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An Accountant; a value creator or a value counter or co-ordinator in a Business

CA.Raj Kumar Gupta , Last updated: 11 October 2014  
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An accountant; a value creator or a value counter or a value co-ordinator in a Business.

Business has been almost fully corporatized in this twenty first century. Now days, we can find that even small business entity prefer to work in corporate firm rather than partnership form or sole proprietor. Hence, due to corporatisation of business entities and advancement of technology in business process, business functions have inter-mingled with each other .In this context we can analyse role of professional Accountants in present business environment.

Traditionally, recording, classifying and presentation of business transaction are responsibility of an accountant in the Business. This role has become more challenging due to increase in size of business and scattered business across multiple locations. Further, advanced form of book keeping and accounting, taxation, and all allied services are clubbed and termed as 'Finance'. Hence, finance is one of the principal functions of any business entity.

We can also say that primary objective of any business entity is profitability and the same is recorded, monitored and evaluated and presented in finance function. Now days, objective of business entity has been redefined and evolved around profitability along with wealth maximisation. Further, objective of business entity (for commercial propose) has been transformed as profitability for wealth maximisation with sustainability. Business sustainability means continuity of business entity with consistent achievement of core objective of profitability with wealth maximisation. Any business is generally constituted by many business functions like Marketing, Production, HR and Finance. These business functions are classified, sub-classified or re-organised in one form or different forms according to nature and/or size of business. So, there can be many functional departments than as cited as the above.

But it is universally fact that out of all business functions, finance function exits in all the business entity. Moreover, it exits even in charitable entity as well. In the case of business entity providing services to its customers, it cannot have production function, or any other function but finance exits as usual. Now a days as per global practices all the business functions are broadly classified into two types one is operation and another is non-operation function or execution and support function.

The business functions, which are directly involved in revenue generation activity of a business, are called operation function or operation team or in more sophisticated manner it is simply called business team. We can find that all the big companies (IBM, Sony, Unilever, Ford and many more) in the world have already segregated its entire business functions into two types i.e. operations and non-operation.

Accordingly, Shared services centre, business services or central services or captive KPO or BOP of big corporations are nowadays prevailing everywhere. The business functions like HR, finance and other allied functions are consolidated as one centrally functioned service and carried out in such Shared services or business centre. So, there is no direct relation amongst operation function (Sales, Production, Technical team,) and Services function or non-operation function (Like Finance, HR and allied services). All the users (staffs, vendors and customers) in operation function are deemed to be customers for shared Service centre or central business services. Role of functional Managers in Changed business environment Finance Manager is dedicated to provide accounting, taxation, compliance, audit and other allied services through shared service centre or business centre of an organisation.

But the function of cost control, cost competitiveness or process audit or review is clubbed in such shared services only if the nature of business is neither technology nor engineering driven. Moreover, team for review of cost and cost control is made of various functional managers. So, It is very injustice to claim that accountants can carry out functions of cost control and process review of entire business .Because overall cost control , review of process and performance measurement in any business needs highly specialised functional skills like Marketing , finance ,Production ,quality HR and etc. We cannot expect that an accountant can be master of all functional skills required to run a business.

But there is always requirement of one dedicated person to co-ordinate with all the business functions for collection, compilation and consolidation of business information which will be further analysed and reviewed and used by functional managers to report performance of sub-process process or business as whole. So, an accountant can play role of a co-ordinator amongst all functional managers which is more administrative and financial than technical and skilled. In the manufacturing company , cost control and review of manufacturing process can be always carried out by qualified and experienced cost engineers .Cost engineers are having specialised skills to understand each process and sub-process of production function .They can put checks and balances in production process.

So, they can easily monitor entire production process and provide further improvements in the same. They can decide about up gradation of plant and machinery or replacement of spares part machinery. Even, there are so many technical terminologies used in production which are not understood by non-technical persons. In the entire process, role of accountant can only be secondary to the production managers or cost engineers. Accountants can play role of co-ordinator to compile information, measurement, and result of review of production process and cost control in production function. In this process, if an accountant claim that he/she is value creator rather than value counter, then he/she is mocking accounting profession and under-estimating specialised skilled sets of cost engineer or production managers.

In this case, cost engineers are value creator and accountants are neither value creator nor value counter, but they are value co-ordinator for cost control and review and appraisal of production function. Suppose ABC Ltd proposes to purchase a new machinery worth of Rs.100 crs as there is introduction of new technology in production process. Then, which department is consulted fist for this investment of Rs.100 cr? Production Department is principal decision maker for this investment though team decision of mixed functional managers including of financed manager is involved. Because only production manager can provide technical requirement, specification, cost and benefits and what if analysis of old and new machinery.

Finance department cannot challenge production department's decision that machinery as decided by them are not technically sound and cannot provide cost saving in production process. But the production department involves finance manager to provide supporting information for making decision for purchase of new machinery. In the whole process, we never find that accountant or say finance manager is value creator. Another important function of business is Marketing or sales which is now days more broadly termed as “Business Unit†or Business operation.

Marketing and Sales is the only business function which always play front role to generate revenue in any business organization. The primary role of this function is to maximise the revenue of business .For this, business managers carry out various function like strategy management, branding, sales operation, customer relationship management, and etc. Business organisation always hires a specialised class of functional managers for all these sub-process of Marketing and Sales. Marketing and Sales Managers are sole decision makers to maximise sales in any business organisation, though they involve all other functional managers as well to make their business decision more precise and appropriate.

Now, we evaluate the role of accountant in Marketing and Sales .In any strategic decion making, marketing department play lead role to understand inputs , analyse information , review MIS and reports of product performance . As all sub-function of Marketing and sales involve an outlay and Sales attract cost of tax also, involvement of finance department is always encouraged to make more and more strategic decision. Finance Manager can provide good support to Marketing Manager to take strategic decision. But it can never be in lead role of strategic management of marketing function. Performance measurement and review of Marketing and sales operation is again of more specialised job than compliance work. Even though various type of structured format can be devised to check, compile, analyse and report sales performance, but professional, experienced and specialised person can only review and report performance of Sales and Marketing operation. Again, this is not a cup of tea for an Accountant.

Now, we can discuss role of an accountant or say finance manager in cost control, effectiveness and efficiency management in Marketing and Sales Department. Only an expert and experienced sub-functional manager in Marketing can understand wastage and its disposal .He/she can under various duplication of activities which may be streamlined by them to remove the cost and control unrequired cost. Marketing manager can review that some of its activities need latest technology to improve and speed dispatch function. Branding managers can decide how to cut down waste in branding activities. When a branding manager is deciding to install hoarding of his product, obviously he consider more visibility at less cost.

An Accountant cannot play lead role to control cost in these sub-functions and not manage efficiency and effectiveness in the same. Efficiency and effectiveness in the marketing and sales require skills of such person who is master of entire marketing process and who has practically involved at the micro level of marketing functions. Such an experienced and specialised person can only audit effectiveness and efficiency of marketing function and help to control cost in the same. Simply, filling the format and calculating figures in marketing function means only compliance function where benchmark and standards are defined and set by marketing professionals.

Suppose, ABC Ltd is planning to launch its product in new market (new region). So, business managers are supposed to take a strategic decision for the same. And total cost involved for launching product in new market is say Rs.20 crs. Now, who will play lead role to take such decision?

We should not be so hyped and tell that a finance manager takes lead role because there is an outlay of Rs.20 Crs and money is involved. Business Managers or say Marketing managers are always in lead role to take decision from launching a product to review of performance in new geographic sales.

Suppose , If Business Manager recommends to hire an office in new region having monthly rent of Rs 1 Lacs PM which is he suppose to be more strategic located, then finance manager can challenge such decision and recommend to take office at Rs.80000- PM.

Until and unless, there is irregularities like compliance with laws, safety, impropriety, finance manager cannot question any such decision taken by Marketing Department. Like wise, all the strategy is being managed by marketing functions and supported by other functions. In services sectors, IT and ties Services (ITs) is one of significant contributors. So we are now doing acid test of role of accountant in IT's. In ITs neither production manager nor Marketing managers play any role, because nature of business is more technology driven than any other business sectors.

An IT experts or software engineers play lead role in entire function of ITs business. From booking new order to development of software and implementation of the same, project leader or manger is more critical player than any other functional managers. They are specialised professional who executes business and moreover highly experienced software engineers are put to develop and create new businesses in IT’s Company. After knowing the role of lead IT professional in ITs business, we can check process review, performance measurement and cost control in ITs bushiness. An engineer who has worked in providing technology services and software development, can understand various areas and scope for improvement in its business. If an IT expert can decide which are activities and steps in software development project , which can be replaced with new technology or new programing language, only such experienced person can decide how to save cost from project or activities which are not effective and efficient.

Efficiency and effectiveness in ITs business can be better understood by the professionals who have exposures to such ITs business at the micro level of functioning. An Accountant can support IT professionals with regard to compliance for statutory compliance, taxes and sharing common services of central business function. An Accountant cannot be eligible to assess performance of a project in ITs business in quality terms. What type of skilled manpower is required, to how much extent is required, uniqueness of programming language required for development of a software are of specialised and technical function, where only technical professional can carry out any functions related with same.

An Accountant can provide compliance with checking of cost and benefits analysis of a project where benchmark is set by ITs Professional in association with Accountants. Again, ITs professional set standards , benchmark and provide structured format for measurement of performance of a project. An Accountant can provide independent function of co-ordination to fill up such formats, compile the same, and compare with benchmark sets. Intrinsic value of performance appraisal of ITs business can be only possible and acceptable to all the stakeholders of ITs Business, when specialised and experienced engineers review all processes or sub-process of ITs business (process of software development ,implementation ) and provides inputs for performance measurements and for improvement of business function.

While an Accountant can collect, classify and report the information generated by such professionals .Accountants are oriented to technology and engineering functions by ITs business to carry out mere collection ,classification and reporting of Information generated by engineers. So, question of independent evaluation of performance of engineering and technological functions by an Accountant doe not arise at all. As usual , information are more or less numeric and quantitative ,hence accountant is called for support function. So, even in IT's business also, we cannot say that performance measurement, process review and cost control are such activities where an Accountant can play lead role .It is only an expert of ITs business who can play lead role in the above mentioned tasks.

So, Accountant plays a role of a co-ordinator for functioning of process review ,cost control and performance measurement. Quality audit , cost engineering and technical audit are such activities in ITs business which takes care of cost control, process review and performance measurement and its reporting. Conclusion: At all the micro level of any business process, only a functional specialists can carry out checking & review of cost control , efficiency ,and effectiveness of business function. An Accountant like Production Manager, Marketing Manager and HR is a functional specialist in his subject domain.

Accordingly, s/he can carry out services of review, measurement, analyss and reporting of finance function, but not of other functions. His/her role in other business functions is only at the level of support or co-ordination. An Accountant may not be supposed to do review and reporting of those business functions where other functional managers play lead roles. An Accountant is universally accepted as finance manager and s/he can take stock of financial performance. If S/she is more experienced in accounting, taxes, audit and allied services, s/he becomes a good finance manager.

Then, Finance manager is responsible to measure financial performance of a business entity. Achievement appraisal of one of the principal objectives of any business entity (commercial propose only) naturally coincide with appraisal of financial performance of that business entity. So, an accountant becomes one of key business leaders to check,monitor ,validate and report financial performance of an business entity. Positive criticism,feedback and Inputs are highly appreciated.


Published by

CA.Raj Kumar Gupta
( (Finance Controller))
Category Others   Report

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