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Weekly UpdatesProposition 3 The Orientation of Management Accountants is Shifting from Scorekeeping to an Active Role in the Decision-Making Process.
Site A Divisional Findings
Overall responsibilities of the controller's function at the division do not appear to have changed; their function remains to ensure the integrity of reported information. The new information system and reporting relationships have redefined the manner in which accountants perform their duties.
Changes Associated with the New Information System. The most significant change in accountants' duties is in accounting for inventories. Previously, accountants were responsible for reconciling inventory balances received from the plants' production reports to general ledger balances updated from a separate system. Some accountants also were involved in manually calculating moving average prices for inventories and preparing adjusting entries during closing. Preparing reconciliations and calculations, along with running computer programs to recharge service area costs, were the primary activities for accountants during the first four days of closing. Although plant personnel were responsible for providing data for inventory entries, accountants were responsible for preparing the entries, ensuring that plant personnel provided information on a timely basis, and making correcting entries for incorrect inventory balances. Inventory transactions were prepared in batches at the end of the month, while plant perso nnel maintained daily production and shipping records within their own systems. One accountant noted that the old system did not require plant personnel to be concerned with accounting inventory balances as long as their own reports were correct. The accountants viewed changing this mindset as a major challenge since there is now only one set of inventory balances.
The new information system has removed much of the time-consuming reconciliation activities associated with periodic closings. Only one set of balances exists; transactions are recorded automatically when plant personnel close production orders, ship inventory, or receive materials. Instead of reconciling balances during closing and making correcting entries, accountants monitor the plant's progress toward entering all production orders and shipments of inventory. If the accountant detects a mistake, plant personnel must make correcting entries because of authorization limits placed on job functions. The new system places a greater emphasis on maintaining a good working relationship with plant personnel and a greater responsibility on plant personnel for maintaining the accuracy of cost information. Overall, accountants at Sites A and B report less overtime and fewer manual entries during the closing process; therefore, more time is available for account analysis.
Nonclosing activities of the accountants have changed little following the installation of the new system. The primary activities during non-closing weeks still include special projects, troubleshooting, and answering cost questions. Providing product cost estimates, establishing new product identification codes in the system, monitoring account balances on an ongoing basis (an activity now possible given the real-time nature of the new system), and recalculating product standards on a monthly basis are all responsibilities associated exclusively with the new system. Previously, a plant could produce and ship a new product (in the system) without the accountant's knowledge. Because the new system is integrated, the accountant must set up new product information in the system prior to production of the product.
Overall, accountants favorably viewed changes associated with the new information system. Less overtime, less clerical/manual work, and more opportunity to analyze accounts and detect problems prior to closing were the primary benefits identified by the accountants who used the new system. The major concern expressed by accountants was the feeling of a loss of control over the accounting process. Most of the responsibility for initiating and recording accounting entries had been shifted to nonaccounting plant personnel. Encouraging plant personnel to take responsibility for problems traditionally viewed as accounting tasks, such as correcting incorrect inventory balances, entering all shipments or production orders in a timely manner, and ensuring that the appropriate plant personnel were involved in the inventorying process, were also concerns identified by the accounting staff. As a result, accountants felt less involved in the accounting process and more involved in coaching, monitoring, and support activ ities.
Changes Associated with the Realignment by Businesses. Significant changes in responsibility came as an indirect result of the new system. The realignment of functions by business changed the focus of reporting for many accountants. Accountants responsible for manufacturing plants now report on both a plant and business level. Reporting at the business level requires gathering information from many different plant sites and consolidating data into a business-wide report. The old system would not permit one person to gather and organize all necessary information. Consequently, the amount of time spent coordinating efforts among accountants at different sites delayed the reporting process.
Business accountants at the division report to supervisors located at different sites. Some accountants are now responsible for plants located in different areas of the country. Two of the four business accountants at the division had met with their supervisors only once during the 18 months since business realignment took place. The other two had met with their supervisors less than 4 times each. The new relationship places more responsibility on accountants to be better problem-solvers and to make decisions independently. However, the new reporting relationship also leaves them without an official local backup during absences from work. "Official" backup for business accountants are accountants working for the same business unit but located at other sites. Accountants at the division all stated they felt comfortable when another accountant on-site would cover their duties while they were away from work. The major concern with a supervisor located off-site was the supervisor's inability to monitor activitie s on a first-hand basis. These issues become important during the performance review process. Another concern with the reporting relationship was the absence of a local supervisor responsible for monitoring workload distributions and coordinating efforts to relieve work overloads on certain desks. Despite these concerns, business accountants supported the new reporting relationships and welcomed increased responsibilities associated with the restructuring effort.
Site A Findings for Proposition 3
Implementing the new system freed accountants from the manually tedious tasks associated with traditional cost accounting functions and allowed for more analytical activities. The emphasis organization-wide was for accountants to become analysts rather than to continue as scorekeepers. Toward this end, the organization has a goal of hiring persons with MBA degrees to fill analyst positions formally filled by persons with undergraduate accounting degrees. Thus, the new system has already affected the responsibilities of the accounting profession in significant ways.
Site B Findings for Proposition 3
At Site B, the accounting function is losing control over data input because control is disbursed. Much of the data entry takes place in the production area; thus control is now located at the operational level. The system creates an atmosphere to utilize marginal economic concepts to run the business. More time is available for analytical work because integration has created efficiencies. Previously, as many as four of five different systems may have been required to conduct a study requiring multiple users to be involved in the data gathering process. Now, similar studies can be conducted by one person in a fraction of the time previously required, thereby increasing efficiency and time spent on value-added activities.
Summary of Proposition 3
In general, the business accountants believe their role has been enhanced by the new accounting system and business realignment. Accountants are an important source of information about the system for plant personnel since more of the actual entry-generating activities are taking place outside the accounting department. Business accountants also enjoy a broader scope of responsibility and the opportunity to work on the business level. During the interview phase of this research, most accountants stated their tasks were becoming increasingly analytical. Definitions of "analytical" varied among the accountants. Some felt that becoming more analytical meant spending time monitoring their accounts and explaining variances on their cost sheets, while others defined analytical as not only providing reports to their managers, but also providing answers to anticipated questions arising from the reports. Alternatively, other accountants stated plant-specific problems causing additional clerical work prevented them fr om conducting analytical activities.
Cooper's (1996) prediction that management accountants will adopt a more supportive role in the organization is upheld by observations in this study. Accountants feel less involved in the functional activities of accounting and more involved in supplying management with information needed to make decisions. Accountants also stated a large part of their duties included aiding plant personnel with questions involving the correct use of the new information system. This, too, is consistent with the supportive role Cooper describes for management accountants of the future.
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