Celebrating Management Accounting [Malaysian Business (Malaysia)]
(Malaysian Business (Malaysia) Via Acquire Media NewsEdge) The Malaysian Institute of Accountants and The Chartered Institute of Management Accounting jointly organised the `National Award for Management Accountants Breakfast Talk' recently. It attracted a number of participants from a broad spectrum of industries.
INCREASED competition in the global market has forced both public listed companies and small-to-medium businesses to frequently benchmark themselves against the best in the world in a bid to outdo each other.
To do this, a number of tools have been developed to measure the financial health and overall performance of the business organisation. The accounting profession has moved from simple book- keeping to a more strategic role at the top management level.
Accountants have realised that, in order to stay on top of their profession, they can no longer focus merely on financial accounting. The trend now is for companies to emphasise more on the use of Management Accounting and the tools available, to turn raw data and financial figures into useful information for every level of management both for control and monitoring purposes.
Whereas financial reporting tells of the past, management accountants help the Chief Executive Officer and his management team steer the company's direction.
Emphasising this further, CIMA's Divisional Vice-President, Yeo Tek Ling, says that in the past, there had been very little about the role played by management accountants - much less to recognise their contribution to the organisation. `With the introduction of accounting software, financial accounting has become easier to handle,' he says. `However, it is management accounting that will eventually help to create value and sustain the business in the longer term.'
Fellow CIMA alumnus, Paremeswaran Rajagopal, concurs. The Assistant General Manager with Century Software (M) Sdn Bhd says that management accountants have to study the cost incurred and eventually analyse the risk exposure involved for their employers. `They play a very big role in the way business is conducted,' he says.
Rajagopal was one of the speakers invited to speak at the National Award for Management Accountants (NAfMA) Breakfast Talk, themed `Management Accounting Tools for Building Sustainable Business Value', at Menara Public Bank. The event, which was jointly- organised by the Malaysian Institute of Accountants and The Chartered Institute of Management Accountants, attracted a number of participants from a broad spectrum of industries. In 2010, Century Software won the `Best Star Award', while Maxis Bhd bagged the `NAfMA 2011 Excellence Award'.
Maxis' representative, Lai Choon Foong, Senior General Manager and Head of Management Accounting and Procurement, says that while both aspects of the accounting profession are important to any business organisation, increasingly, companies see the need to emphasise more on the role played by Management Accountants to analyse and make sense of the raw data.
Using her company's case study as an example, Lai says that for Maxis, `Value Creation' takes on four quadrants covering Cost Control, Risk Management, Improving Efficiency and Quality, and the broad scope of covering Financial Analysis, KPI and Benchmarking Analysis.
`Between 2007 and 2010, there was a saving of RM2.924 billion when the company implemented cost control and the Six Sigma,' she explains. `In 2009, when the Accelerated Cost Efficiency (ACE) programme was introduced, it further helped to save an additional RM38 million, or a total of RM3 billion within a span of four years.'
The ACE, she continues, helps to increase cost awareness within the organisation. A number of line ownership cost teams were initiated within the network organisation. With the implementation of the ACE 2 Programme launched in April 2010, the company is expecting to save a total of RM100 million by June 2011.
Lai gives other examples of how the amount of RM109 million (or 32% of total cost) was saved over a period of 18 months since the implementation of Ariba e-Auction in 2004. `Competition is intensified among the suppliers,' she says. `We achieved a lower overall cost of sourcing through a more efficient process besides enhancing process transparency,' she adds. `Compared to the traditional negotiation approach, e-Auction has helped Maxis to benefit from incremental procurement savings.'
Another RM5.6 million in electricity bills was also saved when the management acted upon the analysis report from the company's management accountants.
Overall, the efforts undertaken by management accountants in the company have helped the company generate a total revenue of US$ 3 billion in 2010, with an EBITDA of 50%. Maxis is today ranked among the best telecommunications company in Asia, second only to NTT Japan. Although it entered into the telecommunications scene slightly later than two other competitors, Maxis is today the market leader since 2001. It is one of the top-ten biggest companies on Bursa Malaysia with a market capitalisation of over US$ 14 billion.
Rajagopal gives the illustration of his company's application of management accounting in helping the organisation become more competitive. `After analysing the raw data, we did what we could to fine-tune the way we operated our businesses. Some cost reduction measures were being introduced,' he says. `For example, we allow our staff to use MSN and Skype to carry out discussions with their colleagues from around the world, which resulted in a huge saving in phone bills,' he says. `We are also using licensed software known as GTM, which has allowed us to save on staff travelling time and cost. Instead of having to travel to the client's place to provide technical support, we use remote assistance.'
Professor Dr Normah Omar, who is a member of the NAfMA Assessment Criteria Committee, says stories like Maxis and Century Software would have remained untold if not for NAfMA competitions, which is now the only platform to recognise the contributions made by Management Accountants within their organisations. Normah urged companies to participate in the upcoming NAfMA 2011.
Normah, who is also the Director of Accounting Research Institute at UiTM, says the idea of NAfMA is to help promote management accounting tools for building sustainable business. There are four categories of awards which participants can hope to win: the Excellence Award, Best Practice Award, Practice Solution Award, and since 2009, the SME Star Award.
In 2004, Maybank Bhd bagged the NAfMA Excellence Award, followed by a string of other listed companies in subsequent years - Nestle (M) Bhd (2005), Philips Lumileds Lighting Company Sdn Bhd (2006), Telekom Malaysia Bhd (2007), Bank Rakyat (2008), Alliance Financial Group Bhd (2009) and last year, Maxis Bhd (2010).
After the breakfast talk, Public Bank Bhd's Managing Director, Tan Sri Tay Ah Lek, also took the opportunity to present a cheque for RM60,000 to NAfMA Organising Committee Chairman and CIMA Divisional Vice-President Yeo Tek Ling. Public Bank has been the major sponsor of NafMA.
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