Accounting Practices

• 2. The Change in focus to Value Creation Process and Modelling

• 3. The Change in Technological Environment

1. Traditional Management Accounting Techniques

• Budget/Forecast v Actual (MTD, YTD) • Management Control Systems (MCS)• Historical Reporting• External Reporting Focus• Control Focus

• Standard Costing• Process Costing• Activity Based Costing • Activity Based Management • Variance Analysis commentary focused on explaining yesterday’s

position • Forecasts for External Audience including rolling Forecasts

1. Change in Management Accounting Techniques

Taylor – Division of LabourKaizen - Continuous ImprovementTQM - Total Quality ManagementTarget CostingABC/ABM – Activity Based ManagementAnthony – Management Control SystemsControl Device – Assess – Effect – Communicate Simmonds – Strategic Management AccountingBalancing focus from financial measures to non-financial

Moving From Control Focus to Empowered Culture and Enterprise Navigator

Amoeba Management AccountingLean Management AccountingBeyond Budgeting – Management AccountingWangdao Accounting – Visible v Non Visible KPIsKaplan and Norton - Strategic Mapping

2. The Change in Focus to Value Creation Process

Image courtesy of Brian Maskell, Lean Accounting Leaders, www.maskell.com

2. The Change in Focus to Value Creation Process

Measurement of Capacity and Resources and the flexibility of allocation or reallocation

2. The Change in Focus to Value Creation Process

Measurement of Capacity and Resources in the context of continuous improvement

relative to goal attainment.

2. The Change in Focus to Value Creation ProcessEnable customer facing decision makers, to understand

the implication, effectiveness of their operational activity on resource consumption (finances) and contribution to value creation.

Focus of energy forGreatest return

3. The Change in Technological Environment

3. The Change in Technological Environment

Technological Paradox- Multiple Standardise

Apps- Multiple Learning

Curves- Multiple Logins- Multiple Sources of

Truth- Multiple Subscriptions- Increase monthly

License cost

Have we actually improved Management Reporting?

1. Mapping Business Workflow

2. Understanding how data is Captured and stored

3. Understand what needs to be measured;

i) How the measure impacts financial statements and

ii) How to assign and communicate to staff for continuous improvement

Business Forms and Relationship with Data Tables and Attributes

Understand the Value Creation Process & Quantify resources and

Capacity

How to Automate Reports, and translate Financial number to

Operational “Speak”

Example A

Drivers Execute

Deliveries

Despatch Schedules Truck Runs

Orders Forwarded to

Despatch

Front Desk Takes

Customer Orders

1. Mapping Business WorkflowUnderstand the Value Creation

Process & Quantify resources and Capacity

Relational Database Design that Maps to Workflow

2. Understanding how data is Captured and stored

Business Forms and Relationship with Data Tables and Attributes

User Interface Design - For mobile and PC enabled Forms for data capture

2. Understanding how data is Captured and stored

Business Forms and Relationship with Data Tables and Attributes

In Built Reporting Engine with Execute SQL Queries

3. Understand what needs to be measured;

i) How the measure impacts financial statements and

ii) How to assign and communicate to staff for continuous improvement

How to Automate Reports, and translate Financial number to

Operational “Speak”

Image courtesy of Soliant Consulting Inc

Security – Custom Accounts and user Privileges

Multiple Users, multiple locations, multiple access privileges

What are the implications for Management Accounting?

Web publishing Engine to create your own cloud and Web browser access

Image courtesy of filemaker.com

3. The Change in Technological Environment

Here’s the Rub – In the Future SME’s will create their own cloud!

Database Software

Built in SecurityAuthentication &

Authorization

User Interface Design Tools

Web Publishing Engine

Mobile Device Enabled

Cloud Hosting Enabled

Integration Capabilities

Built in Reporting and Charting Tools

Cross PlatformWindows, Apple, Web

One BusinessOne Application

What are the implications for Management Accounting?

1. Change in Management Accounting Practice

2. Change in Focus to Value Creation

3. Change in Technology

Performance Reporting Leader- IT Database Development and Integration

Expertise- Workflow Mapping Expertise- Management Reporting Expertise- Financial Reporting Expertise

3. The Change in Technological EnvironmentPerformance Reporting Leader

Operational KPIs Automated and linked to P/L

Vehicle Profitability (Profit Centre PL)Vehicle Utilisation (Asset Utilisation)Site Profit ability (Branch & Cost Centres) Driver EfficiencyProduct ProfitabilityInventory TurnsCustomer Gross Margins

3. The Change in Technological Environment

How much does it cost?

According to Appster a Minimum $50K investment is required for a App development (?) Not true!

Simple Filemaker application with 12 week pay back period is achievable through Labour hour time savings and operational efficiencies.

Let’s Define Management Accounting

According to the Chartered Institute of Management Accountants (CIMA), Management Accounting is "the process of identification, measurement, accumulation, analysis, preparation, interpretation and communication of information used by management to plan, evaluate and control within an entity and to assure appropriate use of and accountability for its resources. Management accounting also comprises the preparation of financial reports for non-management groups such as shareholders, creditors, regulatory agencies and tax authorities"(CIMA Official Terminology).

Business Unit01-

Branch202-

Division354-

Cost/Profit Centre551-

Account Code4055

Income Statement

Statement of Financial Position

Management Reporting through the Prism of the Chart of Accounts is no longer a Barrier

We’ve come a long way

From Management Accountant to

Profit Engineers

From Management Accountants to Profit Engineers

Ask Putney Breeze about your custom Management Accounting Application;

- Rapid deployment Budgeting & Forecasting, - One System Operational KPI Reporting

- Business Case Submission & Approval Management- Integrate Staff Appraisal Systems with Live operational KPIs

info@putneybreeze.com.au

03 9395 1118