In each of these items, it is further classified according to cost elements. This helps accountants meet the requirements of providing timely and useful information on indicators of cost of goods sold, sales costs, and business management costs.
For small and micro-sized enterprises operating in the form of business stores, even though they only apply the Individual Business Household Accounting Regime, these small-sized enterprises have already separated the cost of capital and business expenses.
Regarding cost estimates: Although only established as part of the overall business plan of the enterprise, cost estimates in small and medium-sized commercial enterprises have had certain effects in creating the foundation of estimates in enterprises. In addition, cost estimates for each transaction have more or less helped administrators more easily in choosing business options.
Regarding cost analysis: Cost analysis in small and medium-sized commercial enterprises aims to control costs and serve business decision making. Although still in its rudimentary, simple form, cost management accounting information has more or less helped managers have more basis to make decisions. The rudimentary simplicity of cost analysis is reflected in the preparation of cost reports by cost management accounting, which is carried out according to irregular "orders", and is often associated with transactions that make leaders confused and lack information. Moreover, due to the very different and shallow understanding of management accounting between accountants and leaders, management accounting reports do not meet the "easy to understand" requirement of accountants, which makes it difficult for leaders to use the information provided by accountants.
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2.4.2 Existing problems and limitations in cost management accounting in small and medium-sized commercial enterprises in Vietnam
2.4.2.1 Cost management accounting is not yet taken seriously
Although management accounting has been more or less recognized in small and medium-sized enterprises, this does not mean that cost management accounting is taken seriously. Compared with the amount of money businesses invest in financial accounting and tax accounting such as sending employees to study to improve their qualifications, buying accounting software, inviting consultants, supporting experts, inviting experts to prepare reports and tax settlements, hiring auditors, etc., management accounting in general and cost management accounting in particular are just like "doing extra work for the sake of it". Business leaders at all levels are less interested in the general accounting information provided as well as cost management accounting information, so cost management accounting has not had the motivation to develop. Managers often make decisions based on experience and personal judgments.
2.4.2.2 Cost management accounting has been initially applied and implemented, but only in simple contents, leaning towards concretizing financial accounting.
Along with not being taken seriously, cost management accounting in small and medium-sized commercial enterprises has only stopped at the initial application of simple contents and tends to concretize and detail the information of financial accounting. From the initial information of financial accounting, when requested by the enterprise administrator in each specific case, accounting synthesizes and analyzes according to the administrator's purpose. Most of the cost management accounting work in enterprises is only different from financial accounting in the "analysis" and "provision" of information.
FINANCIAL ACCOUNTING
Collect and Process
MANAGEMENT ACCOUNTING
Analysis
Provide information
Analysis
Provide information
Figure 2.13 Correlation between cost management accounting and financial accounting in small and medium sized commercial enterprises
(Source: author)
Cost management accounting in small and medium-sized commercial enterprises analyzes and provides information based on information collected and processed by financial accounting. However, due to differences in accounting methods and cost recognition principles, cost management accounting information based on financial accounting is not really suitable for the information needs for decision-making of business administrators.
2.4.2.3 The application of cost management accounting is still spontaneous and fragmented.
Cost management accounting in small and medium-sized commercial enterprises is not built into a process or a regular activity, but is only carried out according to the arising needs of business administrators. The cost information needs of business administrators are often irregular and associated with each arising business transaction, which leads to cost management accounting always being passive, cost management accountants are not proactive in initial information, information analysis methods and reporting objectives, etc. The irregular need for cost information along with the lack of importance attached to cost management accounting, in small and medium-sized commercial enterprises, accounting
Cost management is based on the fragmented understanding of individual accountants. Therefore, cost management accounting in small and medium-sized commercial enterprises is spontaneous and fragmented. Specifically, the existing problems in cost management accounting content in small and medium-sized commercial enterprises are as follows:
Regarding cost classification: Cost classification methods largely depend on the classification of financial accounting, the typical classification methods of management accounting such as classifying costs into fixed costs, variable costs, controllable costs, uncontrollable costs, etc. have not been applied. Not classifying costs according to management accounting methods makes management accounting in small and medium-sized commercial enterprises only at the initial, simple level and dependent on each person doing management accounting. In particular, the cost of goods sold indicator is not monitored in detail according to economic content but is mostly detailed for items or for the sales area of the enterprise.
Regarding cost estimates: Similar to cost classification and recording, cost estimates are applied by small and medium-sized commercial enterprises, but they are only simple estimates of a planning nature.
Purpose of budgeting : Small and medium-sized commercial enterprises prepare cost estimates as part of their operational plans. Although they are prepared in the form of annual plans or plans for each transaction, budgets of medium-sized commercial enterprises are usually only intended to predict future costs and can then be used as a measure of plan completion , but are not yet used as an economic management tool.
Cost estimation method : Cost estimation in small and medium-sized commercial enterprises often determines the cost level based on the current year/period cost plus (+/-) the cost increase/decrease due to fluctuations in future cost factors such as increase or decrease in sales volume, number of employees, etc. However, cost estimation in small and medium-sized commercial enterprises has not yet taken into account many fluctuations in factors outside the enterprise such as currency value, upward trend in prices of input factors. Moreover, the methods used to calculate future costs are limited to manual methods or simple Office software without the application of forecasting functions or more modern tools.
Regarding cost analysis and reporting for the purpose of making business decisions: Cost analysis and reporting for the management of unit leaders are not yet regular and scientific. Cost management accounting reports to provide information to business administrators are made in the form of "orders", which are irregular, and are often associated with transactions that make leaders confused and lack information for decision making. Moreover, due to the very different and often shallow understanding of management accounting between accountants and business administrators, management accounting reports do not meet the "easy to understand" requirement of accountants, which makes it difficult for leaders to use the information provided by accountants.
Regarding departmental assessment: due to the characteristics of small and medium-sized commercial enterprises being highly "private", business management is still heavily influenced by the personal nature of the administrator. Business management decisions of business leaders are often influenced by emotional factors rather than compliance with principles, skills, and management knowledge. With the characteristic of using weak
Emotional factors in business leadership, the need for cost information for managers to serve decision making is often not high, managers often prefer to make decisions based on experience, judgment, ... rather than financial parameters provided by accounting. One of the clear manifestations of this problem is the evaluation of departments, effective or ineffective departments are not always evaluated with appropriate criteria. The evaluation criteria used in evaluating departments in small and medium-sized commercial enterprises are revenue and cost of goods sold indicators. However, these indicators are not enough to evaluate the effectiveness of departments. Departments in small and medium-sized commercial enterprises are stores, sales areas (markets) or products, product groups, ... each division and management of departments will need certain criteria to evaluate operational efficiency. Therefore, it can be affirmed that the application of cost management accounting to evaluate the performance of departments in small and medium-sized commercial enterprises is still very limited.
2.4.3. Some causes
2.4.3.1 Causes from business administrators
Lack of awareness of the role of cost management accounting: Awareness is the foundation of action. Due to the lack of awareness of the role of cost management accounting, managers of small and medium-sized commercial enterprises do not have a clear attitude and action on management accounting.
The habit of making economic decisions based on emotions is an important reason in the view of managers about management accounting. Small and medium-sized commercial enterprises are mostly non-state enterprises, operating in the form of private enterprises in the form of family companies. These enterprises are established by an individual or a few individuals contributing capital and managing the business themselves, most of them work based on business
experience, personal relationships, expectations, risks, ... knowledge of business administration is not high. Therefore, the need for accounting information to serve their decision making is not much.
Fear of change: " People create habits" but then " habits create people", so most of us are "fearful of change", this is also true for managers of small and medium-sized commercial enterprises today. "What results will change bring?" is a question that has no definite answer, but the cost for it can be calculated with certainty (such as the cost of building accounting software, staff costs, training costs, consulting costs, investment costs in working equipment, etc.) "Is cost management accounting really necessary when the business is currently doing well, the business is still operating effectively?". Fear of change is a major barrier to the development of cost management accounting in small and medium-sized commercial enterprises.
Cost savings: adding work will generate additional costs, especially when this is a job that requires a lot of intelligence. With small and medium scale, managers believe that business operations are quite simple, information is not much, easy to process, so managers often process and analyze information by themselves using simple methods, estimate or take advantage of financial accounting for the purpose of saving costs. This is also a fairly common reason that limits the development of cost management accounting in small and medium scale commercial enterprises.
2.4.3.2 Causes from the accountant's side
Accounting level: The gap between theory and practice of cost management accounting in enterprises is a huge limitation for the development of cost management accounting in small and medium-sized commercial enterprises.
Training institutions often provide students and trainees with basic knowledge. However, due to the specific nature of cost management accounting, which is highly individualized, when implementing cost management accounting in enterprises, accountants are often quite confused in implementing the basic knowledge learned into specific content related to the characteristics of the enterprise. In addition, the number of accountants in small and medium-sized commercial enterprises is quite small, the average level is not high (mostly at college and intermediate level). With the characteristics of average level and specificity of cost management accounting, the level of accountants in small and medium-sized commercial enterprises has not met the requirements of cost management accounting, especially in building a new, suitable and useful management accounting system.
The remuneration is not attractive; Cost management accounting is a job that requires a lot of intelligence, but the remuneration is not commensurate, making accountants not enthusiastic about cost management accounting. The remuneration for management accounting is only 1-2 million VND/month, usually this remuneration is not regular and is only considered as additional remuneration for accountants when their management accounting work is quite heavy. There is not even a separate accounting staff for management accounting, and if a regular accounting staff (financial accountant) performs management accounting work, it is only considered as doing additional professional work without being paid additional remuneration or salary, therefore, performing management accounting in small and medium-sized commercial enterprises is not an attractive job.