Accounting Management Report on Accounting Functions in Real Business:
Question?? Investigation of Action Telenet Centre Business and functions of accounting
Accounting Management Report analysis review on Accounting Functions in Real Business:
The focus of the entire article is to understand the importance of accounting in the day to day operations of a business. The case of a very small business is deliberately taken so that it is made evident howsoever small business may be managerial control and prudence requires the use of accounting. Since the organisation taken in our is a small privately held organisation it only has cost accounting without any proper balance sheet.
The name of the small set up is Action Telenet Centre, located at Japan Putra Kuala Lumpur.This is a privately held organisation operating out of a single outlet located in the ground floor of the Mall. It is in fact an entrepreneurial organisation working specifically in the local market selling cellphones, accessories related to cell phone and top up credit. It employs one salesman and one upkeep boy
He sells cell phones, accessories related to cell phone as well as top up credit. Its market is limited to the footfalls it receives in the mall .They are generally individuals from the adjoining area. Its speciality is in local brands that are cheaper but have all the features required of.
The place of work was visited over a span of 3 days from Saturday 20th July,2012 to Monday 22nd July,2012.The entire motive for all the regular motives was to better understand the business and the measurement metrics used by the owner to understand the Business Operations. During the process of interview we directly spoke to the owner of the business. Since the owner was directly involved in all sorts of business decisions as well control of operations ,it was prudent to speak to him as that led to powerful insights which would not have been otherwise possible. The preparation for the interview was started after the first day of visit to the shop. Being a privately held company, it hardly had any information about its operations in the public domain. After visiting the outlet preparation were carried out for an in depth interview of the owner. The questions of the in depth interview were prepared on the parameters of accounting practices, control metrics used ,the work flow control used and the on marketing operations of the company. Brief pointers were used to guide through the flow of the in-depth interview. Interviews were also conducted for the salesman sitting across the counter.
The accounting information that the business diligently mentioned were:-
Procurement Cost (Mobiles from Suppliers):-
1) Units of Electricity Consumed
2) Miscellaneous expenses(snacks and lunch for work force)
3) Salary of Salesman and office help
4) Percentage of Discounts(primary and secondary) provided
5) Taxes
6) Advertising & Merchandising Expenses
7) Marketing Spends
8) Faculty Products
9) Products Returned or Damaged in Transit
10) Date of Sale
11) Daily Sale
12) Monthly Sale
13) Credit Days of Vendors
14) Credit Days of Suppliers
15) Requests Booked
16) Orders Cancelled
17) New Customers Added
18) Growth in Sales of customers
19) Net Rate Per Customer
20) Gross Contribution
21) Rent Paid
The information collated above results out of just two activities. Activity 1 during customer interaction in which the salesman collected information regarding the client in terms of his sale, his top up credit ,the orders booked and that could not be booked. The other activity that generated information is when the mobiles are bought from the suppliers that are during vendor interaction. The accountant essentially plays the role of timely collecting the information from the required stakeholders depending upon the business cycle involved for the process. The job of the accountant in the given organisation was of timely collecting the information and making sure it is collated for a monthly overview. Cross-checking of the information with the salesman and the during procurement is also the prerogative of the accountant involved. Yes the accountant plays the role of a referee as well making sure that information provided are not doctored. It is also the prerogative of the accountant to make sure that violation in gross operating parameters set for the organisations for the given period is duly informed to the stakeholders involved so that corrective action is taken. It is very important for the accountants to track the growth metrics so that the business growth is duly recognised and taken care of. According to the owner the accountant is a vital part of the organisation structure without the presence of the accountant it would have been impossible according to the owner look at ways and means to grow the organisation. By actively accepting information and by actively keeping a control on the numbers the accountant gives quality feedback to the owner(in our case both are same).The accountant also helps him to decided areas from where he could raise money to grow his business as well as to improve his cash conversion cycle through a better ,viable credit policy.
The company produces information for the small group of shareholders (read the owner himself) involved with the start-up. The information is provided to make sure that the equity stake (read capital put in) put in by the owner is duly and properly taken care of by the organisation. The information collected is also used by the organisation to be put forward to the tax authorities during end of year tax calculation
As of now looking at the scale of operation of the business, the accountant has got enough information to look into. Moreover the owner does not feel right now; he could have any more information that could be of any more use to him. Thus the present information set is sufficed for the organisation to operate on.
The cost structure is very simplistic as depicted below:-
MRP (Maximum Retail Price)
-Margins
-Discounts
-Sales Expenses
-Taxes
-Cash Discount (if availed)
NR (Net Rate)
-COGS (Cost of Goods Sold: Purchase Price from Vendor)
GC (Gross Contribution)
-Ad Spends
-Other Miscellaneous Expenses
Net Contribution
COGS –FN (Purchase Price from Vendor)
Margins-Fn (Model and Brand)
Taxes-Fn (IT Laws for the year)
Ad Spends-Fn (Banners and Posters)
Other Miscellaneous-(Day to day minor expenses)
The cost structure of the business is very simplistic in nature. This is probably true for any small time organisation having limited operation in a given region. As the business achieves scale we believe the cost structure would become complex with more and more of parameters would creep in to justify operation, the exact details could not be furnished from the owner, as he was very secretive to the information he was holding. Basic approximation of the cost structure was provided which have been duly noted above.
The present set of operations carried by us throws an important light in the day to day functioning of an accountant .We can clearly see the accountant is the basic keeper of the business whose function is to provide data and take necessary steps to corrective action at proper time frame. Without the accountant it would be extremely difficult for the organisation to find out where it is heading and whether it is achieving the growth parameters that have been duly set for it. Looking into parameters as input as Order Input per Customer on a rolling as well on a three month basis , the accountant was also helping the owner to decided how has been his business environment and whether specific steps were to be taken with respect to certain customers or not. The accountant looking into factory operations was rigorously involved with cost cutting .Looking minutely at raw materials procured, man hours employed and maintenance charges he was closely involved to find out ways and thus stop if any wasteful expense if that occurs for the organisation..The accountant thus is also responsible to find out ways to suggest tax savings to the organisation Thus as we look into this organisation (outlet) we can see that accountants has and can serve a variety of important functions for the organisations right from cost accounting, to proper maintenance of ledger .Each function being important and each function looking at through numbers to improve organisational performance. The accountants’ role, however small the organisation may be can never be ignored or rubbished away. He is in short the keeper of the data and also that of ratios that dictate progress for the organisation. Thus it is an important role and also has a great degree of responsibility entrusted to it. Interestingly the owner of the organisation is a Commerce Graduate by vocation, thus we can see why he places importance on accounting so much. Even with the small scale in which the shop was operating he too k due care to record all the transactions and record the parameters on a daily basis so to get a feel of where he is heading. Interestingly being a commerce graduate ,he said for him out of all rations the interest coverage ratio that is the ability to pay off interest out of present profits is the most important to monitor.
ME17
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