New methodology for improving the quality of managerial accounting

September 19, 2019

It is known that the real sector of the economy is of paramount importance in the development of any region, in ensuring the growth of its inhabitants' welfare. Recently, Lobachevsky University researchers conducted a case study of Nizhny Novgorod and the Nizhny Novgorod region showing that the situation in the region had improved markedly on one of most important indicators, the volume of investment in fixed assets of industrial enterprises, the essential component of which are machinery and equipment. At the end of 2018, this indicator grew by 5.6%, to 259 billion rubles. According to the forecast for 2019, growth is planned at 6%. It is no coincidence that equipment maintenance and operating costs (EMOS) become one of the key effectiveness indicators of economic entities in manufacturing industries.

The accuracy and timeliness of accounting these costs and reflecting them in the cost of the product (work, services) determines the reliability of information on production costs in general and on the financial result of economic activity, which, in turn, provides the foundation of the information base for making current decisions and elaborating long-term development strategies for enterprises and the industry as a whole. Information about the EMOS is also an important component of the accounting and management types of reporting, as well as of budget planning documents and value stream mapping.

In accordance with the methodology proposed by a team of researchers at the Lobachevsky University of Nizhny Novgorod (UNN), which was developed with the aim of achieving a significant increase in the quality of the calculation result and the degree of information awareness of the management team of an enterprise and its divisions, the equipment maintenance and operating costs are separated depending on the processes that involve the consumption of these resources. The advantages of the proposed method is the speed of adaptation to changes occurring in the economic, technological and manufacturing areas of a business entity, as well as the universality of its application in all departments engaged in the stream of value creation.

As Professor Igor Mizikovsky, Head of the Department of Accounting at the UNN Institute of Economics and Entrepreneurship notes, the proposed approach, based on advanced methods of modern management accounting, makes it possible to achieve the goals and to significantly expand the information space for managing an industrial enterprise, to provide a strong basis for developing measures aimed at systematic reduction of production costs and technological losses, optimizing material procurement, improving the efficiency of resource management, etc.

"By using the proposed methodology in management accounting and production management practices, a more detailed analysis of the status of costs in the context of production processes can be achieved, conditions can be created for tracking the dynamics of the EMOS within a specified timeframe and bottlenecks in the value stream can be identified in a timely manner," notes Igor Mizikovsky.

Obtaining objective data on the use of resources in equipment maintenance processes, their reflection in the cost of production in the most correct manner is important in terms of adequately assessing the real potential of resource conservation, improving the efficiency of service operations, developing a list of measures to improve technological service, updating the machine tool fleet, and introducing integrated tools for equipment digitalization and the integration of the production facilities involved in value creation stream into the overall production system.

The studies conducted by the UNN researchers are based on the integrated application of the systems, operation-oriented and functional-process approaches, as well as on the use of the methods of decomposition, aggregation, observation, description and measurement. The methodology developed and described in the article is intended for use in accounting practices of many industrial enterprises, subject to its flexible adjustment to the specific features of a particular business entity.

In the future, it is planned to test and introduce the methodology at a number of industrial enterprises in Russia, primarily in Nizhny Novgorod and the Nizhny Novgorod region. Accountants and managers of organizations in the real sector of the economy will be trained to apply it.

According to researchers, the further research in this subject area should be aimed at developing new standard flexible and adaptable methodological solutions, and at updating existing practices in this field.

Standard solutions in the field of cost accounting will greatly reduce the complexity of the development and implementation of appropriate tools in the enterprise. In fact, the need for accountants and managers to constantly "invent the wheel" will be eliminated.

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