Course Description

Ultimately the language of money is what executives and managers rely on to make better decisions. A useful management accounting function is to assign and tag “attributes” to the work activity costs in an activity-based costing (ABC) system.

ABC is noted for much more accurately tracing indirect expenses (commonly referred to as “overhead”) to the costs of products, services, and customers. It provides strategic profit margin information. But ABC can also be used operationally to manage process costs.

Examples of attribute “tags” to work activity costs are (1) level of performance [value adding versus non-value adding]; (2) level of importance [high, medium, low].

Attributes can also be applied to measure and report the costs of quality (COQ). Managing quality is an imperative for any organization to remain competitive. Measurements of quality are essential, however supplementing that information with financial information further adds to success in managing quality.

Unfortunately, most financial reporting neglects to report quality information such as the costs of quality (COQ).

In this presentation the basics of management accounting will be described including on ABC for measuring profits and costs of products, standard service-lines, distribution channels, and customers. The presentation will then expand on how this basic information can be leveraged to report and display how end-to-end business processes can be reported with “lean accounting” to create value stream maps to aid in focusing on waste reduction and throughput cycle time reduction. 

There are four (4) families of COQ attributes. They are prevention, appraisal, internal failure, and external failure. These are the COQ’s components to report the costs of conformance and costs of nonconformance. Each of the four can be hierarchically decomposed tree-branch-leaf into elements for each of them. 

Attendees to this course will feel like they have added being a consultant to their set of skills.

Learning Objectives

• Identify how external statutory compliance financial reporting for government regulatory agencies and the investment community is different from internal management accounting for insights to make better decisions.
• Recognize the fundamentals to calculating costs including complying with costing’s universal causality principle – having cause-and-effect relationships between incurred expenses (e.g., salaries, wages, supplies) and the output costs (e.g., product costs) that consume the expenses.
• Discover how cost “attributes” (e.g., the 4 COQ classifications; value-add versus nonvalue-add) can be attached to costs providing “the color of money”.
• Identify how lean accounting leverages management accounting to create value stream maps.
• Recognize barriers and obstacles that prevent CFOs and accountants from using progressive management accounting methods like ABC, lean accounting, and COQ.

Prerequisites

• None

Who Should Attend

CPAs, accounting/finance professionals and leaders.