Management Accounting

The main task of management accounting is the provision of the management team and owners with information necessary to make managerial decisions. The effect of managerial decisions made and activity results of the enterprise as a whole depend on timeliness and quality of information generated by the enterprise’s management accounting system.

The management accounting area encompasses both the planning of enterprise activity and its subdivisions and the analysis of work results and information on the state of enterprise as a whole (its assets, liabilities, activity results), separate processes, separate groups of assets, controlled indices.

In the management accounting area, our company offers services of development and improvement of management accounting systems of economic entities.

Our experience shows that the following groups of issues are, as a rule, the most pressing ones for enterprises with already working management accounting systems and with a smooth-running system of accountable and operational figures aimed at determining the activity results:

reliability of management information
promptness (timeliness) of providing such information
informativity (sufficiency for performance of tasks, convenience of the form of information presentation).

On this basis, while providing services on improvement of management information systems, the main efforts of our specialists are directed towards raising the above indices (reliability, promptness, informativity of management information) till the necessary and acceptable level.

Performance of such a task usually includes the following steps:

1) Testing and Assessment of the Current Management Accounting System.

In the course of testing the current management accounting system, local regulatory documents (provisions, position descriptions, etc.), as well as the actual document flow are subject to examination.

Based on the results, a regulatory and an actual scheme are prepared and then one finds discrepancies between them and reasons for such discrepancies. In addition, the appropriateness of the system (its correspondence to the tasks set) is being evaluated.

On the testing stage, important is the issue as regards the reliability of management accounting data. Analysis of reliability is carried out, based on comparison of data from various sources, availability of interrelation between data, existence and efficiency of control procedures, as well as by means of comparison with the data from accounting records and documents.

Also, it is important to evaluate how the existing system meets the needs of its users. The following serve as the grounds for making a conclusion on this parameter:

interview with key users of information
frequency index of making requests for additional information
awareness of the availability of reports and their content, as well as the use of data contained in the existing forms of reporting.

2) Analysis of the existing plan information and existing systems of analyzing planned and actual deviations

This analysis is intended for plan performance information and measures taken if deviations are found. In addition, the analysis is meant for the procedure to be carried out if deviations are found: extent (formality) of the analysis of deviation reasons, availability of conclusions on the basis of the analysis results, measures taken.

3) Preparation and discussion of conclusions, based on the analysis results – actualization of fields subject to be changed and desired results of such changes.

4) Suggestion of necessary measures to update the existing management accounting system and implementation of such measures

Such measures, as a rule, involve a correction of the scheme of management accounting processes and forms of information presentation.

After getting mutual approvals on the measures with the key participants of the management information presentation process, we elaborate changes and amendments to the existing regulatory documents aimed at implementation of such measures and take measures to lead the processes of implementation of changes.

One of the trends in the management accounting area is the cost analysis of products (works, services)

Determining the cost of product and organizing the management accounting is one of the main tasks for any manufacturing company. Organization of such accounting assumes distribution of operating expenses between shops (departments) and production processes and well as their breakdown into direct and indirect costs of production.

The main purpose of analyzing the product (work, service) cost is to determine the efficiency of the incurred costs and possible ways of influence and measures to optimize the costs.

PRUDENS offers its clients our knowledge and practical experience in the management accounting area and calculation of the cost price of products. We provide practical assistance to the management team of the client company in organizing the cost price records and in implementation of the necessary information system. After getting acquainted with the technology of production, we give recommendations as to the structure of costs and procedures of their control, including the calculation and comprehensive analysis of deviations from the standard indicators.

The main stages of this work are:

analysis of the employed system of cost price calculation
analysis of appropriateness of the employed cost allocation bases and of the breakdown of costs
analysis of the cost structure
analysis of costs to determine ineffective costs
identification of items which allow for optimization, and determination of methods to influence such items
provision of recommendations