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Survey Results of Management Levels on Business Performance Management Information Needs


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Information on revenue from mining or selling GNL Information on cost of goods sold, operating expenses, and management expenses

Survey Results of Management Levels on Business Performance Management Information Needs

Profit (loss) results by type of GNL, planted forest

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18.8%

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53.1%

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28.1%

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Chart 2.11. Survey results of management levels on business performance management information needs

The survey results in Chart 2.11 also show that all enterprises have information needs at level 4 for information on revenue and profit (loss) results with a rate of 100% of survey responses. For information on cost of goods sold and non-production costs, enterprises only have information needs at level 3 mainly (53.1% of survey responses) and mainly for financial reporting purposes.

The survey results show that the CTLN in the province do not have a high demand for accounting information systems used for controlling and evaluating operations. Some companies have information needs at level 4 but only focus on production costs, revenue, profit (loss) results at the end of the period and use information on fixed assets for forestry land management and conflict resolution with households. The number of CTLN that do not have a need for accounting information for management, control and evaluation accounts for 18.8% of the survey opinions. These are micro-sized companies. Their activities focus on assigning financial investment contracts to households and when the exploitation period comes, they purchase and sell forests or raw wood or determine the profit received according to the percentage of investment.

Thus, due to the low demand for accounting information for control and evaluation, management levels at CTLN in the province have not paid attention to establishing a system of economic indicators to serve the control and evaluation functions.

* Classification of costs and revenues

+ Cost classification

The production cycle in forestry production and business is characterized by a long period of time, starting from the stage of planting forests to the stage of exploiting raw wood. Therefore, all costs incurred in the forestry production process are also correspondingly long. The content of forestry production costs is related to many stages but is mainly divided into two main types of costs, which are costs related to planting and caring for forests and costs related to the exploitation of raw wood. Specifically:

- Costs related to forest planting and care activities

These are costs related to investment in planting and caring for forests from the beginning until the forest reaches the age of exploitation, including costs such as: Forest planting design costs, vegetation clearing costs, land preparation costs, digging holes, seedling costs (including main planting and supplementary planting), fertilizer costs, costs of forest-related drugs (stimulants, pesticides); loan interest, labor costs; land rent, etc.

- Costs related to GNL mining operations

This is the cost incurred at the stage of exploiting mature forests, including costs such as: exploitation design costs, bidding costs, exploitation construction costs, etc.

Most of the CTLNs in the province classify costs according to their operational functions and economic content. Costs at CTLNs are classified as follows:

- Cost classification by operational function

According to the operating function, costs incurred at CTLN are classified into production costs and non-production costs.

+ Production costs include direct labor costs, indirect labor costs, and production costs. Specifically:

CPNVLTT includes costs of materials directly serving forest production activities, from planting, caring to forest protection and management. These costs include seedling costs; fertilizer costs; pesticide costs; growth stimulant costs; lime powder costs; cover costs; ...

CPNCTT is the amount of money that must be paid to workers directly involved in planting, caring for and managing and protecting forests, including: Salary, bonuses, allowances, overtime pay, meal allowances, etc.

CPSXC are costs used for organizing, managing and using for the production process of production teams and groups. These costs include costs of tools and equipment for planting, caring for and managing and protecting forests such as costs of lawn mowers, costs of excavators, etc.; costs of electricity, water and telephone; costs of protective equipment; costs of resource tax; costs of technical design consultancy and costs of appraisal of planting projects,

Forest care and protection management; stationery costs, meetings, propaganda and mobilization on forest protection management; ...

+ Non-production costs include operating expenses, management expenses, financial expenses and other expenses. Specifically:

Selling expenses are necessary expenses used for the sales process and ensuring the consumption of products to customers. At CTLN, the types of expenses included in CPBH are mainly advertising expenses; transportation and unloading expenses; costs of evaluating and certifying GNL meeting quality standards;...

Enterprise management costs are expenses incurred in the office department of the enterprise and other expenses related to the organization, management and administration of the company. Enterprise management costs usually include the following expenses: employee costs in the management department and office of the enterprise (including: salaries, bonuses, allowances, salary deductions); expenses for uniforms and supplies; depreciation costs of office fixed assets; tax and fee costs (including land tax, business license tax, road and bridge fees); expenses for purchased services (including electricity, water, telephone costs; property rental costs; other cash costs, etc.)

Financial expenses are expenses related to financial investment activities such as interest expenses, losses due to exchange rate differences, payment discounts for customers, etc.

Other expenses are expenses arising from irregular activities, outside the expenses serving the normal production and business activities of the enterprise such as liquidation costs, fixed asset transfer costs; fines for breach of contract, late tax payment fines; losses when the company contributes fixed assets to joint ventures or associations; …….

- Cost classification by economic content

This classification serves to collect and manage costs according to the original economic content without considering the specific use of the cost, the location of the cost or the cost classified by factor. According to this classification criterion, production and business costs in CTLN are divided into factors such as raw material costs; tool and equipment costs; fixed asset depreciation costs; labor costs; costs of purchased services and other costs in cash... according to current regulations.

The results of in-depth interviews in Box 2.1 show that businesses are not interested in classifying costs according to the aspect of management accounting such as: Classifying costs according to the ability to assign costs to cost accounting objects, according to the relationship between costs and the volume of activities, thus not ensuring the provision of information according to management requirements.

Box 2. 1. CTLN has not paid attention to classifying costs according to international accounting


Currently, the company classifies costs according to financial accounting, that is, by operational function and economic content to serve the purpose of cost accounting, calculating raw wood prices and preparing financial statements. Cost classification according to the economic management aspect has not been implemented because the company's Board of Directors does not have a need for comparative, analytical and forecasting information. On the other hand, the company does not have activities to evaluate the implementation of norms and plans of affiliated departments, so the information provided to management levels in the company is all from the financial accounting system.

Source: Interview with Mr. Nguyen Trung Thanh, Accountant of Son Duong Company

The classification of costs according to international accounting has not been given due attention and investment by forestry companies, therefore, forestry companies do not have the basis to analyze the fluctuations in costs arising in production and business when the scale and level of exploitation change. In addition, the company's management levels also do not clearly identify the specific changes in costs arising in each stage of forest production and exploitation of raw wood corresponding to each level of exploitation in order to make accurate decisions in the company's production and business activities.

2.3.1.2. Current status of the system of norms and budgeting associated with the control and evaluation functions of administrators in forestry companies in Tuyen Quang province

(*) The system of performance standards in forestry companies in Tuyen Quang province

* Bill of materials

Box 2. 2. Building material standards requires complex analytical techniques


Every year, the company is assigned production and exploitation targets, the output of raw wood for sale according to contracts signed with wood processing enterprises such as: Woodland Joint Stock Company, An Hoa Paper Joint Stock Company, etc. In addition, most of the main materials used in forestry production are produced by the company's nursery team based on the assigned forest planting plan. Therefore, the company is always proactive in forest production and exploitation, the amount of raw materials of the company does not fluctuate much over the years. Meanwhile, the construction of raw material norms is complicated, requiring many analytical techniques, so the company has not built a raw material norm system.

Source: Interview with Mr. Nguyen Phung Bac, Head of Science and Technology of Son Duong Forestry Department

Survey results (Appendix 1E) show that 100% of respondents of CTLN in the province do not establish material norms.

The author conducted in-depth interviews in Box 2.1 with business leaders to find out why businesses do not establish material standards.

* Labor standards

The survey results in the Appendix show that 100% of respondents said that the enterprises in the province did not develop a labor norm system. According to the results of the actual investigation, the enterprises only developed salary scales and salary tables for employees.

Currently, the salary scale and payroll system of state-owned enterprises is built based on Decree No. 49/2013/ND-CP dated May 14, 2013 of the Government. For state-owned enterprises, the basis for construction is supplemented by Decree No. 53/2016/ND-CP dated June 13, 2016 of the Government and Circular No. 28/2016/TT-BLDTBXH dated September 1, 2016 of the Ministry of Labor - Invalids and Social Affairs. The salary level is determined as the salary level of region IV (VND 3,070,000), based on Decree No. 90/2019/ND-CP dated November 15, 2019 of the Government. The scope of adjustment of the salary scale and payroll system is the following positions and job titles:

- Direct production labor (forest planting, care and protection workers and design technical workers)

- Car driver

- Professional, technical, operational, executive, and service workers (positions in production departments and teams)

Illustration of Salary scale, salary table for direct production workers and drivers in Appendix 2.31

- Management labor (Head, deputy head of affiliated units)

- Specialized manager (Chairman of the Board of Directors, Director, Deputy Director, Chief Accountant)

Illustration of Salary scale and indirect labor salary table in Appendix 2.32

* Fixed asset usage norms

The survey results in Appendix 1E show that 66.7% of respondents said that the company has established a fixed asset usage standard. However, through practical research, this norm is implemented for the use of fixed assets such as cars and is implemented at small and medium-sized enterprises, while micro-sized enterprises do not establish a fixed asset usage standard.

The car usage norms of the above-mentioned CTLNs are built in the form of a contract based on actual kilometers used, and the contract unit price is based on the transportation service unit price.

of cars on the market. This system of norms is specifically regulated in the Regulations on internal expenditure, management and use of assets of the CTLN.

Illustration of car usage allowance in Appendix 2.25

* Cost norms

Cost norms in forestry enterprises are very important, this is the basis for companies to determine the level of expenditure for investment, care and protection of forests according to annual estimates and details for each type of forest tree. Thanks to that, forestry enterprises can control costs, minimize waste or loss of resources occurring in the production and business process. In particular, the model of forest planting contract, which is commonly implemented in forestry enterprises today, really needs a system of cost norms that enterprises build as a basis for supporting seeds, materials and techniques for households and individuals receiving contracts.

The survey results in Appendix 1E show that 66.7% of respondents said that their companies have established cost norms, this number is concentrated in small and medium-sized enterprises, the remaining enterprises do not establish their own cost norms. The establishment of cost norms is based on the results of implementing cost norms of the previous period and the regulations on technical norms issued by the State. Specifically:

+ For CPNVLTT standards and CPNCTT standards in afforestation

All CTLNs have established production cost norms based on Decision No. 1347/QD-UBND on approving unit prices for seedlings in 2020, Decision No. 38/2005/QD-BNN of the Ministry of Agriculture and Rural Development on technical and economic norms for afforestation, forest regeneration promotion and forest protection.

- Direct material cost standards

The CPNVLTT standards are built to include standards for seedlings, fertilizers, stimulants, pesticides, bags, lime powder, covers, etc. to serve the process of planting and caring for forest trees such as eucalyptus, acacia, etc.

Seedlings are used for two purposes of afforestation: main planting and supplementary planting. After the main planting period, companies conduct periodic inspections and review the percentage of living trees to ensure the planned afforestation scale. The company will replant the dead trees. The CPNVLTT rate used for supplementary planting is determined at a rate of 10% - 20% of the CPNVLTT used for main planting, depending on the type of planted forest and the production stage.

CTLNs build CPNVLTT norms based on Decision No. 38/2005/QD-BNN of the Ministry of Agriculture and Rural Development issued on July 6, 2005 on "Economic and technical norms for afforestation, forest regeneration promotion and protection".

"forest" . However, depending on the specific situation, each CTLN can adjust to apply some indicators to suit its actual production and business conditions.

Illustration of direct material cost norms for forest planting in Appendix 2.3

- Direct labor cost standards

The CPNCTT norms are built for each specific job such as clearing vegetation, digging holes, filling holes, preventing pests and diseases, replanting... and built according to each production stage such as afforestation, forest care...

The CTLNs build the CPNCTT norms based on Decision No. 38/2005/QD-BNN of the Ministry of Agriculture and Rural Development issued on July 6, 2005 on "Economic and technical norms for afforestation, forest regeneration promotion and forest protection" . However, depending on the specific situation, each CTLN can make adjustments to apply some criteria to suit its actual production and business conditions.

Illustration of direct labor cost standards for planting and caring for forests in Appendix 2.4

+ The CPSXC norms are built based on Circular No. 15/2019/TT-BNNPTNT guiding some contents of investment management of forestry works. The CPSXC norms are the norms of costs incurred in general for the investment process of planting production forests, including the following costs:

- General costs include costs of labor protection equipment and environmental protection; costs of transporting equipment, construction machinery and labor force to and from the construction site; costs of ensuring traffic safety for construction (if any).

- Management costs include the costs of organizing and managing the production forest planting process until exploitation.

- Construction investment consulting costs include costs related to survey; design and estimate preparation; implementation supervision and other related consulting costs.

- Pre-tax income

The CTLN also establishes labor standards for exploitation in case the CTLN exploits forests for sale. Standards are established for the cost of clearing the ground cover before exploitation, making a wharf for gathering raw materials, felling trees, stripping branches, cutting tops, raking, transporting, cutting and stacking, and transporting and preserving GNL if not yet transported. Labor standards for exploitation are applied according to State regulations.

Illustration of direct labor standards for exploiting production forests in Appendix 2.38

CTLNs do not establish detailed CPSXC norms because this type of cost includes many complex cost contents. Instead, CTLNs determine the percentage

The rate after being established will be submitted to Vietnam Paper Corporation if it is a subsidiary or to the Provincial People's Committee if it is a company under the management of the province. After that, Vietnam Paper Corporation or Tuyen Quang Provincial People's Committee will approve the rate. This is the basis for companies to conduct production and business and assign it to the production team.

Although companies have built a complete cost standard system, this standard system does not meet the requirements of high-level management but only meets the basic level in planning, budgeting and cost control. This is reflected in the fact that the components involved in building production cost standards lack senior managers or accountants or both.

Box 2. 3. Planning and technical department in charge of developing production cost norms


The company's planning and technical department is responsible for production planning, analysis, and evaluation of the effectiveness of the production process. Therefore, the production cost norms are assigned to the construction department, then submitted directly to the Board of Directors for approval and request the Provincial People's Committee to approve the norms. This process does not involve the accounting department.

Source: Interview with Mr. Vu Dinh Manh, Director of Nguyen Van Troi Agricultural Company

The in-depth interview results in Box 2.3 show that the planning and technical department is the main component in building the production cost norms, other departments participate in a coordinating role. Thus, most of the enterprises have the participation of the Planning and Technical department when building the production cost norms, of which, only Son Duong Enterprise has all 3 components of the Board of Directors, the Planning and Technical department and the Accounting department, with the Board of Directors representative as the head of the steering committee, Chiem Hoa Enterprise has the participation of 2 representative components, the Planning and Technical department and the Accounting department, the rest only has the Planning and Technical department to build the production cost norms and submit them. Therefore, most of the construction of economic and technical production norms at the enterprises has not met the management requirements.

In addition, the survey results (Appendix 1E) show that 100% of respondents do not establish norms for periodical expenses, including: sales expenses and business management expenses. However, according to actual research at the enterprises, the internal spending regulations of the companies have provisions for lump-sum expenses for business management expenses. Specifically as follows:

- Business trip expenses

- Costs for conferences and receptions

- Reception costs at production teams

- Internet and phone usage costs

- Cost of electricity for lighting and household use

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