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ISSN 1987-5789 ESSN 2587-5426
doi 10.56079
Journal number 2 ∘ Besik Bauchadze ∘
Management Accounting Development in the Process of Digital Economy Formation (Case of Georgia)

https://doi.org/10.56079/20222/8

 

In the article there is given the assessment of digital economy in Georgia. It is established that effectiveness of managing activities of the organization depends on the information level support. There are discussed the issues of evaluation of the management accounting system functioning, development of cost accounting and budgeting methods, selection of the automated system for information and analytical support. The management accounting data allows not only to analyze the financial results of the organization activities, but also to manage costs, formulate assortment, investment, contract and pricing policies, and, consequently, directly to manage the organization work. The management accounting, which is the special system of knowledge, skills and abilities, can be described as the combination of two main subject areas: as a science and as a practical field of activity. The digital economics and management accounting are interrelated, because along with their development, the management accounting data appear digitally, processing them while using the innovative technologies. The management accounting should be flexible enough to provide any data needed to make the managerial decisions. The management accounting automation is the individual and complex process, as it is necessary to “transfer” the requirements of owners, managers to the accounting system, in terms of software product functionality and parameters, in accordance with the approved regulations. There exist the ready-made software products designed for automation of accounting, however, for medium and large business entities, the best option is to refine the software package for their specific activities, which will allow them to get the maximum efficiency. The article discusses the options for setting up the management accounting system in the organization, substantiates the benefits of implementing “1C: ERP Enterprise Management” as the mechanism for effective management of the company resources.

 

Keywords: Automation, information technology, digital economy, management, Management accounting, control.

JEL Codes: D83, L86, L96

The scientific works of the following authors are dedicated to a similar topic: Tchiladze .I; Sokolov I.V.; Vakhrushina M.A.; Ivashkevich V.B.; Kaverinoi O.D; Karpova T.P; Khorngrena CH.T; Foster D.J; Antonia R.N; Parker R.N and others. 

 

Introduction

A comprehensive management accounting system is one of the components of an effective management system in a market economy, in Georgia and across the world. A well-organized management accounting system serves as the foundation for the company's competitiveness and is an important factor in crisis management.  Management Information Support is the purpose of management accounting. The basic components of a management accounting and analysis system, according to international practice, are: Accounting and management of expenditures; Development of evaluation and comparative indicators of the activity; Planning and budgeting of operational, production, financial and investment activities. The management accounting and analysis system should also incorporate forecasts of internal and external elements that impact the activities of the enterprise.

 

Development of Management Accounting

 

      To adequately grasp the essence and significance of management accounting as an element of the business structure management system, let us examine its development. The evolution of management accounting is frequently depicted by a sequence of steps: 1. Prior to 1950, management accounting was used to identify expenses and exercise financial control. (Voloshin, 2002, 352,) 2. From 1950 to 1965, the field of management accounting is broadened by the provision of information required for control and planning via the use of decision analysis and accounting methodologies. 3. From 1965 to 1985, the emphasis changed to minimizing the use of resources in business processes, process analysis, and cost control through the use of more precise mechanisms. 4. By 1995, the purpose of management accounting had evolved from resource-based management of targeted outcomes to resource-based management of targeted results (Zalevsky, 2009,3–10). Due to the above, the management accounting, in accordance with the economic processes, has undergone a transformation, in particular: 1) an independent direction has been revealed in the accounting system - "Accounting and Expenditure Accounting"; 2) "Management accounting" was formed as a category, conceptual principles; 3) Transformation of management accounting into controlling; 4) Digital transformation of management accounting. The source for the development of the scientific direction was the first guideline on management accounting in 1956, written by R. By Anthony, which focuses on two key issues (Anthony, 1956,): ​​how to identify and analyze problems in activities; How to measure costs. Published in 1962 by C. Horngren, its distinguishing feature from other papers in accounting is that it focuses on the decision-making process in managing costs rather than the direct methods of measuring them. (Horngren Charles, 1962,). In 1969, R. Parker outlined new principles of management accounting, focusing not on cost management but on managing the organization, making business decisions and ensure its effectiveness. (Parker, 1969, 167.)

      The development of scientific thinking in the mid-1980s led to the development of the concept of "management accounting" in theory and practice.In the second period of evolution, justified by the understanding of the diversity and dynamism of micro and macroeconomic factors affecting the functioning of the business structure, the study of the theory and practice of using accounting as a decision-making mechanism was intensified. In the process, management accounting researchers T. Johnson and R. Kaplan considered it necessary to expand the scope of management accounting and made the following proposal (Johnson, Kaplan, 1987, 22-30,): review the management of the organization and understand the value of information as a key source for implementing business decisions; Use non-financial information. That is, indicators that have no monetary value but are substantial and relevant, namely: market share, response time, product quality indicators, production time, customer satisfaction quality, etc. At this point, it was noted that managerial accounting should be primarily aimed at achieving business development goals. In this regard, approaches emerge that will help set goals and achieve them. The scientific thinking of the period of the development of classical management accounting is transformed from a cost accounting system to a cost management system.

 

The Digital Economy

 

The digital economy is based on three basic principles: infrastructure support (hardware, software, telecommunications, networking, etc.); E-business (processes carried out by the organization through a computer network); E-Commerce (Network Transfer of Goods) (EU-Japan Center for Industrial Cooperation 2015). To analyze the actual basis of the digital economy we can consider the following indicators: Internet growth; Hardware sector; Communication sector; Digital media; E-commerce; The dangers of the digital economy; The Digital Economy of the World (Britton, McGonegal 2007). In January 2020, the Government of Georgia approved the "National Strategy for the Development of Broadband Networks of Georgia 2020-2025 and the Action Plan for its implementation." The strategy was prepared within the framework of the EU Digital Market Harmonization Project HDM / EU4Digital, with the expert assistance of the World Bank. The strategy aims to address existing digital inequalities and to develop policies and regulations in line with EU and international best practices in order to develop the digital economy and information society in the country. (https://pmcg-i.com/publications_file/1337611a5be288455)

With the formation of the digital economy in the country, a clear understanding of the need for innovative change in the organization of the information system of business entities was established, because information today is a strategic resource that, when used rationally, enables effective business operations.

Management accounting and digital economics are intertwined, since with its development, management accounting data appears digitally, which is processed utilizing novel technology. Management accounting should be adaptable enough to supply any data required for managerial decision-making.

Normative legal acts in Georgia do not establish rules for the management of accounting. They are set by the owners, the heads of the organizations, because this type of accounting is not mandatory, the organizations independently decide on the necessity of its implementation. There is a sharp difference between the Western and Georgian approaches to the concept of management accounting. In Western companies, management accounting is used for analysis, planning and informed decision making, while in Georgia - for reliable and complete coverage of the organization's activities.

Management accounting automation is an individual and complex process, as it is necessary to "transfer" the requirements of owners, managers to the accounting system in a combination of software product functionality and parameters. There are ready-made software products designed for automation of accounting, however, for medium and large business entities the best option is to refine the software package for their specific activities, which will allow them to get maximum efficiency. It should be noted that any, even ultra-modern, accounting software supports only those processes that are described and implemented in practice in accordance with approved regulations. Consequently, software product selection and automation are used only for organizations that have already described and implemented a management accounting system and its need has been identified in practice.

In identifying aspects of building a management accounting model for a business structure in the digital economy, attention should be paid to information technology resources such as ERP class systems. (Enterprise Resource Planning) ERP class systems are multifunctional applications that create a unified environment for automating the accounting, control, planning, and analysis of all enterprise operations. ERP system creates infrastructure for electronic data exchange, both between departments of the enterprise, as well as with suppliers and customers outside the enterprise (Averina, 2018,  40-49,)

SAP is one of the world leaders in integrated management solutions for enterprises and organizations and provides software that fully meets the needs of different sectors of the economy. One of the most important developments of SAP is the mySAP CRM Enterprise Resource Management System, which covers all areas of financial and management accounting, personnel management, operations and corporate services, and also contains powerful analytical tools. It can be used with all other SAP systems - Customer Relationship Management (mySAP CRM), Product Lifecycle Management (mySAP PLM), Supply Chain Management (mySAP SCM), and Customer Relationship Management (mySAP SRM), as well as other (open source technology) With systems. The SAP ERP system allows you to provide reliable information about the financial condition of the company for planning, comprehensive analysis, to control the activities of the company and the factors affecting the performance of the business. One of the elements of the mySAP ERP system is the Financial Management Module (mySAP Financials), which is designed to maintain accounting and reporting, to support corporate governance at both the corporate and individual levels. This program allows you to get an updated, holistic and objective picture of the whole business, which in turn allows you to get more in-depth information to make decisions. In addition to financial accounting and cash flow management, mySAP Financials features advanced management accounting features, particularly in the area of ​​indirect cost control. The importance of this aspect is determined by the fact that with the development of production technologies, indirect costs occupy an increasing share in the cost structure of the finished product and in the ongoing work. The functionality of the mySAP solution is unique in terms of controlling financial indirect costs and therefore deserves more detailed attention.

 

Planning and Budgeting

 

       Planning and budgeting in the process of corporate governance is quite a complex process, which involves the collection, processing and storage of large amounts of data, as well as the implementation of various methods of forecasting, planning and analysis. The planning and budgeting system should meet the generally accepted requirements for the qualitative characteristics of management information - completeness, reliability, timeliness. The above conditions can be met only with the help of adequate information systems. As planning and budgeting tools, four categories of software are considered: spreadsheets; Corporate governance systems; special budgeting systems and systems tailored to individual requirements.

       As practice shows, in Georgia, spreadsheets are often used for planning and budgeting, especially in small businesses, and this is not surprising, because plans and budgets are drawn up exactly in the form of spreadsheets. In addition, spreadsheets are one of the simplest, most accessible and popular tools. Spreadsheets are indispensable for small businesses. They can also be useful for larger enterprises that are starting to create a budget system. However, as more departments become involved in this process, the methodology becomes more complex and the amount of data increases, spreadsheets (as a budget tool) quickly reach the limit of their functioning.

Another class of automated systems used to generate production budgets is corporate governance systems. However, strictly speaking, we are talking here about several classes of information systems at once. ERP class systems are used to solve supply and production management problems for businesses. Such systems include well-known products such as SAP R / 3, Oracle E Business Suite, SSA ERP LN, Microsoft Dynamix AX and others. Banks use ABS - automated banking systems. Russian developers use abbreviations such as KIS (Corporate Information System), MIS (Management Information System) and others (informally, such software products are called "ERP-oriented"). Corporate systems are complex (more or less), their main task is to unite the basic services of the enterprise in one circle (customer order - production order - material purchase order - material supply - production of finished products - delivery of finished products to the client). In addition, such systems always have a set of financial and accounting functions. In particular, ERP systems fully meet the planning of financial needs at the operational level.

   In recent years, in practice, specialized budgeting systems have become widespread and are now regarded as a separate category of information systems, which in turn fall into the broader class of business management. The functionality of specialized software allows you to fully overcome the shortcomings of spreadsheets and corporate systems, as this program was originally created for budget tasks and over the years of its development "absorbs" all the necessary functions and features. Possibilities for integration of specialized budget systems should be noted: Finally, for successful operation, the budget system should be able to exchange information with other systems. First of all, we emphasize the need to integrate the budget system with accounting and operational planning systems. ). Such integration is necessary because it is these systems that contain a significant portion of the budget data, as well as the factual information needed for almost all controls.

 

„1C: Enterprise“ Software Systems

 

Given that the capabilities of the "1C: Enterprise" software system meet the current needs of existing business entities in general. Let us highlight the advantages of "1C: ERP Enterprise Management", which define its widespread use among Georgian organizations:  Accounting and control, analysis, planning and forecasting, work process coordination, staff training; Allows you to combine data on a variety of processes into a single information field; Establishes an effective communication system between employees of different levels; Processes and generates large volumes of information; provides the ability to synchronize with "1C Company" other software products. In most of the small business in Georgian reality, accountants and managers work in one system, in the appropriate modules for them.                   

That is why the program "Balance" and other similar programs can not be considered just an accounting program. There are not many such accounting programs in the Georgian market, their functionality is also different. The Balance program is a unified, universal system for trade, manufacturing, construction accounting automation, managerial reporting, and accounting.

Conclusion

 

     Management accounting is thus the information system necessary for the management system to implement business decisions that affect the company's operations in both the short and long term. The use of digital technologies in management accounting brings a number of advantages, including: accumulation of information in one information field, reduction of time and labor costs, systematic presentation of information. The choice of management accounting automation program is individual to each individual. Any program should have the ability to further refine and make significant changes. When choosing the right software, it is equally important to choose a reliable provider that will ensure the smooth running of the company in the future.

 

References:

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https://pmcg-i.com/publications_file/1337611a5be288455.pdf

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