Archive for June, 2011


Monday, June 27th, 2011

This is a post by CMA Ananda Mohapatra


A note on Accountancy, a watch dog of States/Nations’ sustainable economic development is presented herewith below with background references in due consideration to our previous communications, specifically due to call of time and situation for building the State/Nation strong, prosperous and developed.


1. Consequent upon the Press release of Union Ministry of Corporate Affairs(MCA), GOI (Govt. of India) of date 25th Feb-11 notifying thirty-five (35) Indian Accounting Standards converged with IFRS ( referred to as Ind-AS), Invitation along with the attachment of circular for IFRS Summit-2011 issued & mailed by Mr. Sethuraman Mahalingam, Chartered Accountant, Hon’ble Chairman, CII (Confederation of Indian Industry) IFRS (International Financial Reporting Standard) Summit-2011 & ED (Executive Director) Cum CFO (Chief Finance Officer) of Tata Consultancy Services Ltd, with the theme “Final steps towards IFRS Convergence” scheduled to be held on dated 18th May-11 at The Taj Mahal Palace, Mumbai.

2. Notification published in Gazette of India of Union of India on dated 3rd Mar-2011 issued by MCA, GOI concerning to Election to the 18th Council and FOUR Regional Councils of ICWAI (A statutory Body set up under an Act of Parliament), an apex body of Accountancy of the Nation for the term 2011-15 and the responses of esteemed Members then and there in the period commencing from the date of issue of final nominations to till date including Notification dated 7th Mar-11 concerning issue of election manifesto in the part of the contesting candidates.

3. Issue of an Anti-Competitive Retail Supply of Electricity Tariff Order dated 18th Mar-11 by OERC (Odisha Electricity Regulatory Commission), a quasi-judicial independent body set up by an Act of Parliament ( Referred to as Electricity Act-2003) applicable to 4.5 crores people of Odisha, then the reactions of majority learned Members of State Legislative Assembly of Odisha including put up of an adjournment motion, review petition filed by GOO (Govt of Odisha) and the stay order issued by Hon’ble High Court, Odisha on dated 31st Mar-11 consequent upon filing of a PIL before the Court praying to declare the aforesaid tariff order as illegal, arbitrary, biased & anti-competitive.

4. Competition Act-2002, Companies Act-1956 & Companies Bill-2009 along with the amendments and the Notifications issued by Union Ministry of Corporate Affairs, GOI in the subject matter of competition laws then and there including it’s planning to put up Companies Bill-2009 in the august house of Parliament in the ensuing Monsoon Session.

5. Current year weather report and climatic condition of Sambalpur so also of Odisha during this month of April-11 in comparison to corresponding month of previous years.

6. Different Theories of Economic Development and its Formulae of Sustainable Development I.E., “Professionalism-Competition-Financial Viability-Customer Service” vrs “Energy-Environment-Employment-Economics” communicated previously.

7. Development of ODISHA so also Nation and the role of Media, the Fourth Pillar of Indian Democracy after showing due regards to Indian Culture and religion, the culture of his Lord ShreeJagannatha and his Mausi and Mausi’s sister Maa Samaleswari (Goddess of Resources) and the teachings of Shree Shree Thakur Anukulchandra on Accountancy/Economics, Politics etc.

Accountancy is a branch of mathematical science that is useful in discovering the position of business, the causes of both success and failure. Accountancy is defined by the Oxford English Dictionary as “the Profession or duties of an Accountant”. In the ancient Vedic period, people were using accountancy. In Atharvaveda and Rig Veda we find the term like “Vikraya” denotes Sale , “Sulka” means price. Similarly in every ancient Sastras/Books like Quran, Bible, etc we find Accountancy in different mode but with a common objective. It is thousands of years old; the earliest accounting records, which date back more than 7,000 years, were found in Mesopotamia (Assyrians). The people of that time relied on primitive accounting methods to record the growth of crops and herds.

In our words, Accountancy is a game of “Plus” and “Minus” or Income and Expenditure and what is the status of the Enterprise at a particular date. It is also an Add-Less game. How much we are adding or how much we are spending for attaining a common goal? These processes are called Accountancy. Over the period of time, Accountancy did not able to establish itself as a machine to process the data suitably for sustainable development of the economy. Corruption in the society has touched to every one due to failure of Accountancy. We have come across several events of failure of Accountancy as seen in case of Satyam Scam, Enron Scam, Securities fraud etc but proper remedial measures could not be taken due to its’ intricacy. Though the subject is very simple but we made it difficult due to our unlimited wants. As the subject is read/implemented in English only where very little scope opened for other languages. We inserted difficult terms for a simple function in Indian Accountancy and dissuaded commons far away for which it lost its’ popularity and started to run in the direction of elimination and alienation. Due to lack of proper reading and implementation of accountancy in governance of Govt and Non-Govt Sector, Nation have lost huge resources in the name of 2G Spectrum Scam, Land Scam, CWG Scam, Power Sector Loss Scam etc resulting low growth rate, raising of poverty and un-employment and lastly damaging to good environment. So in an era of liberalisation of economic activities of the Nation, time has come now to think over the subject for sustainable development of the economy. Real economic progress with true inclusive growth can only be possible and attained with its’ friendly implication which is not at all a difficult job in the part of Senior Members of the Apex Body of accountancy.

The title of this Article is Accountancy: Watch Dog of Sustainable growth/Development of economy. If we critically view Accountancy then we to find that Auditing, Finance, Economics, Management, Reporting, Analysis and the similar topics are the branches of the main subject of Accountancy but we did not read it properly for which we lost many things including harming to God gifted good environment. We the people became poor, the gap between poor and rich increased. Developed Nations including USA , UK , Franch, Switcherland , Germany found scope to comment on our Poverty. “Transparency International” was created to study and report our problems of backwardness. But we the people did not try to know the international politics of his Lord, Lord ShreeJagannath or Lord Radhaswami or Lord Ram and even forgot our Guru. We started to quarrel with each other by competing with each other without knowing the rules of the game of Competition. We forgot his Lords’ World Theory “Vashudeva Kutumbankam” (Globe Brotherhood) also but propagated without showing any confidence and without any implication, paved way for the third men to interfere who were least concern with Indian Culture, Religion and Tradition. In the process our resources get started to occupy by few corrupted hands. We invited the worse situation of un-employment/poverty due to non-professional in our approach, forgetting social responsibility and wrongly implementing Accountancy in governance.

Accountancy is a common practice of every household of the Nation. The subject was very easy in the past and is required to be presented suitably for common access to reach the target of up-keeping the pace of sustainable development of the economy. Even today we are not able to present the Consolidated Balance Sheet of the Nation. Balance Sheet of a system/concern speaks the performance of its’ Accountancy. Though it is not presented but we know very well what is the position of Balance Sheet of the households of the Nation. We have also provided with the Balance Sheets of Govt and Non-Govt Organisations and what its’ position we know it very well. The true and fair picture of the organisations which suppose to be reflected in the Balance Sheet have lost in the process of accountancy due to adoption of inaccurate presumptions. Some of the inaccurate presumptions are appended herewith as follows:

i) We tried to manage our resources with the mindset of unlimited wants which gave birth to inaccuracy in decision making.

ii) We rated our self inaccurately. We over estimated our self as Professionals. Later on we failed to discharge the fixed duties of a Professional.

iii) We inaccurately planned to eliminate corruption which is not at all true. Corruption can not be eliminated. It was there in mythological periods of history, even Lord Krishna and Lord Ram have not escaped from corruption. Society will lost it’s pleasure in the absence of corruption because the definition of corruption is infinite. If once we think our daily functioning throughout the day including personal work to official work from leaving bed from morning to going to bed at night, then can we finalise to divide the total functioning into just and un-just? We can not rated ourself. So corruption is a relative term which can be assessed by applying Accountancy.

iv) We deliberately avoided some principles for personal gain while taking decision. We observed Ram-Laxman theory but forgot Krushna-Balaram theory. In both the cases almighty lord is present but in different exposure. In the first case he was playing the role of big brother but the second case he played the role of younger brother. So we forgot to implement one side of his lords’ theory of development.

Due to failure Accountancy implication, Corruption started to spread over the society vibrantly. We the people feel today how corruption in the society have snatched away the bread and butter of millions. We saw multi billion rupees scams, irregularities and misappropriations in functioning of governance of Govt and Non-Govt sectors which relate with national importance. Anna Hazzare represented we the people and continued hunger strike to protest against corruption by demanding Peoples’ representation in JAN LOKPAL Bill Committee. Govt of India felt the implication and cooperated we the people for finding out solution. It is the start of the work against corruption in a specific area needs to be expanded to other area.

Ornament is made of gold but it is not pure gold. Ornaments can not be made of with pure 24 Carat Gold. A meagre quantity of non-gold metal is mixed up with gold to make ornaments. The meagre % (Let us Say 4%) of mixing of non-gold metal with gold is allowable and pass on by we the people. But if the share of non-gold metal mixing with gold exceeds the allowable limit of 4% for making ornament, then it is not passed on. While the % of mixing non-gold metal in gold ornaments exceeds 50%, then the ornament can not be passed on with name gold-ornament. In the society today corruption has exceeded highly than allowable limits. It is now running above 50%. Ornament is lovely used by women and it can not be separated from them so far as Indian Culture and Tradition are concerned. We the people enforced to Mother India so also to her sister Mother Odisha to wear duplicate gold ornament but they did not wear and politics started then of fear and favour. Corruption in the society has spread in such a level that Mother India and Mother Odisha are fearing to move by wearing gold ornaments due to stealing away of ornaments by anti-socials.

So while setting the plans and policy and approving the subject, we are to be very cautious to pass on resources in the head of corruption. Let us we fix up the target of lessening 50% of corruption, so that it will be easy in our part to achieve the target.

The concept of Profit/Loss of a system is being born from corruption. So while calculating profit/loss of a system, we are to be very cautious to load a reasonable % on cost to Pass on. In our view this Profit/Loss of any systems can be restricted with maximum limit of 20% inclusive of cost of Capital.

In order to accomplish all above mandate figures and targets, let us assess the performances of the service holders of the nation and find out the ways of improving performance. In democracy every one has right to live. Nobody can be excluded from governance. So we are to rate the performance of all paid persons of the nation. We have made up FOUR simple Benches for offering seats to paid persons of Nation. The FOUR Benches are as follows:

Bench-1- In this Bench, Seats are available here for those who talks less and work more. Generally these people are honest and believe the theory “Work is Worship”. They use to commit for performing the job and do best of them. They perform better than their commitment. They believe in fair competition for the sustainable development of the nation.

Bench-2- In this Bench, Seats are here for those persons who work as per their talks. In this bench we find persons of accuracy in relation with their speech. These persons are average in nature. They believe in honesty in performance. Generally gentle men in approach. They believe in fair competition.

Bench-3- In this Bench, Seats are available for those who talks more and work less. These people are earning money by taking the advantage of situation. They are concerned with all work, but immediately they will be not concerned. These people foolishly think themselves that they are very clever which is not. They try to satisfy everybody but the result is Zero. They believe in “Work is Worship” in less confidence. They put questions on Competition after knowing what is competition. They fond up to play games but very least knowledge on games.

Bench-4- In this Bench, Persons to seat here are that they neither talk nor work. These are “Useless” paid persons. In the office, they use to sit but least concerned with official work. If somebody asks them any question in the official matter, they generally use the method to avoid. Sometime they remain absence from office for days together and then arrive at office at the end of month to receive salary. These persons are very irregular in nature. They do not know what they are doing. These category of people are addicted in narcotics.

So the above criteria of rating paid persons or say performance rating is very simple and can be accommodated but how to improve performance of the above category of persons is a question to answer. Let us find out the solution to question by taking suitable measures so that promotion from one bench to other will be very easy. The following are the procedure for promotion from one bench to other.

From Bench-4 to Bench-3

This 4th Bench Category of persons are to be administered closely, so that they will use to attend office. After few days of sitting in office, they will start to talk and will participate in the official matter, they will interfere in the discussion of their colleagues. They will be issued warning for not taking narcotics. Proper administration is required in the part of management to bring them to office so that they will be promoted to the third Bench. The fourth bench persons of no work-no talk with be promoted to more talk and less work Bench i.e., Bench No.3

From Bench-3 to Bench-2

The persons sitting in the third bench are to be administered closely and they are to be advised to maintain equality in their talking and working. After few days this third bench people will try to perform their duty as per their talk or commitment so that they will be promoted to the Second Bench where persons of equality in talk and work are sitting. This administration is not at all difficult in the part of management.

From Bench-2 to Bench-1

The second bench persons are of good integrity, they generally do not like to talk more. They perform duties as per their commitment. So this second bench persons are to be administered closely so that they will be inspired to work more, because they understand the time value of money. This is not at all difficult in the part of administrator to motivate them to work more by showing them the first bench where persons of high integrity are sitting. In the process they will be promoted to the first bench.

Good Bench-1 (performer is rewarded)

The first bench of persons who are talking less and doing more are of high integrity persons and believe in honesty in discharging official duties. These persons of first bench are really asset to the Nation.

We have no such standards in accountancy to measure and improve performance of the paid persons of a system. So time has come now to design standards to measure the quality of labour /manpower/person simply and comprehensively so that productivity of Nation will raise undoubtly. We have constraints to attend the 3rd CII Summit on IFRS Convergence with the theme “Final steps towards IFRS Convergence” scheduled to be held at The Taj Mahal Palace Mumbai on 18th May’2011 and would like to submit this notes before the esteemed expert Members of the Committee for kind consideration. This would be very much appreciated if our theme of accountancy helped to the esteemed Members for taking a conclusive decision on the subject matter of this article. We may wish all success of the ensuing Summit . We would also like to request before the esteemed Members of the Committee to have a look and reference on our last article i.e., “Fair Competition & Economic Development” which is now published in portal before arriving at any decision on the subject matter.

We express our thankful to Srj. Sethuraman Ramalingam, Chairperson of CII 3rd Summit on IFRS Convergence & CFO Cum ED of Tata Consultancy Services Ltd for sending the invitation to attend the Summit .

In the meantime election processes have been started for the 18th Councils of the apex body of accountancy (ICWAI) after release of notification in Gazette of India on dated 3rd Mar-2011. Experienced and eminent Members of the Professions have filed their nominations for Election to the 18th Council which is scheduled to be held on 3rd Jun-11. We have received letters and emails from different contesting candidates with request to cast the vote in their favour. Some experienced members have issued their “election manifesto” which is very much needful in the part of a voter. The issue election manifesto as per the regulation of ICWAI in the part of contesting candidates have not yet been regularised. However, on reply to the election manifesto of some new candidates, we wanted to know a simple answer “Why ICWAI”. The contesting candidates have not yet replied.

ICWAI, an apex statutory body of Accountancy set up & came into operation in the year 1959 after passing of CWA (Costs and Works Accountants) Act-1959 after a gap of 10 years of setting up ICAI (Institute of Chartered Accountants of India) which is another statutory body of Accountancy set up by an Act of parliament, just before the adoption of the Constitution of India in 26th Jan-1950. Then a common question arises if there was a body of Accountancy, then why the Law Makers thought for constitution of another accountancy body i.e. ICWAI even after passing of Companies Act-1956. What were the problems in the part of Law Makers in framing Companies Bill-1956? Whether there were any problems during the time of framing Companies Bill-1956? In our view the second statutory body of Accountancy ICWAI was constituted for the reasons as discussed herewith in the tile Subject “Accountancy: Watch Dog of Sustainable Development of Economy” and secondly to promote “fair Competition”, the concept of which is already communicated in the last month as published in web portal. We may hope Hon’ble Minister, Union Ministry of Corporate Affairs, Govt of India Srj. Murali Deora along with his good Secretary Srj. Mittal Saheb will redress the issue suitably by issuing required notification and with making necessary addition, deletion or alteration in the Companies Bill-2009 without any favour or fear but with maintaining mutual help and cooperation, so that the subject matter of this article will prove beneficial for the people of the Nation.

On 18th Mar-11, while august house of Odisha Legislative Assembly (OLA) is in live Session, OERC (Odisha Electricity Regulatory Commission), a quasi judicial and independent Body set up by an Act of Parliament issued anti-competitive tariff order for retail supply of electricity to the 4.5 crores people of Odisha after allowing huge losses over and above their own projections and approval. Inefficiencies, malpractices, abetment, conspiracy, mismanagement, indiscipline and anti-competitive functions which are avoidable in nature are all being passed on to the honest and esteemed consumers without showing any mercy. Just before one year, the people of Odisha had tolerated to carry the burden of hike in electricity tariff to the extent of 40% for only reason of constant tariff of last nine years where as the reason is not sufficient and People showed their simplicity and ignorancy. Is it natural justice? Is exploitation to illiterate, ignorant and simple people is allowed under democracy? The answer will be “No”, but require proper administration, analysis and communication.

In the last retail tariff order dated 18th Mar-11 of OERC, again retail tariff of electricity applicable to whole of Odisha has been raised more by 30% without any reason in an environment of anti-competitive functions. People of Odisha under the guidance of esteemed consumers association started to laugh by listening the news of hike of electricity tariff once again, because the consumers’ association representatives advised them in mobile messages that you are now free to thieve power. The Learned Members of OLA demanded withdrawal of tariff order and major Opposition INC put forth an adjournment motion in the house for discussion. The GOO (Govt of Odisha) replied in house that they will appeal before OERC for review of its order. GOO appealed then.

But in another event, Srj. Dilip Kumar Mohapatra Advocate and Consumer Activist of Odisha filed a PIL before High Court Odisha and prayed for withholding the above anti-competitive, illegal, unjustified and arbitrary tariff order. Hon’ble High Court of Odisha have been pleased to allow Stay order on the current tariff of OERC and hearing to the case is now going on. Being an Analyst of Power Sector, I know how injustice is being delivered to the innocent and illiterate People of Odisha, I also know how the mechanism of Odisha Power Sector is adding liability to the sustainable development of the State so also nation. The event enforced me to note the happenings and to communicate to the Union Government, being a citizen of a federal State.

Current year weather position as on end of April-11 is comparatively very good in comparison to corresponding month of previous last 10 years in at Sambalpur. His Lord has recognised our expressed Statement in the theory of development “Performer is rewarded”. CO2 (Carbon Di-Oxide) Gas is a gas can be eliminated within one year, if necessary steps are being taken today. We have a file on the subject of “Loss of Power distribution Sector is directly related with warming and pollution of Environment”. In this file we had expressed earlier after release of weather report by GOO that Odisha power sector is emissioning 68% of CO2 Gas to environment in compare to 58% of national level. In the three important seasons of last year summer, Rainy and winter we forwarded that file with our observations and notes for a consciousness of all concerned. Odisha media both electronic and print in the last year so also in the current year have presented the subject of environment regularly by different programs and they deserve for thankful. People of Odisha so also nation including Leaders, Administrators and Professionals have worked for lessening emissioning of CO2 Gas. The game has started now and is required to be moved properly for the sustainable development of the State so also Nation.

Forex Technical View

Thursday, June 23rd, 2011

 This is a post by CMA D.S.Kapoor.  he is at present in employment as GM-Finance with a Kanpur based listed company. he has been tracking the stock market for the last 20 years and the forex market for the last 3 years.



Weekly Chart



Last week, it was indicated that currency is getting support and is above 50 DMA (44.64) and 50MMA (44.80), as against the week’s closing at 44.82 and once, these supports get breached decisively, the targets may be around 44 – 43.85. It was also indicated that technical indicators are suggesting happening of such possibility within next fortnight. Resistances for next week were expected at 45.05 / 45.35 and Supports at 44.64 / 44.35 / 44.00.


Last week, it opened at 44.74, high / low at 44.8250 / 44.52, and closed at 44.72 as against earlier week’s closing at 44.82. Thus, during the week, though, 50MMA has been breached downside, but 50 DMA has still not been breached on closing basis on any day, though intraday, it has gone below 50 DMA. Further 5MMA is also slightly above 50MMA.   


Now, during the current week, we expect 5MMA to breach 50MMA on the lower side, which is a bearish signal. Once it happens, we expect lower targets – 44.40 or below. This view shall get negated, only if the Currency goes above 45.20 – 45.25.


Major Resistances : 44.87 / 45.06 / 45.20

Major Supports       : 44.45 / 44.10 / 43.85





Weekly Chart



Last week, our preferred view was that the Cross should consolidate around current levels and then only, up move to start again. It was also indicated that positioning of different weekly moving averages indicate towards continuation of bullish trend, however, clear bullishness will be visible, only once 50WMA(1.3580) crosses 200WMA(1.40), which may take another 2 – 3 months time. Resistances for next week were expected at 1.4725 / 1.4890 and Supports at 1.4450 / 1.4375.


Last week, it opened at 1.4627, high / low at 1.4696 / 1.4320, and closed at 1.4345 as against earlier week’s closing at 1.4634. Thus, there has been consolidation during first three days followed by weakness in next two days.   


Now, next week, it is expected that, if 1.4320 is not breached on lower side, further consolidation in between 1.4350 – 1.4600 is expected before any fresh move starts. However, if it gets breached, next support level to be watched shall be around 1.4110.


Major Resistances : 1.4417 / 1.4476 / 1.4539   

Major Supports       : 1.4320 / 1.4260 / 1.4145






Weekly Chart


Last week, it was indicated that the Cross shall not go below 50 DMA and bullish momentum should continue. In between, there is resistance around 1.6635 (200MMA). Once that is crossed decisively, further targets may be 1.6685 / 1.6840. Resistances for next week were expected at 1.6535 / 1.6685 / 1.6840 and Supports at 1.6335 / 1.6285.


Last week, it opened at 1.6425, high / low at 1.6470 / 1.6217, and closed at 1.6233 as against last week’s closing at 1.6427. Thus, on first four days, the bullish momentum was witnessed. However, there was profit booking on the 5th day of the week. Once again, the Cross has closed on Friday below 50 DMA (1.6365).


Now, next week, since 50 DMA is above 200 DMA and 5MMA, 13MMA & 21MMA are in phase, there are fair chances of bounce back or consolidation in the current range of 1.62 – 1.65.


Major Resistances : 1.6313 / 1.6360 / 1.6420

Major Supports       : 1.6195 / 1.6110 / 1.6060








CMP(10th June)





























Friday, June 17th, 2011


A.N.Raman   Cost Accountant   Chennai

        India is already on the forefront of cutting edge competitiveness in manufacturing sector and is an emerging giant in so many manufactured products. Glancing at the growing list of the companies entering the platinum and gold list of manufacturing excellence in Frost and Sullivan awards year after year the country is certainly poised for a great leap not only in services sector but in manufacturing field as well.  One reason which has been well documented in this journey is the success stories of many companies introducing lean and flexible manufacturing practices with the Zero defect approach. The next frontier of excellence to sustain the edge will be a world class cost management which travels beyond operational excellence. It may be worthwhile to draw a list of characteristics which can be the cornerstones of a world class cost management framework.

     The attempt to enlist the characteristics of a World Class Cost Management (WCM) draws  on the Cost Management maturity Model framework propagated by the Confederation of the Indian industry  juxtaposed with some of the finest principles of excellence framework in manufacturing practices centred around the Deming’s  PDCA Cycle . The following key characteristics may be considered as the hall mark though it can be a growing list gradually as we evolve with experience :

·         Top Driven Tone

·         Policy Deployment Integration

·         Strategic and operational differentiation

·         PDCA Cycle Centric

·         HRA processes integration

·         Sustainability based

·         Amenable for assurance processes(governance)

·         Systems driven

The above features need elucidation for a better understanding of the emphasis underlying.

A WCM will be always top driven.  The tone at the top should be strongly conveying the criticality of cost management as a core process for achieving the entity strategies. This would be significantly important for a business strategy  strongly flavoured by cost leadership ideas.  The top management communication should be constantly emphasizing on the process of cost management rather than emphasizing on cost out comes alone. Quite often one may find that desired outcomes of cost advantage required are articulated and the processes are left to the strategy executing teams. But in a WCM environment the tone at the top will also articulate on structured cost management processes.  This will give enough drive even to the HRA processes to constantly examine the skill gaps on cost management and take counter measures to fill the gap.

A WCM will be always integrated with the Policy deployment architecture. Typically a company which is process driven with a high level of empowerment at all levels one can always notice an extensive practice of policy deployment .Whether it is financial or non financial , the policy deployment framework brings in lot of role clarity and alignment with the business strategy or the annual business targets. WCM will be inextricably linked up with such an environment and thus the Cost Planning as a functionality  will be cascaded down into targets and sub targets with a high degree of alignment across the business along with a review mechanism. For example if a new product for a customer at a target price is a part of the business strategy, a WCM company will deploy this strategy even to let us a say a vendor sourcing group with a deployed target of locating the source of a particular raw material of a given quality at a given price aligned with the new product  strategy.

A WCM will clearly differentiate between strategic and operational cost focus. Traditionally, the subject of cost had always been operations  focused due to the overwhelming influence of the cost accounting  framework. The primary objective of the cost accounting systems  is to generally  unitize all expenses to a unit of output . The bias of operations is discernible. However , a WCM dominant enterprise will articulate the operational cost issues differently from strategic  issues. As a result you will find in such companies even costs lying outside the system in an extended value chain being considered integral  as a part of the holistic cost focus. Further , considerations of business strategy such as target product segments and customer segments, segment specific strategic initiatives, long term strategic processes will get a different emphasis instead of  examining costs purely from operational perspectives. As a result of this perspective comparison of costs between periods may have operational significance  whereas cost comparison between two strategic scenarios will be more overarching in terms of decision making. This differentiation will play a large role in the WCM architecture.

A WCM practice will clearly have the Deming cycle of Plan – Do- Check—Act at  its centre. The practice of PDCA cycle from shop floor to top floor has become the hall mark of world class excellence. The same is applicable even for a WCM enterprise. Generally cost has always been treated as an outcome .The tendency in many enterprises operating under a continuous improvement environment  is to perform all the improvement activities and see cost savings as an out come of waste elimination efforts. Very often these cost estimates tend to be wrongly estimated and not reflected totally in the bottom line inviting sarcasm and reprimand from finance team members. But in a WCM company this would not be the practice. In WCM companies the cost information would appear in the beginning as a part of the PDCA cycle. Reliable cost information as a planning point and a check point would authenticate the continuous improvement process. The PDCA cycle would be firmly in place both at strategic and operational decision making environment of the business thus giving a perfect financial reliability to the decision making process. 

A WCM populated enterprise will have a HR interface distinctly different. At the outset , the most fundamental aspect will be to see cost management as a management process and not as a function of a finance executive reporting to the CFO or the head of finance.  Visualising cost management as process in itself has challenges of HR processes as the enterprise will have to identify skill gaps on cost management at all levels of organization and at all functions.  The skill matrix prepared by HR function at an enterprise level will also have to map the cost management skills required for the cost management process. A continuous review of skill gap on cost management from top floor to shop floor and imparting training on the same so that a robust PDCA cost management cycle is in place will be a major objective of the HRA function in a WCM environment.  Besides the internal focus on skills of cost management, if the HRA function is also driving quality management process in an enterprise dealing with vendors they  should also perform this skill gap analysis on cost management with the tier one vendors to start with.

A WCM oriented company would have embraced sustainability philosophy. The WCM process in the current context should also reflect sustainability concepts in the form of sustainable cost structures connected to environmental and socially responsible values. The PDCA cycle should reflect the resources outlay on environmental issues in all processes. The PDCA cycle at a strategic level should reflect concerns of environment and social issues and the related resources impact. The cost structures will be so articulated which will transparently reflect the environmental footprints of the enterprise. For example a company making paper should so transparently articulate its cost structure in a strategic analysis as to what extent the environment protection or degradation  to forest wealth has happened. Such an analysis should be even visible to governing body so that strategies can be suitably modified to make them sustainable. Similarly, business strategy itself can be so formulated in India so that it takes care of the society in design of products or processes. The related cost issues will be articulated explicitly in a company with a WCM practice.

A WCM enterprise will make its cost management processes amenable to governance assurance.  The world class governance framework goes beyond compliance and balances it with performance. A governing body in such an environment goes beyond issues like audit committee, independent directors composition etc and demonstrate a high oversight on strategic performance of the entity governed. A WCM process will align itself with such a governance framework and brilliantly highlight the performance issues to an enlightened board. Towards this, the cost reporting framework will be  conforming to standards such as cost accounting standards or management accounting principles and will be capable of being subject to a process of assurance. Such a WCM process does not confine itself to only an audit trail of cost accounting but will also embrace review of cost based decision  taken records through the PDCA cycle. The decision making processes and risk management practices will have an explicit link with the cost management system thus strengthening the governance mechanism.

A WCM company will be supported for its information from established systems. A quick scan of the most of the companies which have implemented the ERP systems will reveal that most of them have largely underutilized the cost management modules. But a WCM company would have significantly exploited the cost management modules of such ERP systems. Either by using the built in functionalities or by using the Analytics tools linked to the ERP WCM companies make an extensive use of the system based information to perform the PDCA cycle. Such a full exploitation in fact can return the investments made in such systems normally claimed by the vendors.

In the above write up we have tried to capture some of the cornerstones of a world class cost management framework. This is a constantly evolving field and by having a maturity model on cost management companies can benchmark themselves and constantly improve to retain the competitive advantage besides the manufacturing excellence.  While the efforts on improving quality and delivery have become structured in the Indian business a great deal of effort is still required on cost management front.