Management Accounting Systems Support Start-up Business Growth And Accounting Tools For Better Value And Performance

Summary of the article

You are requested to continue your academic research on a the same topic presentation (that you have presented during the lecture).

The research must at least cover the following:

1. Select the research paper from one of the accounting journals.

2. Summarize the article with related learning outcomes.

3. Articulate the accounting keywords with related explanations.

3. Emphasize a theoretical discussion around the mentioned topic.

4. Propose your own small/medium company with related activity, figures, costing elements ( A separate excel filed will be created to allow you uploading numeric examples with formulas) to better value the problem.

5. Interpret / Debate the outcomes in the UAE if possible.

The authors in the article “Management Accounting Systems Support Start-up Business Growth“ have illustrated the subset of Management control system which is a Management Accounting system. The system specifically includes the package of system incorporating cultural control, administrative control, cybernetic control, rewards and compensation [1]. The system incorporates mission and vision strategy, plans and key success factors, key performance measures, performance targets, organizational structure, performance evaluation, group and organizational levels, penalties for mixed performance targets. In non financial rewards evidence support. The association between the sustainable growth of the organization of Business and the presence of Management control system in order to successfully meet the changes in strategies and evaluation in structure. The strategic alliance with managerial accounting system is required which helps in getting control and planning for supporting an effective internal business in the market. This plan would help in enhancing the performance, profitability, and sustainability of the organization in the future, the study enables in understanding the importance of the managerial accounting tools in the entrepreneur businesses without providing information analysis about the performance of the existing services and products.

The authors also believe that in order to evaluate the performance of e-business in the market it is important to use variance analysis research of the contributing margin statements. A flexible budget believe to be a volume adjusted column that allows the variance calculation that separates the effect of the purchasing costs and selling prices from the purchase qualities and sales volume of the organization. The different financial strategies would be enabling the managers of an organization to be able to make improvements in order to prevent failures from increasing costs and thus, forfeiting the sales in the future thereby damaging its reputation in the market.

Accounting keyword with related explanations

Figure 1: Relationship among variances

Source: (Lee and Spencer, 2013)

Profit planning

Profit planning is the most important aspect of operational strategy and its role is to provide a profit planning by translating them in the future financial performance targets of the organization [2]. The internal business processes involved in the working of the operations in the business processes of the organization can be assessed and improved through integration, coordination and optimization. The primary requirements for driving strong sales are through the provision of exemplary service and support.

In order to ensure the organization to meet its profit plan, it requires developing effective performance measures to directly linking with the operating activities and the various line items in the business strategy [3].  The financial performance can be evaluated by using the accounting ratios from the information related to the financial statements.

The financial performance can be measured with the measures such as the Return on Equity (ROE), Return on Investment (ROI), Net Present Value (NPV), break even analysis, payback analysis and feasibility analysis [4]. The financial performance of an organization is derived from the sales to customers resulting from the success of other perspective including the internal business processes with learning and growth [5]. The customer satisfaction is created for the temporary service and support such that the company value comes from the process cost reductions. The training of the employees in respective of the financial performance of the organization definitely relate to the improvement of the internal business process development centre and customer satisfaction.

NPV

The Net Present Value or NPV is the term which signifies the difference between the present value of the cash outflows and the same of the cash inflows [6]. It is used to measure the profitability of the project being undertaken by a particular organization

Break even analysis is the analysis which helps in determining the punt of revenue at which the revenue becomes equal to the costs associated with the project [7].

It signifies the amount of time required for the investment made by a particular company to recover the initial outlay in terms of the savings or profits [8].

It is the evaluation of the project being undertaken to be feasible for the implementation in the future [9].

Enoc Group is a retail store which is a leader in the UAE. The company expertise in bakery, automotive services, as well as registration and testing the facilities across the Middle East. The success of the retail business segment is led by the implementation of its unique business strategy which prioritizes the needs and offerings of the customers in a diverse business objective [10]. With the advancement of the latest technology, the company has decided to design and implement an e-commerce website such that to incorporate the details of its products and services and the payment scheme for its customers in order to attract more of them on a global platform.

Tangible Benefits
Category	USD
Initiating Dealership	$            63,000.00
Enhanced sales	$          120,000.00
Increased payroll	$            56,000.00
Enhanced sponsorship	$            25,000.00
Funds from sponsors	$            39,000.00
Increment in market share	$          150,000.00
Enhancement of accessibility	$            30,000.00
Reducing processing error	$            25,000.00
Total Tangible Benefits	$          508,000.00

Theoretical discussion

Tangible One-Time Costs
Category	USD
Preparation of site	$            40,000.00
Buying website domain	$            25,500.00
Website Development costs	$            80,000.00
Software requirements	$            40,000.00
Hardware requirements	$            55,000.00
Installation costs	$            11,500.00
Payment of employees	$            14,000.00
Employee training	$              8,000.00
Sponsor fees	$            16,000.00
Total Tangible On-Time Costs	$          290,000.00

Tangible Recurring Costs
Category	USD
Staff resource usage	$            30,000.00
Website maintenance cost	$            50,000.00
IT support	$            40,000.00
Total Tangible Recurring Costs	$          120,000.00
Total Tangible Costs	$          410,000.00

Table 1: Cost and Benefit analysis for the website development of Enoc Group

Source: Created by author

Costs of Proposed System	Year 1	Year 2	Year 3	Year 4	Year 5
Preparation of site	$    2,500.00	$            –	$            –	$            –	$            –
Buying website domain	$              –	$            –	$            –	$            –	$            –
Website Development costs	$       500.00	$            –	$            –	$            –	$            –
Software requirements	$    1,000.00	$     500.00	$  1,200.00	$  1,000.00	$  1,000.00
Hardware requirements	$       700.00	$     200.00	$     300.00	$     400.00	$     500.00
Installation costs	$       600.00	$            –	$            –	$            –	$            –
Payment of employees	$       800.00	$     500.00	$     500.00	$     500.00	$     400.00
Employee training	$       500.00	$     500.00	$     500.00	$     500.00	$     500.00
Sponsor fees	$       800.00	$     800.00	$     500.00	$     500.00	$     400.00
Total Cost of Proposed website	$    7,400.00	$  2,500.00	$  3,000.00	$  2,900.00	$  2,800.00

Table 2: Break down analysis for the website development of Enoc Group

Source: Created by author

 

Figure 1: Break down analysis for the website development of Enoc Group

Source: Created by author

Payback Analysis (ENOC Group- website development)
Benefits of option	Year 1	Year 2	Year 3	Year 4	Year 5
Labor cost savings	$         20.00	$    30.00	$     45.00	$     45.00	$     60.00
Improved working	$         25.00	$    40.00	$     40.00	$     45.00	$     45.00
Improved savings	$           5.00	$    10.00	$     15.00	$     30.00	$     45.00
Total Benefits	$         50.00	$    80.00	$   100.00	$   120.00	$   150.00
Costs of option	Year 1	Year 2	Year 3	Year 4	Year 5
Preparation of site	$       120.00	$          –	$          –	$          –	$          –
Buying website domain	$       130.00	$          –	$          –	$          –	$          –
Website Development costs	$       120.00	$          –	$          –	$          –	$          –
Software requirements	$           5.00	$      8.00	$       9.00	$       3.00	$          –
Hardware requirements	$         10.00	$    15.00	$     20.00	$     20.00	$     25.00
Installation costs	$         12.00	$          –	$          –	$          –	$          –
Payment of employees	$               –	$    10.00	$       6.00	$       6.00	$       6.00
Employee training	$         10.00	$    15.00	$     15.00	$     20.00	$     25.00
Sponsor fees	$               –	$    10.00	$       6.00	$       6.00	$       6.00
Total Costs	$       407.00	$    58.00	$     56.00	$     55.00	$     62.00
Net benefits/costs	$      (357.00)	$    22.00	$     44.00	$     65.00	$     88.00
Cumulative benefits/costs	$      (357.00)	$ (357.00)	$ (313.00)	$ (248.00)	$ (160.00)
Break Even Period	2.313253012

Table 3: Payback analysis for the website development of Enoc Group

Source: Created by author

Cost Benefit Analysis using Present Value (ENOC Group)
Benefits of option	Year 1	Year 2	Year 3	Year 4	Year 5
Labor cost savings	$         30.00	$   55.00	$   60.00	$   65.00	$   70.00
Improved working	$         20.00	$   40.00	$   40.00	$   45.00	$   45.00
Improved savings	$           5.00	$   15.00	$   15.00	$   20.00	$   40.00
Total Benefits	$         55.00	$ 110.00	$ 115.00	$ 130.00	$ 155.00
Costs of option	Year 1	Year 2	Year 3	Year 4	Year 5
Additional costs	$       130.00	$         –	$         –	$         –	$         –
Development costs	$           5.00	$     8.00	$     8.00	$     3.00	$         –
Maintenance costs	$         10.00	$   20.00	$   20.00	$   20.00	$   20.00
User time during implementation	$         10.00	$         –	$         –	$         –	$         –
Operations costs	$              –	$     8.00	$     4.00	$     4.00	$     4.00
Total Costs	$       155.00	$   36.00	$   32.00	$   27.00	$   24.00
Net benefits/costs	$     (100.00)	$   74.00	$   83.00	$ 103.00	$ 131.00
Cumulative benefits/costs	$     (100.00)	$  (26.00)	$   57.00	$ 160.00	$ 291.00
Net benefits/cost (NPV @ 5%)	$       (95.24)	$   67.12	$   71.70	$   84.74	$ 102.64
Cumulative NPV	$       (95.24)	$  (28.12)	$   43.58	$ 128.32	$ 230.96

Table 4: NPV analysis for the website development of Enoc Group

Source: Created by author

 

Figure 1: NPV analysis for the website development of Enoc Group

Source: Created by author

Economic Feasibility Analysis – Feasibility Analysis Project
Cost Benefit Analysis using Present Value
YEAR OF PROJECT >>>	0	1	2	3	4	5	Total
Net economic benefit	$               –	$   40,000.00	$   50,000.00	$    60,000.00	$     60,000.00	$     60,000.00
Discount rate (5%)	$            1.00	$            0.91	$            0.83	$             0.75	$              0.68	$              0.62
PV of Benefits	$               –	$   36,363.64	$   41,322.31	$    45,078.89	$     40,980.81	$     37,255.28
NPV of all BENEFITS	$               –	$   36,363.64	$   77,685.95	$  122,764.84	$   163,745.65	$   201,000.93	$   201,000.93
One-time COSTS	$ (42,000.00)
Recurring Costs	$               –	$ (28,500.00)	$ (28,500.00)	$   (28,500.00)	$    (28,500.00)	$    (28,500.00)
Discount rate (10%)	$            1.00	$            0.91	$            0.83	$             0.75	$              0.68	$              0.62
PV of Benefits	$ (42,000.00)	$ (25,909.09)	$ (23,553.72)	$   (21,412.47)	$    (19,465.88)	$    (17,696.26)
NPV of all COSTS	$ (42,000.00)	$ (67,909.09)	$ (91,462.81)	$ (112,875.28)	$  (132,341.17)	$  (150,037.42)	$  (150,037.42)
Cumulative Difference	(42,000.00)	(31,545.45)	(13,776.86)	9,889.56	31,404.48	50,963.50

Responsibilities of each members of organization:

The CEO of an organization is responsible for increasing the profitability and productivity of the organization through the reduction of the production costs related to the business process [11]

The manager is responsible for operating the business processes in an efficient way such that to increase the productivity of the organization [12]. Another significant function of the manager is to score updates related to the progress of the project being undertaken by the company.

The responsibility of the supplier is to facilitate the working of distribution channel system of the organizations and to deliver the raw materials for the companies to manufacture the same

The employees of the organization are responsible for implementing the project which is undertaken by the company within the scheduled time line such that to increase the productivity of the organization in the long run

The sponsors of an organization are responsible for investing on the project to be implemented by the organizations that help increase the profitability of the organization in the market

The clients are the customers of the organization who are the main source of revenue

Business plan for starting up of an ecommerce website in UAE:

• Researching the market
• Implementing the competition analysis
• Incorporating the brand management strategy
• Implementing appropriate business development strategy

• Hiring a website development consultant
• Hiring a UAE national sponsor
• Getting the website name to be approved by the Department of Economic Development (DED) [13]
• Establishing a tenancy contract
• Creating a memorandum of association (MOA) with the sponsors
• Finally submitting the MOA agreement, legal documents, and tenancy contract to the DED

References

Azar, Samih Antoine and Nazim Noueihed, “The Discounted Payback In Investment Appraisal: A Case Study”, IJBA, 5 (2014) <https://dx.doi.org/10.5430/ijba.v5n5p58>

Birkinshaw, Julian, “DO WE STILL NEED MANAGERS?”, Business Strategy Review, 25 (2014), 6-6 <https://dx.doi.org/10.1111/j.1467-8616.2014.01042.x>

Brooker, Edward, “Profit Planning, 3Rd Edition”, Annals of Tourism Research, 39 (2012), 1749-1750 <https://dx.doi.org/10.1016/j.annals.2012.05.009>

enocretail.com, “Enoc Retail – Welcome To The World Of Retail”, Enocretail.com, 2016 <https://www.enocretail.com/> [accessed 3 June 2016]

“FACULTY ROLES AND RESPONSIBILITIES”, Higher Education Abstracts, 47 (2012), 261-263 <https://dx.doi.org/10.1111/j.2150-1092.2012.00045_20.x>

KlovienÄ—, Lina, “PERFORMANCE MEASUREMENT SYSTEM COMPATIBILITY WITH BUSINESS ENVIRONMENT”, ecoman, 17 (2012) <https://dx.doi.org/10.5755/j01.em.17.2.2163>

L ee, Michael and Cobia Spencer, “Management Accounting Systems Support Start-Up Business Growth”, 2013

Morano, Pierluigi and Francesco Tajani, “Break Even Analysis For The Financial Verification Of Urban Regeneration Projects”, AMM, 438-439 (2013), 1830-1835 <https://dx.doi.org/10.4028/www.scientific.net/amm.438-439.1830>

Omar, Mohammad Abu, “Using Net Present Value (NPV) To Test The Integrated Model In Building Management Information Systems”, Pressacademia, 3 (2016), 50-50 <https://dx.doi.org/10.17261/pressacademia.2016116535>

Rahni, Ahmed, Emmanuel Grolleau, Michaël Richard, and Pascal Richard, “Feasibility Analysis Of Real-Time Transactions”, Real-Time Syst, 48 (2012), 320-358 <https://dx.doi.org/10.1007/s11241-012-9147-z>

“Website Terms And Conditions And UAE Law”, Arab Law Quarterly, 18 (2003), 209-211 <https://dx.doi.org/10.1163/026805503773081933>

Young, Gary J., Howard Beckman, and Errol Baker, “Financial Incentives, Professional Values And Performance: A Study Of Pay-For-Performance In A Professional Organization”, Journal of Organizational Behavior, 33 (2012), 964-983 <https://dx.doi.org/10.1002/job.1770>

[1] Michael L ee and Cobia Spencer, “Management Accounting Systems Support Start-Up Business Growth”, 2013.

[2] Edward Brooker, “Profit Planning, 3Rd Edition”, Annals of Tourism Research, 39 (2012), 1749-1750 <https://dx.doi.org/10.1016/j.annals.2012.05.009>.

[3] Lina KlovienÄ—, “PERFORMANCE MEASUREMENT SYSTEM COMPATIBILITY WITH BUSINESS ENVIRONMENT”, ecoman, 17 (2012) <https://dx.doi.org/10.5755/j01.em.17.2.2163>.

[4] Gary J. Young, Howard Beckman and Errol Baker, “Financial Incentives, Professional Values And Performance: A Study Of Pay-For-Performance In A Professional Organization”, Journal of Organizational Behavior, 33 (2012), 964-983 <https://dx.doi.org/10.1002/job.1770>.

[5] Lina KlovienÄ—, “PERFORMANCE MEASUREMENT SYSTEM COMPATIBILITY WITH BUSINESS ENVIRONMENT”, ecoman, 17 (2012) <https://dx.doi.org/10.5755/j01.em.17.2.2163>.

[6][6] Mohammad Abu Omar, “Using Net Present Value (NPV) To Test The Integrated Model In Building Management Information Systems”, Pressacademia, 3 (2016), 50-50 <https://dx.doi.org/10.17261/pressacademia.2016116535>.

[7] Pierluigi Morano and Francesco Tajani, “Break Even Analysis For The Financial Verification Of Urban Regeneration Projects”, AMM, 438-439 (2013), 1830-1835 <https://dx.doi.org/10.4028/www.scientific.net/amm.438-439.1830>.

[8] Samih Antoine Azar and Nazim Noueihed, “The Discounted Payback In Investment Appraisal: A Case Study”, IJBA, 5 (2014) <https://dx.doi.org/10.5430/ijba.v5n5p58>.

[9] Ahmed Rahni and others, “Feasibility Analysis Of Real-Time Transactions”, Real-Time Syst, 48 (2012), 320-358 <https://dx.doi.org/10.1007/s11241-012-9147-z>.

[10] enocretail.com, “Enoc Retail – Welcome To The World Of Retail”, Enocretail.com, 2016 <https://www.enocretail.com/> [accessed 3 June 2016].

[11] “FACULTY ROLES AND RESPONSIBILITIES”, Higher Education Abstracts, 47 (2012), 261-263 <https://dx.doi.org/10.1111/j.2150-1092.2012.00045_20.x>.

[12] Julian Birkinshaw, “DO WE STILL NEED MANAGERS?”, Business Strategy Review, 25 (2014), 6-6 <https://dx.doi.org/10.1111/j.1467-8616.2014.01042.x>.

[13] “Website Terms And Conditions And UAE Law”, Arab Law Quarterly, 18 (2003), 209-211 <https://dx.doi.org/10.1163/026805503773081933>.