An Effective Tool for Better Management

An Effective Tool for Better Management

The study clearly focuses on gaining much better understanding on activity based costing systems while giving the reader its concepts and how to apply the concept and success stories. Activity based costing is an emerging trend with many obstacles as many people are used to follow the traditional costing methods which has been the practice throughout. Simply many organizations have been practicing the traditional costing methods as it is easy to understand and is less costly. Unlike the activity based costing methods, traditional costing methods have simple rules and is easily understood. However this study advises the benefits of using activity based costing while mentioning that it may be a tedious task and requires importantly the coordination of the cross functional teams to work smoothly.

The findings can be used for local manufacturing company where activity based costing will be very useful to identify costs accurately. It is indeed important for manufacturing organizations to use activity based costing as there are range of cost activities and the costs can be broken into cost pools before identifying the cost drivers and allocations. Taking the nestle research mentioned in the article it required the coordination of the cross functional teams across the organization to share information. Teams need to share information while making the process less sophisticated to identify correct areas and make right decisions.

This stresses the importance of educating the users of accounting information and also the people who work in the accounting departments. However unlike traditional costing methods where only the accounting department is involved, in activity based costing it is a team work for which all departments need to get involved. Therefore it is important to educate all users that their contribution is important for this. Specifically it needs to be mentioned that accurate cost information can be obtained by this.

Therefore it is vital for all people working in an organization to identify the areas of improvement in accounting and finance while making recommendations for process improvements and enabling the organization to achieve their goals.

Customer profitability analysis

Customer profitability analysis

Main objective of this study is to determine the impact of activity based costing(ABC) on the  customer profitability analysis (CPA). Previous studies have examined the importance of customer profitability without checking the potential usefulness of ABC to develop CPA.

Customer profitability analysis can use for any income increases by using any strategic decision, such as change of delivery term of a contract up to terminate business dealings of unprofitable customer. 

Researchers state that if customer related cost can be reduced without any change for customer experience or while maintaining the quality of the product or service, there is a impact on customer profitability. It is necessary to distinguish the characteristics profitable from unprofitable customers.  

Researchers have identified four expense categories impacting on customer profitability

1.Purchasing Patterns  and customer profitability

2. Delivery Policy and customer profitability

3. Accounting Procedure and customer profitability

4. Inventory holding and customer profitability

According to the  activity based concepts are paramount important to focus on customer profitability. There are three types of customers who are potentially unprofitable however might be retained

(1)  New and growing customers, who promise profitable business in the future and may provide a stepping stone for penetrating lucrative new markets;

(2) Customers providing qualitative rather than financial benefits, including customers at the edge in the development of new markets who provide valuable insights into likely trend movements in consumer demand;

(3) Customers providing increased capability because of their status as recognized leaders in their markets or fields of expertise.

Researchers request to negotiate with customers to influence the behavior in a way it is profitable to organization without compromising customer satisfaction.  Improved negotiations might include

Non-cash incentives from sunk-cost investments –

Restructure of delivery runs to create a more timely but less frequent service for the customer;

Capacity maximization on delivery runs that are required for profitable customers by offering a more frequent service for the potentially unprofitable customer with unpredictable demands;

Purchase of equipment on behalf of customers which they can use rent-free, in lieu of discounts and/or agent’s commissions. The cash saved on reduced discounts/commissions potentially should exceed the cost of the asset. Additionally, ownership is retained and a stronger bond is forged with the customer, thereby generating greater negotiating power in future;

Free short-term financial advice which will create efficiencies for the customer, leading to reduced internal workload and consumption of resources;

New products at no cost in return for reduced discounts, to serve a dual purpose: improving customer profitability while providing a useful vehicle for the promotion of new products;

A trade-off between quantity discounts and settlement discounts that minimize the costs of cash overdraft and maximize long-run production scheduling.

The most important point of customer profitability analysis is that management should aware about the unprofitable customers and make more attention in developing strategies to minimize the losses or make the customer profitable without reducing the customer satisfaction.

Resources allocation to activities provide clearer picture of resources consumption by customers. Using activity drivers will assist to assign activity cost to customers. Turney and Stratton developed an activity-based model using micro and macro activities which easily assign the cost to final products.

Customer costing objective – depicting the profitability of a customer using the cost of macro activities;

Performance improvement objective – isolating detailed areas for potential improvement by focusing on micro activities.

How ABC important to Sri Lankan Companies

If you look at Asia’s top 100 companies, top 100 brands, etc there is hardly any Sri Lankan companies in the list. Countries who are less developed than Sri Lanka like Pakistan, Vietnam even have some presence. We have failed due to so many reasons. One main reason is Sri Lanka does not have sustainable product or services to offer to the world. We are unable to compete with the low price high quality products in the market.

Only a few Sri Lankan companies practice the activity based costing which directly supporting to total quality management (TQM), 5-S system etc.  Practicing ABC costing will provide manufactures or service provider some clear picture about high cost pools. So they can attack high cost areas by adding high technology, streamline the processers, bringing new concepts, product modification, outsourcing etc.  Sometimes they may have more involve in low cost pools which is not adding value. This also help to enhance the quality or practice  total quality management.

ABC costing helps to take product pricing decisions. Such as the final price to customer. Whether to continue or discontinue the production. whether to produc the product or make outsourcing. Keep the particular customer drop the customer. Etc. Management can use this  ABC costing to make above decisions.

Companies can use the ABC costing data for budgeting purposes. Since it gives more accurate cost information and accurate customer profitability analysis. Further it improves the budgets and same can be used to measures of department and division performance.

ABC costing helps in effective utilizing the scares resources and make the input cost low. It focus more on profitable customers and cost centers which lead to make product cost low. Hence it generates more sales and with less efforts with the improved quality. 

Any barriers to implement it in Sri Lanka

Most of the Sri Lankan companies, specially management is not aware about ABC costing principles and they do not understand the benefits which can obtain. Hence there is some resistance from Management to implement ABC costing in their organizations.

ABC costing is more time consuming for implementing and to collect data. It’s a systematic and lengthy process. Also there is less people available with required knowledge to implement and practice ABC costing.

If a company is trying to purchase, implement and maintain an activity based system, the initial cost is huge. Hence it is much difficult to implement for smaller organizations.

Some companies have complicated process.  Establishing the causes and effects and the relationship between cost driver and final product costs is difficult and unclear.

ABC does not conform to generally accepted accounting principles in some areas.

Application of Balanced Scorecard in the University System of Sri Lanka

Application of Balanced Scorecard in the University System  of Sri Lanka

In today's  global completion  every organization is trying to provide quality service to win the competition. like other organization universities also focusing on ensuring academic excellence. Therefore universities are always trying to recognize the performance improvement measurements to achieve their predetermined goals and objectives. For this purpose universities can use Balanced Scorecard model. Therefore, the BSC focus on the fact that university required a balance between both financial and non financial measures.

The Customer Perspective

When University consider customer perspective it should identify its potential stakeholder and their expectations clearly. In University there are few customer groups such as students, staff, public, government and donors so under the customer perspective each and every stakeholders interest to be addressed. The customer perspective can accomplish using performance indicators such as  quality of graduate, quality of service provided community, etc. In Universities students are the main stakeholders. So the university has to produce quality graduate who possess good knowledge, skills and attitudes which match with job market requirements. Also  Universities can develop community based extra activities to achieve interest of community.

ex. Universities can conduct seminars for grade five scholarship examination, G.C.E.O/L and A/L examination, organize blood donation camp and medical camps.

The Internal Process Perspective

Internal process perspective measures the performance of the internal work and procedures of the university. This highly focus on the quality of academic learning process, increase infrastructure facilities and maintain good relationship with students and university administration to minimize conflicts. The considering this perspective may leads to achieve productivity.

The Financial Perspective (FP)

In traditional perspective university measures net operating ratio, research funding effectiveness by focusing cost and revenue. Under the BSC methodology university can initiate programme’s such as external degree programmes and post graduates progarmmes rather than depending on treasury. And the funds received from those programmes can be allocated to extra activities and staff development activities. Also those self generated funds can be used to allow staff members to participate for foreign conference and training with the purpose of getting utmost benefit from them to the university. Also university have to attract research grants.

The Learning and Growth Perspective (LGP)

Learning and growth perspective of the BSC attend to the universities competence to uphold high performance levels over time. This has focus on enhancing working environment,  self-confidence of staff , professional and personal development of staff

, quality assurance and effective use of technology. In university system this can be accomplish through encouraging staff  to start higher studies by funding course fee by university , can arrange varies staff development programmes with the assist of  Staff Development Centre, encourage academic staff to conduct research.

Conclusion and Recommendation

In early days most public universities mainly focus on the improving the graduate employability rate by ensuring academic excellence but with the environment changing rapidly and expectation of stakeholders are ever increasing universities also focus more on not only academic excellence but also service excellence, managerial enrolment growth, staff development, and cost effectiveness and increase revenue. Because when we concerning higher education sector quality of educational service and stakeholder satisfaction are most vital factors to be considered. Accordingly to achieve those expectations university should develop best performance indicators. For this purpose balance scorecard can be used as a conceptual framework which can be use in translating universities strategic objectives into a set of performance indicators. Rather than only  focusing on operational performance of the university and use of quantitative financial measures, the BSC approach associate the university's strategy to measurable goals and objectives in four perspectives namely financial, customer, internal process and learning and growth. Also once the BSC is developed for the university it is essential to have continuous improvements and enhancements.

GREEN ENERGY SOLUTIONS TO THE APPAREL INDUSTRY

This research will identify the energy usage and consumption of Apparel industry in Sri Lanka and provide ‘Green Energy’ solutions for the industry. As a main export business and a large industrial component in Sri Lanka, apparel industry consumes large amount of electricity. So, the study was a step towards achieving the goal of introducing green energy solutions to the apparel industry. The adoption of green energy solutions to the industry is seen as an important strategy in finding a solution to the energy problem. Green energy is the sustainable provision of energy that meets the needs of the present without compromising the ability of future generations to meet their needs. Technologies that promote sustainable energy include renewable energy sources, such as hydroelectricity, solar energy, wind energy, wave power, geothermal energy, and tidal power, and also technologies designed to improve energy efficiency.

In order to increase the accuracy of the research, the researcher will discuss more methodological arguments in literature review. Therefore it will be very supportive to develop independent variables for a selected dependent variable. The researcher has identified “the green energy solutions to the apparel industry in Sri Lanka” as the dependant variable, and the factors that determine the adoption of green energy to the industry as the independent variables, which are namely, the current energy sources using in the apparel industry in Sri Lanka, availability of green resources in the country, the energy consumption and the usage of apparel factories, senior managers attitudes towards adopting green energy to the industry and the government regulations and motivation towards the green energy concept. The population of the research is based on the main apparel factories in Katunayeka trade zone in Sri Lanka, which can be taken as a sample to represent the whole Sri Lankan apparel industry and the researcher is using the simple random sample technique as the sampling technique.

Apparel industry is an energy intensive industry and the energy cost in this sector is a significant component of its operational cost. Operating costs can certainly be reduced by performing energy analysis and diagnostics, leading to efficient energy conservation and management policies. Apparel sector uses energy from several sources. Among those, electricity is the most extensively used energy. This study has assessed the energy used in apparel sector of Sri Lanka and suggested Green Energy solutions to the apparel industry.

As a main export business and a large industrial component in Sri Lanka, apparel industry consumes large amount of electricity. So, the study was a step towards achieving the goal of introducing green energy solutions to the apparel industry. The adoption of green energy solutions to the industry is seen as an important strategy in finding a solution to the energy problem. The key factors to reducing and controlling CO2, which is the major contributor to global warming, are the use of alternative approaches to green energy generation and the exploration of how these green energies are used today and may be used in the future as green energy sources in Sri Lanka.

Further, the secondary data collected by the existing green factories in Sri Lanka is provided to support the core idea of the research. The difference between the energy consumption of a green factory and a standard factory is shown by tables and figures followed by the electrical usage in 2009 to 2012 mid and moreover, the trend of the electrical cost and the unit usage is analysed monthly to give a clear image on the electrical usage in a Green factory.

It can be stated that the investment made on the green energy efficiency measures can be recovered within recent future. In addition, reduction of energy cost will result in decline of production cost of the apparel factories and to achieve competitive advantage.

ENVIRONMENTAL MANAGEMENT SYSYTEM OF KANDALAMA HOTEL SRI LANKA

ENVIRONMENTAL MANAGEMENT SYSTEM OF KANDALAMA HOTEL SRI LANKA

The study aims to understand the importance of an Environmental Management System for the Hotel industry by focussing its attention on Aitken Spence Hotel, Heritance Kandalama which is a fore runner in implementing Environmental Management Systems locally as well as globally.

The hotel being located in the midst of the lush greenery of the Dambulla District of Sri Lanka came under rapid pressures of various groups with special reference to environment conservation organizations challenging the construction of the Hotel in the mid 1990 decade while the initiation stages of the project were under way. The study reveals how the Hotel re-surfaced and diminished the adverse brand image created by various pressure groups and finally to become an icon of the green concept and environment conservation.

After the Hotel was built using environmentally friendly practices, the major mechanism which continued the environmentally friendly approach of the Hotel was its Environmental Management System. The study mainly focuses on the operationalization of the waste management aspects of the Environmental Management System and discloses the unique practices adopted by the company in achieving the preset environmentally friendly and cost saving objectives.

 Subsequent to a thorough analysis of the prevailing Environmental Management System practices, the study recommends a viable direction of improvements for the system bringing in to light the possibility of generating bio energy to facilitate the current environmentally friendly practices and to cut down on costs. The study also primarily acts as an appropriate source material for obtaining information on the environmentally friendly practices adopted by Sri Lankan Companies in the Hotel industry.

Increase in Foreign and Local Tourists

With the ending of the ethnic conflict of the Northern and the Eastern provinces of Sri Lanka which impacted the security of the entire country adversely, a wide spread positive attitude has emerged towards the tourism sector of Sri Lanka across the world.

Encouraging Adventure sports in Sri Lanka, new hotels permitted to be built in east cost of the country and promotional campaigns are some of the new tourism promotions sponsored by the government.

“With the implementation of the new Tourism Act No. 38 of 2005 in August 2007, we have witnessed an enhanced effort at destination marketing through the newly established Sri Lanka Tourism Promotion Bureau”.( Aitken Spence Hotel Holdings PLC, Annual Report 2008/09, )

This increased readiness level and the diminution fear of travelling to Sri Lanka of worldwide communities will have a positive impact on Kandalama Hotel since the natural beauty and serenity of the surrounding combined with the placid peacefulness of the hotel is willing to be embarked by thousands of travellers. Being one of the top five star hotels in Sri Lanka, the tourist attractions to the hotel will be inevitable.

On top of the foreign tourist attractions, the affluent local customer base will also be adding value to the revenue generation capability of Kandalama Hotel as a result of increased tendency towards leisure with the prevailing peaceful condition of the country.

 Increased Concern for eco Tourism and Environment Conservation

With rising global issues such as global warming and environmental imbalance radically impacting the daily livelihoods of communities, the eco tourism sector which was once seen as an innovative move has now become the ultimate saviour of the industry. This is as a result of the decreasing demand for the conventional tourism sector as a result of adverse impacts generated by it to the environment.

Barriers of Implementing ABC costing in Banking & Finance Industry

Barriers of Implementing ABC costing in Banking & Finance Industry

Biggest challenge of implementing ABC costing in this industry is the resistance of Operational Managers for this new accounting system. Many managers have a perception unless this mechanism reduces some of the unwanted cost it will only time and resources used for dedicating the implementing of this system. Further most of the Branch managers have a marketing and sales background and hardly have an accounting background. So it is difficult to convince them to switch from traditional cost method to activity cost method.

Another barrier is, most of the time branch managers are given a target or a average lending rate which they need to maintain for a month. Another barrier of implementing ABC costing is that when organization starts to collecting information about various processes,managers tend to take it as way of trying reduce workforce and other privileges enjoyed by them currently. For an example when records about travelling is collected, they would take that as a step taken to reduce the transportation cost accordingly. So managers tend to provide information about their privileges as they would think company will reduce some of it in future.

Another barrier of implementing ABC costing is to lack of knowledge of identifying proper cost drivers. Instead of identifying proper cost drivers managers tend to estimate it. This will not help to calculate the proper figures for each activity. If it becomes evident that driver information is not available new driver should be selected by managers.

Once all the information is gathered and set to finalize the cost structure, gaining approval from the senior management and board of directors. According to new cost structure some of the products can be given for less than it is given currently. For an example current annual interest rate of the Gold loan is 19% but if a proper ABC costing is done this can be reduced to 12%.

Strategic objectives of the management also plays a vital role in ABC costing. For an example some products are used to generate profit for the company and management purposefully takes decisions on increasing the interest rates of certain products. Micro finance is such a product and it is a highly profitable product when it comes to lending. Interest rates of such products are not sensitive for ABC costing as it would reduce the total profit earned by the company. Average Interest rate of Micro Finance is more than 21%, this high interest rate is mainly based on credit ratings of the customer segment.

Further, company cannot implement ABC cost system due to market conditions and competitor rates and prices. If the overall market rate is lower than the estimated ABC cost then managers are force to lower the rate irrespective of the ABC costing. Since the manager are expected to maintain an average of lending rate, they are eligible to reduce interest rates of certain products which are sensitive to market and competitor rates. When maintaining an overall interest rate, the branch manager has the liberty to decide the rate given for each product by complying with minimum rate given by the company. Ultimately, product price is influence by the managerial decisions and not align with ABC costing method.

Central Bank rules and regulations are also another barrier when it comes to deciding the borrowing rate. Unlike other industries banking & finance is highly regulated barrowing interest rates are regulated by Central Bank. In this case even if the ABC costing recommends to high interest rate, still the organization cannot increase barrowing interest rates. (Barrowing interest rates includes rates given for fixed deposits and Savings). For an example if the total average lending rate is 21% per annum, a finance company can grant a 18% (per annum) interest for barrowing. But this cannot be implemented due CB rules and regulations.

Internal politics is also another barrier that Sri Lankan organization face when it comes to implementing ABC system. There can be various cost reduction initiatives take after ABC system to make some products profitable. Staff members who are affected by this will not support this new ide due to that. As a nation, Sri Lankans are resistant to change and this makes new systems such as ABC hard to be implemented. Further major difficulty in implementing ABC arise when department within the company disagree with the costs allocated to their cost centers. There can be disputes with in department to where each department will deny to accept certain cost for their product or department.

Activity Base Costing in Banking & Finance Industry

Activity Base Costing  in Banking & Finance Industry

How to use activity Base Costing  in Banking & Finance Industry.

Banking & Financing industry is one of the highly regulated industries in any country and highly govern by Central Bank or the National Bank of that respective country. Financial products mainly consist of lending products such as leasing, vehicle loans, mortgage loans and barrowing products such as Fixed Deposits and savings.

In Sri Lankan context most of the barrowing products are govern by Central Bank of Sri Lanka. Lending rate is the main component which determines the price of the product. That is the benefit which customer gets. In lending, lending interest rate is the main component which determines the price of the product.

The above rates are established in many ways. Some of the criteria are, Central Bank lending rate cap, competitor rates and prices, based on fixed cost and variable cost, financial objectives of the group of Directors etc.

In the following analysis, how activity base costing can be used to determine the price of the final lending products and its long term implication and barriers of implementing it to the industry have been discussed.

How activity base costing has been used in deciding barrowing rate and how it can be improved further.

To identify the rates of financial products first all the activities have been classified according its product. All the activities are rated according to product level. All the resource requirements according to product level are taken. Top down approach, Recycling approach and Interview or participative approach have been used to identify and classifying activities for the activity dictionary.

For a lending product following costs were identified

Indirect Cost	Cost Driver
Administrative cost & Back office cost	No of hours dedicated for completing a task
Training development cost	No of individuals from each department participated
Audit	No of audits conducted for each department
Transportation cost	No Kilo Meters per job
Material Cost- Stationary, computers, Calculators etc	No of units used by each individual
Building/Electricity/Water cost	Square footage Utilized
Minor staff and clerical staff wages	Total no of employees occupied in a building
Phone, Mobile & Internet charges	Consumption by each individual(respective of department)

Secondly cost associated with each activity is been identified. Following costs have been identified- employee labor for maintenance & production, physical resources such as computers, It equipment and such as building and other cost. The total cost of each activity is calculated by using each employee data from personal interviews and other forms of discussions.

Thirdly cost driver rate for each activity is been calculated. In this scenario cost driver rate is the estimate cost of resource consumption per unit (Rs 100 of lending and borrowing). Once the activity of cost and activity volume (total lending amount and total barrowing amount) are determined, the cost- driver rates are calculated by dividing the total activity cost by the total activity volume. Following sources were taken to calculate the cost driver rate- historical budget data, head count data, occupancy and transactional cost information maintained by the company.

Fourthly, cost driver rates prepared in the third step was used to identify cost for each lending and borrowing products were used to determine the final cost of product.

Balanced Scorecard (BSC) and organizations’ vision and strategy

Balanced Scorecard (BSC) means translating organizations’ vision and strategy 

Over the years, lean principles, concepts tools and techniques expanded throughout the entire supply chain due to its benefits such as cost reduction, improved quality & flexibility and Just-In-Time deliveries. This has led to an increased importance for lean supply chain performance to the different stakeholders. Balanced Scorecard approach gives a good guidance for a company’s supply chain management.

In simple terms, Balanced Scorecard (BSC) means translating organizations’ vision and strategy into more practical and realistic goals. BSC considers four aspects of an organization. Those are,

·         Financial perspective – Financial performance

·         Customer perspective – Satisfy, retain and acquire customers in targeted segments

·         Internal business process – deliver the value proposition to the target customers

§  Innovetive products and services

§  High quality, flexible and responsive operating processes

§  Excellent post sales support

·         Learning and growth

§  Develop skilled, motivated, employees

§  Provides acces to strategic information

§  Align individuals and teams to business unit objectives

Earlier, the organizations just focused on the financial aspect of the organization. That means the things which have happened in the past. However, BSC focus on creating a long term value for an organization. This is called BSC due to the fact that this system balances financial and non financial aspect of an organization.

Therefore, BSC is very important to any organization, especially for a country like Sri Lanka. The reason BSC is important to Sri Lanka because, strategic thinking and strategy implementation is lacking in our country.

Even there are loads of educated and very well experienced professionals in our country; we are still fear for the change. We need stability and when a change comes even for betterment for our own selves, we resist the change.

That is a mindset which we owned from the colonization period. We still go with the flow as it is and we do not think strategically or out of the box. If we can identify that and do something to overcome it, we will be able to change our country.

Therefore, when implementing a strategy, some kind of a framework is required for us to follow. That is why BSC is very important to a country like Sri Lanka, when implementing strategies. BSC enables an organization to;

§  Formulate and communicate new strategy for a more competitive environment

§  Increases revenues, without just cutting costs and enhance productivity

§  Each and every employee implements the new growth strategy in their day to day operations

The selected research article is about application of lean manufacturing systems in order to continuously improve the supply chain management by using the BSC approach. There should be a perfect alignment between the supply chain strategy and the characteristics of the products or services. Managers should use a combination of lean techniques throughout the SC in order to improve global performance. LSC mainly focuses on obtaining value and eliminating waste that occurs along the supply chain.

There are three approaches for measuring the lean performance. Those are, measuring the degree of implementation of lean tools and techniques, measurement of outputs resulting from lean implementation and finally the combination of the both. However, the lean performance dimensions to be measured are identified based on the type of the business organization and the goal set.

When implementing BSC, aligning the goals with the indicators of the goals previously identified, should be done. In addition to that, those indicators had to be categorized according to the above mentioned four aspects – Financial, Customers, Internal Business process and innovation and learning. And who will perform the measurement, and who will collect the data should be clearly defined by the management.

After the measurement process the result is 27.4%. This indicates that there are more aspects to be improved. Since this is work in progress, it is still early to measure and decide the performance of this organization. However, areas to be improved should be identified.

This method could be implemented in Sri Lanka as well. Any SME could be chosen for this. After selecting an organization, its supply chain should be identified properly. After identifying the supply chain, the lean techniques should be applied using BSC.

However, when selecting the indicators the organizations will face a difficulty on deciding the indicators. That is a barrier which Sri Lankan organizations will face.

 Apart from that this method is very useful for the Sri Lankan organizations. If possible all the organizations should adhere BSC.

ABC Costing to see correctness

Most of the private own companies are tending to apply ABC costing to see correctness of their unit price over competitive products. For example Emerald has implemented ABC method and identified over costing of traditional method finally they gain competitive advantages by reducing unit cost. Cost reduction is a global trend while looking for error in the existing costing method to avoid over costing of unit rate. so there are tendency of applying ABC method to calculate their unit cost. But still there are lot of organizations specially government own organization such as Sri Lanka Transport Board, Ceylon petroleum corporation ,Sri Lanka railway are need to be pushed  to implement  ABC cost method to calculate fair overhead unit rate so that proper calculation of unit cost in order to make them profitable organization.   

There are some barriers of implementing ABC method in Sri Lanka as well. Some of he limitation are  is listed below .

·         High Cost of implementation and difficulties to convince management about the importance of ABC method over traditional system.

·         Lack of expertise has lead to high cost.

·         Resistance to change. Most of the middle and top management in both private and government organization are preferred to continue with the existing system rather than the taking challenge  to go for new system.

·         The responsible management team for cost department are comprised of accounting  background people and there are not willing go for complex mathematical system.

There is lack of competitiveness among the product has lead to limited thinking for new system

An analysis of the spam and its issues in marketing communications in FMCG industry

Cyber-Crimes, Spam 

 This study is focusing on evaluating the extent of spamming problem faced by the online buyers of Fast Moving Consumer goods Industry. Hypotheses are deduced between dependent and independent variables and data were collected through a survey given to 150 participants clustered as school children, undergraduates, professionals. These data collected are tested using statistical methods, correlation analysis, regression analysis, Anowa, Cronbach Alpha and based on the results gathered the developed hypotheses are expected to  be evaluated.The intention of the study was to explore people’s attitudes towards the rigorousness of the issue of spam and the possible remedies that act as barriers against the problem, such as user awareness, actions taken by them to protect themselves and regulations available for cyber crimes. The insights were gathered from mainly three segments of consumers representing school children, undergraduates and professionals/ employees who are having specific profiles on online privacy concerns, socio demographics and particular coping actions, sharing of personal information and specific attitudes towards spam. Each cluster of the sample collected was given questions with regard to the dependent variable, the significance of the issue spam and the independent variables, consumer awareness, actions taken against spamming and the regulations available in respect of spamming. The survey data used for gathering of consumer insights were evaluated the SPSS software. According to the findings there is a strong negative relationship between the risk exposure from spam and the consumer awareness with a correlation coefficient of (-0.797) intimating that when the consumer awareness enhances the effects coming from the issue spam are reducing with a significance value of 0.000. Also the relationship between the severity of the spamming problem and the actions undertaken by the consumer to combat the issue and safeguard themselves is showing a negative relationship with a magnitude of (-0.781) (sig value 0.000). More over the analysis performed based on Pearson correlation indicates a relationship which shows a negative trend with a coefficient and a significance of (-0.792) and 0.001 respectively.

                    Further this study states that as in the study performed in Belgium the clusters of various age groups in Sri Lanka are not significantly different in their mean opinions with each other, regarding the matter. There is only an apparent difference in the mean opinions of the age clusters would be the two age groups below 16 years and above 40 years. According to the research findings participants are obviously engage in various coping actions in order to protect themselves from spam these behaviors should be scrutinized by undertaking more researches in the future.

Activity Based Costing system a viable instrument for small and medium

Activity Based Costing system a viable instrument for small and medium 

Sri Lankan Context

Similar to Developing countries, business framework of Sri Lanka is composed of SMEs. SMEs are the main contributors to the economy in Sri Lanka.

What could be the reasons behind the low level of adoption of ABC in Sri Lanka? In my view, one reason is that Sri Lankan people always resist change initially. We are brought up in this culture where we follow the norms and traditions. There is a general reluctance when new ideas or methods are proposed. Like in this case, our accounting has been based on traditional systems. Most of the organisations practice traditional costing. They do not want to change it. People managing costs and accounting in Sri Lankan firms are hesitant to initiate these new techniques like ABC.

Complexity in adopting ABC is one other major reason why it is not widely practiced. Defining various activities in a process, identifying their cost drivers, determining the resource allocation per product becomes cumbersome when the process in study is complicated or lengthy. Add to that, if the firm produces variety of products and each one has a very detailed process, ABC implementation becomes a very tedious task. Before ABC is to be implemented, the whole organization has to be geared up for it. Even the lowest level employee involved in the process should contribute by keeping record of either the labour hours, machine hours, amount of goods handled etc. so activity allocation is possible. If this type of activity measurement is not done ABC implementation is not easy, since the accounting or costing department cannot solely do it on their own.

In my opinion, accounting departments of organisations should take a more proactive and practical approach to implementing ABC in Sri Lanka. Government organisations like Ceylon Oxygen, Petroleum corporation, Pellawatta sugar can get the help of accounting and costing experts to adopt ABC at their organisations. Talking about the textile industry, Sri Lankan apparels always had a high value in international markets with their outstanding quality at cheaper prices. Multitude of skilled labour at low costs paved the way for this. However, countries like Bangladesh and Vietnam are gradually becoming major threats to this industry. If Sri Lankan apparel companies can adopt ABC costing, they might be able to cut down on the wrong overhead allocations and become more competitive in terms of pricing strategy.

Implementation of ABC results in more in-depth analysis of the process. Each and every activity related to providing a good or a service has to be identified and costs allocated for each. This could lead to identification of unnecessary processes, repetitive activities, improper movement or handling of goods that could ultimately lead to longer cycle times, higher costs etc. Hence ABC infact could be used as a lean manufacturing tool.

Lean production: mistakes and limitations of accounting systems inside the SME sector

The Obsolescence of the Traditional Accounting Methods in Lean Environment

The intense global competition in 1984 forced organizations to improve their manufacturing system and adopting lean principles. Attention to the quality of products and processes, the level of inventories, and the improvement of work-force policies has made manufacturing once again a key element in the strategies of Organizations intending to be world-class competitors. Such organizations, anticipating difficulty with growth, must adopt cost reduction strategies if they wish to maintain and increase profits. One strategy that can yield returns in competitiveness is Lean Manufacturing, with its relentless concentration on eliminating waste and producing high-quality goods at the lowest possible price. Lean Manufacturing improves the production figures by eliminating waste in producing a product for cost reduction purposes. However, there remains a major obstacle to the lasting success of this revolution in the organization and technology of manufacturing operations. Most organizations are still using the traditional accounting methods that were developed decades ago for mass production

Lack of Relevance

Traditional accounting reports are not directly related to the organization's strategy. It is, by its nature, primarily financial in the way they collect and report information. But the goals of lean organizations are primarily established nonfinancial. Strategic goals will often make reference to financial objectives and these goals can generally be reported through the financial accounting system but most of the goals are nonfinancial

Cost Distortion

Traditional accounting methods is concerned with cost elements, but the pattern of cost elements has changed in recent years, and this detailed analysis is less important. Back when cost accounting was developed, the breakdown of costs into cost elements was quite straightforward. Total cost is determined by adding up material, labor and overhead costs for each level of the bill of material until the final product cost is determined. Obviously, there are some inaccuracies built into the traditional accounting methods. They present serious problems when applied to Lean as direct labor rates are too high for lean. Not many years ago, direct labor was a large part of the cost of a product as much as 30 to 60 percent of total cost. Material costs were low, and overhead was much lower. Today, a high-tech manufacturer may experience direct labor costs as low as 2% to 5% of the cost of product, and overhead of 40% to 60% of cost of product. Using the traditional accounting methods in a Lean environment, overhead costs normally can't be traced directly to the product.

Inflexibility

Traditional accounting reports do not vary from plant to plant within an organization. Similarly, they do not change over time as the business needs change. The reports are consistent across the organization, the divisions, and the entire corporation. A single set of numbers controls the whole organization. This does not make sense for a lean organization. An important aspect in the implementation of lean is that each plant is different. They have different products, different processes, different strengths and weaknesses, different problems and different people. For the management reporting to be of value, it must take account of these differences. Similarly, plants change over time, and their management reporting must also change with them.