The key role of management accounting in reducing costs and improving profits

The external environment is beyond the control of the enterprise itself, and enterprise management can only start from the inside. Throughout the world, enterprises all over the world are vigorously applying management accounting in the pursuit of how to improve profits and reduce costs. On the basis of strengthening cost management and control, management accounting has advanced a lot compared with simple cost management. Management accounting includes cost management (cost accounting). Of course, the lower the cost, the better, and it is not only the content of cost management. It also pays attention to modern quality management such as TQM and Six Sigma and modern manufacturing technologies such as JIT, lean production and agile manufacturing, which can improve the income of enterprises. Management accounting also calculates quality cost for quality management. Management accounting is an internal accounting that combines management and accounting. It is different from external accounting such as financial accounting and tax accounting, and mainly provides strategic, tactical, daily business operation decision support services and performance management for enterprise managers. For example, management accounting can solve the following problems:

Analyze the profit of product line (or product) to see whether to continue to increase production or reduce production or even stop it; Whether the spare parts and services are self-produced or outsourced is better; What is the marginal profit per unit product?

Analyze the profit of customers, sales channels and market areas to determine the marketing strategy;

New product development, how to design new products and control the target cost of new products under the premise of ensuring the company's expected profit;

How to gradually reduce the consumption cost of materials, labor and other resources in the production of existing products, gradually improve production and reduce manufacturing costs;

How to design a good enterprise cost control system and gradually reach the best level of industry performance. How to eliminate non-value-added activities and improve business processes such as marketing, production and service;

What is the total cost of products, customers and sales channels (including the total cost of the whole process of value chain and supply chain from R&D and design to manufacturing, sales, distribution and after-sales service)? How to accurately quote and price products from the whole life cycle and value chain process;

How to reduce the total cost from a strategic height, not just the manufacturing cost, because the cost of sales and distribution is also very high now, and there are various management expenses, which are also links that need to be greatly reduced.

In terms of figures, which department of the company has the best performance, which department is the worst, how to improve the performance of the department, and so on.

Most foreign manufacturing companies have implemented activity-based cost management (ABCM). ABCM is used for strategy, tactics, daily operation management and business process improvement, which is a more refined strategic cost management. Activity-based costing management and balanced scorecard are two main core themes of management accounting today. Balanced Scorecard is used in enterprise strategic management and performance evaluation. It has become popular in China, but most of it is limited to evaluating employees' performance. Many foreign enterprises have also applied the balanced scorecard for strategic management and performance evaluation.

There are a large number of management accountants in enterprises in all market economy countries in the world. One of the main responsibilities of corporate CFO is to improve profits, including management accounting business such as cost control. In particular, most managers in the financial department are also management accountants or have a high level of management accounting technology, and managers in production and sales departments must also master management accounting knowledge and technology (especially cost accounting).

China enterprises urgently need a large number of management accountants.

At present, what China enterprises need most is a management accountant. A management accountant is better than a dozen economists.

China enterprises are short of management accountants, who used to be called cost accountants. The teaching and research of modern management accounting in universities in China lags far behind most countries in the world, which is mainly due to the planned economy in China. In addition, modern management accounting is an interdisciplinary and comprehensive subject, which requires new knowledge such as production management and information technology, and it is also a constantly developing management technology. There is a serious shortage of management accounting teachers in China, which is one of the reasons why it is difficult for China University to train management accounting talents that enterprises urgently need. Nowadays, enterprises only have to train management accountants themselves.

Due to the lack of management accountants, most enterprises apply management accounting only to product cost accounting, and still use traditional cost accounting methods that reflect inaccurate cost information. For example, because we don't know the exact cost of which products and customers, we don't know which products and customers are profitable and which products and customers are losing money, which is the root cause of decision-making mistakes. The implementation of management accounting project requires the participation of all employees of the enterprise, which is an inter-departmental project, and accounting, production, marketing, procurement, warehouse, management, logistics and other departments should actively participate. Enterprise informatization is very important, but it is not enough to implement ERP only. ERP is only an informatization tool, and it is really useful only to obtain decision-making information that is conducive to improving enterprise profits and be used by managers! This requires the work of a management accountant!

I hope my answer can help you solve the problem. If you are satisfied, please adopt it as the best answer.

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