Diagnostics of Management Accounting and Budgeting

Project Goal

To develop a progressive methodology (concept) capable of overcoming the limitations of traditional cost accounting systems and establishing a cause-and-effect relationship between products (services, clients) and the costs required for their production (service).

Main Tasks:

• Business improvement;
• Increasing the company’s competitiveness;
• Establishing adequate costs per unit of product, service, and, accordingly, adequate prices;
• Influencing the cost-driving factors of various types of activities;
• Evaluating the performance of both the company and specific types of activities (operations).

Project Stages:

• Familiarization with the Company:
  • Strategy;
  • Organizational structure;
  • Business processes;
  • Financial reporting;
  • Management reporting;
  • Motivation.
• Developing a methodology for activity-based cost management (ABC management systems):
  • Classification and grouping of costs;
  • Company activities;
  • Establishing cause-and-effect relationships between activities and costs;
  • Cost drivers characterizing the consumption of costs by activities;
  • Report on tracing (allocating) indirect and auxiliary costs to activities:
    • Format;
    • Calculation algorithms;
    • Data sources.
  • Cost objects (products, services, clients);
  • Establishing cause-and-effect relationships between cost objects and activities;
  • Activity cost drivers characterizing the consumption of activities by cost objects or other activities;
  • Report on calculating the amount of each activity driver for cost objects:
    • Format;
    • Calculation algorithms;
    • Data sources.
  • Report on calculating rates per unit of activity cost driver:
    • Format;
    • Calculation algorithms;
    • Data sources.
  • Report on calculating activity expenses allocated to cost objects:
    • Format;
    • Calculation algorithms;
    • Data sources.
  • Profit & Loss (P&L) report in the context of cost objects:
    • Format;
    • Calculation algorithms;
    • Data sources.
  • Regulating processes under the activity-based cost management system (ABC management systems).
• Preparation of the document “Methodology for Activity-Based Cost Management System (ABC management systems)”.

Execution Methodology:

• Preparation of a preliminary list of requested documents from the Client and analysis of these documents;
• Preparation of a list of questions for the Client’s respondents and analysis of the response results;
• Analysis of the received information;
• Coordination and approval of the developed documents on the methodology of the activity-based cost management system (ABC management systems).

Project Result:

• A formalized methodology (concept) for the activity-based cost management system (ABC management systems) corresponding to the project’s goals and tasks;
• A structured list of works and investment volumes for automating the methodology of the activity-based cost management system (ABC management systems).

Value for the Client:

• Having a progressive activity-based cost management system;
• Information coming from this system helps justify management decisions in various areas:
  • Strategic direction:
    • Pricing decisions (pricing);
    • Forming the product assortment (product portfolio);
    • Increasing customer value;
    • Analyzing the competitive situation;
    • Sourcing suppliers;
    • Analyzing product strategy.
  • Operational direction:
    • Improvement (reengineering) of business processes and activities;
    • Cost reduction;
    • Managing the prime cost of products, services, and clients;
    • Establishing new forms of customer relations;
    • Motivating managers.