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Organizing cost management accounting information at Vietnamese construction enterprises in the context of integration
Posted date 16/01/2018
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Posted date 16/01/2018
1.042 view
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International economic integration has created many opportunities and challenges for Vietnamese enterprises in general and construction enterprises in particular. Accordingly, more and more foreign enterprises with potential in capital, technology and good management skills are participating, creating increasingly fierce competition in a common equal playing field.
Dr. Le The Anh
Dai Nam University
Dai Nam University
International economic integration has created many opportunities and challenges for Vietnamese enterprises in general and construction enterprises in particular. Accordingly, more and more foreign enterprises with potential in capital, technology and good management skills are participating, creating increasingly fierce competition in a common equal playing field. Vietnamese construction enterprises that want to stand firm and develop sustainably in the market need to have the right strategic orientation as well as control production costs. To do that, each construction enterprise needs to build a flexible and effective management accounting information system to analyze, process and provide timely information to managers. Based on that useful information, managers can plan business strategies and effectively control the operating process to ensure the implementation of the set goals. Therefore, building and perfecting the management accounting information system in traffic construction enterprises is necessary.
1. The role of cost management accounting information system
Cost management accounting information system can be defined as the accounting information used by managers who use accounting information to make their important decisions. This will help managers to have a better understanding of the organization and perform control functions more effectively. Management accounting information system helps managers to make decisions such as:
Strategic Management : Strategic management decisions of an organization can be made by the managers of the organization using management accounting information.
Performance Management : The performance of an organization can be managed by using management accounting information. It will help the managers to make important decisions for the organization.
Risk Management : Management accounting information will provide a framework to help managers in identifying, managing and reporting risks. This is extremely helpful in meeting the organization's objectives.
2. SWOT analysis of development trends of Vietnamese construction enterprises
Strengths
- The new policy system and specific planning open up many development opportunities for construction and installation businesses.
- With the goal of promoting economic growth, and the government's investment strategy for key infrastructure projects.
- Local labor is cheap.
Weaknesses
- Some State-owned enterprises have many advantages when participating in bidding for construction projects with State investment capital, reducing the effectiveness of bidding and can greatly affect the quality and progress of construction for contractors who do not have the capacity to perform.
- The slow progress of administrative procedure reform is a huge barrier to investors. Despite many efforts in administrative procedure reform, the total tax payment time is 247 hours, which is very high compared to other countries in the region. Vietnam's customs clearance time is 21 days, higher than the average of 13-14 days of ASEAN-6 countries.
- Most domestic contractors are small and medium-sized enterprises with weak competitiveness and outdated construction technology.
- The management level of contractors is still limited, lacking good managers and skilled workers.
Opportunity
- The demand for construction and installation is expected to increase in the near future due to the rapid urbanization.
- The recovery of the real estate market.
- The Government's efforts in policy innovation contribute to market transparency and attract more foreign investment capital. Effectively implementing VNACCS/VCIS automatic customs clearance and applying the single customs mechanism (NSW), customs clearance time for goods is reduced by 3.5 - 4 days and costs are reduced by 10-20%, which will improve the business environment for FDI enterprises.
- Deposit investment channels are becoming less attractive due to lower interest rates. Cash flow may shift to other more effective investment channels such as real estate. At the same time, interest expenses of transport construction enterprises are also reduced, contributing to cost reduction.
- The legal framework for the PPP (Public-Private Partnership) model has been increasingly improved, creating favorable conditions to strongly attract private investment capital into the infrastructure sector. Recently, a number of large PPP projects have been implemented, such as the Nha Trang-Phan Thiet Expressway (VND 46-47 trillion), Trung Luong-My Thuan Expressway Phase 1 (VND 14.6 trillion), Bac Giang-Lang Son Expressway (VND 13 trillion), and My Thuan 2 Bridge (VND 9.8 trillion). However, a disadvantage of the PPP model is that the State still has to invest in PPP projects. Therefore, mobilizing additional counterpart loans, especially ODA capital, is also one of the important tasks at present.
- Recently, Vietnam has signed economic agreements that will create the premise to attract FDI capital into the construction sector.
Challenge
- Lack of transparency and government monopoly in the energy sector create risks for foreign and private investors.
- Negative impacts due to energy shortages and poor infrastructure affect FDI flows.
- Investment costs of FDI enterprises increase due to low labor productivity.
- Inadequacy and lack of transparency of the legal system in the field of tax and business registration.
Thus, SWOT analysis shows that Vietnamese construction enterprises are facing many opportunities as well as challenges. To be able to take advantage of these opportunities, Vietnamese construction enterprises need to make the right decisions in business management. These decisions can only be made when managers have complete, timely and effective information. Information on production costs and product prices is extremely important information in the enterprise's information system.
To carry out construction works, enterprises need to prepare input factors such as: Materials, labor and construction machinery. These cost factors form the cost of the construction work. According to survey data, the cost of a normal construction work includes 60-70% of material costs, 10-20% of labor costs, and 10-20% of construction machinery costs, of which steel accounts for 60-70% and Cement.
Due to the large costs incurred during the construction process, businesses need to build a system to collect, process and provide appropriate information to control costs. The management accounting information system includes people, procedures, equipment and bookkeeping systems used by an organization to:
+ Develop accounting information;
+ Communicate accounting information to decision makers.
1. The role of cost management accounting information system
Cost management accounting information system can be defined as the accounting information used by managers who use accounting information to make their important decisions. This will help managers to have a better understanding of the organization and perform control functions more effectively. Management accounting information system helps managers to make decisions such as:
Strategic Management : Strategic management decisions of an organization can be made by the managers of the organization using management accounting information.
Performance Management : The performance of an organization can be managed by using management accounting information. It will help the managers to make important decisions for the organization.
Risk Management : Management accounting information will provide a framework to help managers in identifying, managing and reporting risks. This is extremely helpful in meeting the organization's objectives.
2. SWOT analysis of development trends of Vietnamese construction enterprises
Strengths
- The new policy system and specific planning open up many development opportunities for construction and installation businesses.
- With the goal of promoting economic growth, and the government's investment strategy for key infrastructure projects.
- Local labor is cheap.
Weaknesses
- Some State-owned enterprises have many advantages when participating in bidding for construction projects with State investment capital, reducing the effectiveness of bidding and can greatly affect the quality and progress of construction for contractors who do not have the capacity to perform.
- The slow progress of administrative procedure reform is a huge barrier to investors. Despite many efforts in administrative procedure reform, the total tax payment time is 247 hours, which is very high compared to other countries in the region. Vietnam's customs clearance time is 21 days, higher than the average of 13-14 days of ASEAN-6 countries.
- Most domestic contractors are small and medium-sized enterprises with weak competitiveness and outdated construction technology.
- The management level of contractors is still limited, lacking good managers and skilled workers.
Opportunity
- The demand for construction and installation is expected to increase in the near future due to the rapid urbanization.
- The recovery of the real estate market.
- The Government's efforts in policy innovation contribute to market transparency and attract more foreign investment capital. Effectively implementing VNACCS/VCIS automatic customs clearance and applying the single customs mechanism (NSW), customs clearance time for goods is reduced by 3.5 - 4 days and costs are reduced by 10-20%, which will improve the business environment for FDI enterprises.
- Deposit investment channels are becoming less attractive due to lower interest rates. Cash flow may shift to other more effective investment channels such as real estate. At the same time, interest expenses of transport construction enterprises are also reduced, contributing to cost reduction.
- The legal framework for the PPP (Public-Private Partnership) model has been increasingly improved, creating favorable conditions to strongly attract private investment capital into the infrastructure sector. Recently, a number of large PPP projects have been implemented, such as the Nha Trang-Phan Thiet Expressway (VND 46-47 trillion), Trung Luong-My Thuan Expressway Phase 1 (VND 14.6 trillion), Bac Giang-Lang Son Expressway (VND 13 trillion), and My Thuan 2 Bridge (VND 9.8 trillion). However, a disadvantage of the PPP model is that the State still has to invest in PPP projects. Therefore, mobilizing additional counterpart loans, especially ODA capital, is also one of the important tasks at present.
- Recently, Vietnam has signed economic agreements that will create the premise to attract FDI capital into the construction sector.
Challenge
- Lack of transparency and government monopoly in the energy sector create risks for foreign and private investors.
- Negative impacts due to energy shortages and poor infrastructure affect FDI flows.
- Investment costs of FDI enterprises increase due to low labor productivity.
- Inadequacy and lack of transparency of the legal system in the field of tax and business registration.
Thus, SWOT analysis shows that Vietnamese construction enterprises are facing many opportunities as well as challenges. To be able to take advantage of these opportunities, Vietnamese construction enterprises need to make the right decisions in business management. These decisions can only be made when managers have complete, timely and effective information. Information on production costs and product prices is extremely important information in the enterprise's information system.
To carry out construction works, enterprises need to prepare input factors such as: Materials, labor and construction machinery. These cost factors form the cost of the construction work. According to survey data, the cost of a normal construction work includes 60-70% of material costs, 10-20% of labor costs, and 10-20% of construction machinery costs, of which steel accounts for 60-70% and Cement.
Due to the large costs incurred during the construction process, businesses need to build a system to collect, process and provide appropriate information to control costs. The management accounting information system includes people, procedures, equipment and bookkeeping systems used by an organization to:
+ Develop accounting information;
+ Communicate accounting information to decision makers.
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Diagram: Management accounting information system
3. Evaluation criteria for management accounting information systems in construction enterprises
In construction business management, information is a resource and an asset that plays an increasingly important role. In which, management accounting information is one of the important tools for management and decision making. To ensure the information needs of managers in making the right decisions on short-term business plans and long-term business strategies, the management accounting information system must ensure that the quality of information provided is at a high level. A management accounting information system is considered complete if it meets the following criteria:
(1) Ensure completeness of information : Complete construction of reporting system, summary indicators and detailed indicators necessary for business management, cost management, risk management, determining business efficiency of each construction department, each item, each project.
(2) Ensuring the timeliness of information : As a special economic sector that is affected by the natural environment, construction terrain, etc., management accounting information in traffic construction requires a relatively high level of timeliness. For example, port construction projects affected by tides or construction projects during the rainy season need to be provided with timely information on construction progress for managers to analyze and consider production management decisions, etc. In general, the periodic preparation of management accounting reports for traffic construction enterprises will be more flexible to ensure that managers' information needs are met.
(3) Ensure honest and reasonable information : Management accounting information needs to be honest and reasonable so that the unit's leadership knows clearly the strengths and weaknesses of their own unit, accurately determines the performance of each construction team and group to serve the decision making of effective construction organization structure.
(4) Ensuring efficiency : That is, the information must be complete, timely, honest, and accurate, but the cost of obtaining information must be reasonable, not costly in terms of time and material costs in collecting, processing, and providing information. Investors require traffic construction enterprises to not only ensure safety during construction, ensure quality and construction progress, but also have reasonable prices and demonstrate competitive prices in the construction market.
4. Factors affecting management accounting information systems
There are two groups of factors affecting the management accounting information system: internal factors and external factors of the enterprise.
Internal factors of the business
First, the awareness of the Board of Directors: To complete the management accounting information system well, the first influencing factor is the awareness of the board of directors at all levels of the enterprise. If the board of directors is aware of the importance and role of the management accounting information system, the construction and completion of the management accounting information system will be effective and of good quality. Because the information from the management accounting information system directly serves the board of directors of the enterprise to make decisions on production and business plans, and plan the business strategy of the enterprise. Therefore, right from the stage of determining the information needs, the board of directors of the enterprise needs to grasp the business performance of each department, each construction team, which project, which construction brings more or less benefits to the enterprise will affect the decision on organizing the management accounting information system.
Second, the capacity and sense of responsibility of the staff: With the characteristics of dispersed production and business activities, the production site is also the place of consumption, so the ideas and requirements of business leaders on the management accounting information system need to be specified by a system of indicators and implemented by the staff of the business. The staff need to have enough knowledge and skills to ensure that from the stage of collecting information from projects, works, entering data into the information system to processing data, building and installing the management accounting system must ensure consistency, accuracy, completeness and timeliness for the management accounting information system. In the process of developing the management accounting information system, updating new knowledge and skills for staff, especially those working directly at construction sites, also contributes to improving the effectiveness of the management accounting information system.
Third, information technology platform: management accounting information system can only be applied in enterprises that have an information technology system that has reached a certain level: a centralized (online) management information technology system throughout the enterprise. For enterprises whose information technology system is not yet developed, dispersed, and not processed online, even if they want to, they cannot effectively deploy a management accounting information system. Along with the information technology system, centralized data management requires enterprises to have the financial resources to build and install the system.
Factors outside the business
First, the competition between construction and installation: The decisive factor for the success or failure of each enterprise in the market depends on the business strategy and the allocation and use of resources appropriately and effectively. The management accounting information system is a powerful tool serving the management of internal operations of each enterprise, so there are often no common standards. Therefore, each enterprise needs to invest a lot of time and resources to build, consolidate and perfect the management accounting information system that is specific to the production and business activities of the enterprise. Each enterprise must keep and build its own information to make decisions to gain many advantages in the market, the most important of which is the information from the management accounting information system. Therefore, no enterprise can easily transfer the experience and technology of the management accounting information system to another enterprise.
Second, the legal system: the legal system has the effect of guiding enterprises to build and perfect the cost management accounting information system. The system of legal documents such as the accounting law and the system of guiding circulars and other guiding documents that are built completely and stably will facilitate enterprises to build a suitable and effective cost management accounting model. On the contrary, if the system of legal documents is not synchronous and unstable, it will be a big barrier for enterprises when implementing. The legalization and level of detail need to be based on each type of accounting. With financial accounting that has been legalized and regulated, it needs to be detailed and specific. However, with cost management accounting, there only needs to be guiding documents on basic contents without needing to be legalized and should not be legalized, because cost management accounting information serves the internal needs of the enterprise. Therefore, with the current legal system, enterprises that have built a cost management accounting information system need to complete it more fully. For enterprises that do not have a cost management accounting information system, there is a direction to focus resources on building it.
In short, in today's increasingly competitive business environment, in order to survive and develop, construction enterprises need to build a management accounting information system. That system will help managers have information to exploit and make the most of available resources and manage possible risks well. Therefore, research and development of a management accounting information system is a mandatory requirement for every construction enterprise. A flexible and effective information system will be an effective tool for managers to operate and make the right decisions to achieve the ultimate goal of safety and profit./.
REFERENCES
1. Nguyen Tan Quang Vinh, Construction industry report 2015 .
2. Ministry of Finance, Circular 53/2006/TT-BTC, Guidance on applying management accounting regime in enterprises , dated June 12, 2006
3. Cheryl L. Dunn & William E. McCarthy, The REA Accounting Model
In construction business management, information is a resource and an asset that plays an increasingly important role. In which, management accounting information is one of the important tools for management and decision making. To ensure the information needs of managers in making the right decisions on short-term business plans and long-term business strategies, the management accounting information system must ensure that the quality of information provided is at a high level. A management accounting information system is considered complete if it meets the following criteria:
(1) Ensure completeness of information : Complete construction of reporting system, summary indicators and detailed indicators necessary for business management, cost management, risk management, determining business efficiency of each construction department, each item, each project.
(2) Ensuring the timeliness of information : As a special economic sector that is affected by the natural environment, construction terrain, etc., management accounting information in traffic construction requires a relatively high level of timeliness. For example, port construction projects affected by tides or construction projects during the rainy season need to be provided with timely information on construction progress for managers to analyze and consider production management decisions, etc. In general, the periodic preparation of management accounting reports for traffic construction enterprises will be more flexible to ensure that managers' information needs are met.
(3) Ensure honest and reasonable information : Management accounting information needs to be honest and reasonable so that the unit's leadership knows clearly the strengths and weaknesses of their own unit, accurately determines the performance of each construction team and group to serve the decision making of effective construction organization structure.
(4) Ensuring efficiency : That is, the information must be complete, timely, honest, and accurate, but the cost of obtaining information must be reasonable, not costly in terms of time and material costs in collecting, processing, and providing information. Investors require traffic construction enterprises to not only ensure safety during construction, ensure quality and construction progress, but also have reasonable prices and demonstrate competitive prices in the construction market.
4. Factors affecting management accounting information systems
There are two groups of factors affecting the management accounting information system: internal factors and external factors of the enterprise.
Internal factors of the business
First, the awareness of the Board of Directors: To complete the management accounting information system well, the first influencing factor is the awareness of the board of directors at all levels of the enterprise. If the board of directors is aware of the importance and role of the management accounting information system, the construction and completion of the management accounting information system will be effective and of good quality. Because the information from the management accounting information system directly serves the board of directors of the enterprise to make decisions on production and business plans, and plan the business strategy of the enterprise. Therefore, right from the stage of determining the information needs, the board of directors of the enterprise needs to grasp the business performance of each department, each construction team, which project, which construction brings more or less benefits to the enterprise will affect the decision on organizing the management accounting information system.
Second, the capacity and sense of responsibility of the staff: With the characteristics of dispersed production and business activities, the production site is also the place of consumption, so the ideas and requirements of business leaders on the management accounting information system need to be specified by a system of indicators and implemented by the staff of the business. The staff need to have enough knowledge and skills to ensure that from the stage of collecting information from projects, works, entering data into the information system to processing data, building and installing the management accounting system must ensure consistency, accuracy, completeness and timeliness for the management accounting information system. In the process of developing the management accounting information system, updating new knowledge and skills for staff, especially those working directly at construction sites, also contributes to improving the effectiveness of the management accounting information system.
Third, information technology platform: management accounting information system can only be applied in enterprises that have an information technology system that has reached a certain level: a centralized (online) management information technology system throughout the enterprise. For enterprises whose information technology system is not yet developed, dispersed, and not processed online, even if they want to, they cannot effectively deploy a management accounting information system. Along with the information technology system, centralized data management requires enterprises to have the financial resources to build and install the system.
Factors outside the business
First, the competition between construction and installation: The decisive factor for the success or failure of each enterprise in the market depends on the business strategy and the allocation and use of resources appropriately and effectively. The management accounting information system is a powerful tool serving the management of internal operations of each enterprise, so there are often no common standards. Therefore, each enterprise needs to invest a lot of time and resources to build, consolidate and perfect the management accounting information system that is specific to the production and business activities of the enterprise. Each enterprise must keep and build its own information to make decisions to gain many advantages in the market, the most important of which is the information from the management accounting information system. Therefore, no enterprise can easily transfer the experience and technology of the management accounting information system to another enterprise.
Second, the legal system: the legal system has the effect of guiding enterprises to build and perfect the cost management accounting information system. The system of legal documents such as the accounting law and the system of guiding circulars and other guiding documents that are built completely and stably will facilitate enterprises to build a suitable and effective cost management accounting model. On the contrary, if the system of legal documents is not synchronous and unstable, it will be a big barrier for enterprises when implementing. The legalization and level of detail need to be based on each type of accounting. With financial accounting that has been legalized and regulated, it needs to be detailed and specific. However, with cost management accounting, there only needs to be guiding documents on basic contents without needing to be legalized and should not be legalized, because cost management accounting information serves the internal needs of the enterprise. Therefore, with the current legal system, enterprises that have built a cost management accounting information system need to complete it more fully. For enterprises that do not have a cost management accounting information system, there is a direction to focus resources on building it.
In short, in today's increasingly competitive business environment, in order to survive and develop, construction enterprises need to build a management accounting information system. That system will help managers have information to exploit and make the most of available resources and manage possible risks well. Therefore, research and development of a management accounting information system is a mandatory requirement for every construction enterprise. A flexible and effective information system will be an effective tool for managers to operate and make the right decisions to achieve the ultimate goal of safety and profit./.
REFERENCES
1. Nguyen Tan Quang Vinh, Construction industry report 2015 .
2. Ministry of Finance, Circular 53/2006/TT-BTC, Guidance on applying management accounting regime in enterprises , dated June 12, 2006
3. Cheryl L. Dunn & William E. McCarthy, The REA Accounting Model
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