ACCOUNTS DEPARTMENT

OUTLINE

Michael Mwanandimai
Contents
PRICING................................................................................................................................................... 2
STRUCTURE ............................................................................................................................................. 3
ACCOUNTING POLICIES & PROCEDURES ............................................................................................... 5
STAFF....................................................................................................................................................... 8
LEADERSHIP STYLE.................................................................................................................................. 9
PRICING
Three important variables are key in coming up with the optimal pricing strategy and these are

• Perceived customer value

• Competition
• Cost

In determining your pricing strategy, I would set the floor at the higher or our competitors’ price and
our cost-plus margin price and the price ceiling would be the premium we can charge to customers
for the uniqueness of your product, but at a price that does not adversely affect the total
contribution of the company.

COST PLUS PRICING

In determining a cost-plus price, it is essential to come up with a full cost of the product (production
costs plus overheads). If you produce more than one product, it is critical that costs are allocated as
accurate as possible and this involves the use of an Activity Based Costing (ABC) system.

The company usually has a target Return on Assets (ROA) and hence the next step is to find a mark-
up, which when charged on the ABC cost per product, at the current sales mix, will achieve the
target ROA.

COMPETETIVE & CUSTOMER VALUE-BASED PRICING

These two prices can be attained through market research. I would investigate

• Prices competitors are charging

• Whether they have economies of scale that we do not have that would allow them to charge
lower prices
• Estimated market shares of the competitors.
• Any price changes the company has implemented before and how it affected sales (this
allows us to estimate the elasticity of price)

The final price charged must be above the floor (cost based or competitor price) but below customer
value-based price (calculated by past fluctuations in sales when prices were changed)

CEILING
CUSTOMER
VALUE BASED
PRICING

COMPETETIVE COST BASED

PRICING PRICING

FLOOR
STRUCTURE

To explain how he accounts department under my supervision would improve the company
structure I will break down the activities of the company into two main categories

• Primary activities
• Secondary activities

In each of these main categories are sub-categories

I will start by assessing how the accounts department would contribute to the primary activities

PRIMARY ACTIVITIES

INBOUND LOGISTICS

The accounts department will assist in achieving the following objectives

• Minimizing inventory storage costs – Having come up with a standard cost for the products,
I will devise a weekly raw material budget. This is a modelling system that is pull-based, in
that we forecast sales based on information from the marketing department and an analysis
of past trends. Using the standard costing and product information we anticipate the raw
materials that will be required the following week. This avoids buying unnecessary stock and
lowers inventory storage costs. This is a mini version of the Lean manufacturing system.
• Reducing pilferage- Theft in production and manufacturing companies is a serious problem
and hence I would put in an internal control system that tracks inventory movements in real
 time (continuous inventory management system). All inventory movement will have to be
supported by documentation (GRN, INVOICES, PO, GRV). Inventory counts should be done
weekly so that variances are addressed as soon as possible and the store’s manager must be
personally accountable for any variances.

• Making sure raw material does not become obsolete- Over and above inventory budgeting
mentioned earlier, I would enforce a First in First Out policy to manage inventory damage
and obsolescence.

• Ensuring an efficient procurement system -As part of the internal control system, I will
design a process that ensures that raw materials are sourced at the lowest price available
without compromising quality. This involves only buying from registered suppliers,
requesting monthly price lists from suppliers, getting quotations first for major or once off
purchases.

• Timely delivery of raw materials – To make sure that we never run out of inventory, I will
implement the Economic Order Quantity (EOQ) model. I use past trends to anticipate
inventory movements and to determine our upper limit, lower bound and re-order
quantities. Also ensuring proper maintenance of supplier records ensures that payments are
made in time and deliveries come on time. Therefore, I will devise an internal control system
to handle the receiving of goods, document flow, entry into the financial systems and any
balances and checks that must be done to guarantee accuracy.

OPERATIONS

With regards to the production process, the accounts department can help in the following areas

• Identifying Critical Success Factors & Key Performance indicators-. I would implement a
top-down approach in identifying the Critical Success Factors in the production that would
help the company achieve its strategic goals (e.g. if the strategy is cost leadership then cost
is a critical factor and we break down costs & variances into material efficiency, material
price, labour rate and labour efficiency variances).

• Data recording- For the company to be able to assess the production there needs to be a
system of recording the relevant data. I will design an internal control system that outlines
who, how and when this data is recorded and to whom it is to be reported to.

• Variance Analysis -Having identified the Key Performance Indicator and recorded the
relevant data I would carry out daily, weekly, and monthly variance analysis and
investigations.

OUTBOUND LOGISTICS

In respect to outbound logistics, my accounts team would contribute in the following ways
 • Sales projections – Through trend analysis and data mining, a model can be created that can
anticipate sales with relative accuracy. The model would have to be adjusted for any real-
time input from the marketing and sales department. This ensures that buffer stocks of the
right are kept and reduces the likelihood of getting surprise orders which are unplanned for.

• Inventory Control- I will set up a system of monitoring finished goods movements and
detecting any variances as soon as possible. This can be done through a continuous
inventory management system

• Order Fulfilment- By combing the continuous inventory management system and our
accounting system we can enter orders as they come into the accounting system and be able
to tell if all of them can be fulfilled. I will also manage the despatch inventory control
through document creation for every movement (SO, INVOICE, GDN), document flow and
daily stock reconciliations.

MARKETING, SALES & SERVICES

The accounts department can be designed to assist the marketing department in the following areas

• Sales projections- Assisting in sales projections through competitor analysis, economic

forecasting models (regression and life cycle) and sales mix analyses.

• Marketing Budgets- Can assist in coming up with and monitoring marketing budgets. Will
also help in determining, measuring and evaluation of key marketing metrics.

ACCOUNTING POLICIES & PROCEDURES

I will design an internal control systems manual that addresses the following areas
• Revenue Cycle
• Purchases Cycle
• Cash Receipts, expenses, and management
• Inventory Control
• General Journal Entries
• Fixed Assets management
• Payables and Receivables

Below is a flow chart for the revenue cycle. This serves as an example of what the starting point
would be for each category mentioned above. I would identify the procedures, checks and
documents flow for each process.
The table below outlines the major issues to be addressed by our internal control system

Revenue Cycle • Timely recording of sales

• Accurate data entry
• Revenue recognition
• Sales forecasting

Purchases Cycle • Timely recording of purchases

• Accurate data entry
• Raw material forecasting
• Quality checks

Cash • Segregation of duties

• Cash and bank reconciliations
• Cash Management (MILLER ORR MODEL)
• Management of excess cash
 Inventory • Accountability
• Storage costs
• Pilferage
• FIFO
• Quality checks
• Stock counts
• EOQ Model
Payables • Early settlement discounts
• Cost of financing
• Maintaining accurate records
• Supplier lists
Receivables • Cost of working capital
• Credit risk management
• Bad debts
Journal Entries • Document flow
• Responsibility
• International Financial Reporting Standards to be adopted
Fixed Assets • Fixed Asset Register
• Asset schedule
• Depreciation policies
• Impairment policies

ACCOUNTING SOFTWARE

Both QuickBooks and Pastel are very good Enterprise Resource Planning software. I have used both
and I am comfortable using any. Below is a quick comparison of QuickBooks and Pastel

QUICKBOOKS ENTREPRISE PASTEL EVOLUTION

PRO’s
No once off cost. Just yearly subscription A lot of depth
A yearly subscription of $1 200 Many Add on Features
Easy to set up Local support services
Easy to use even for beginners.

CON’s

Lacks the depth of Pastel Evolution Once off cost of $ 2 500 +

Fewer Add on Features A yearly subscription of over $1 600
Can be difficult to use for beginners.
Difficult to set up
 STAFF

ACCOUNTANT

Duties
• Monthly Financial Reports
• Trial balance reconciliation
• Control Accounts Reconciliations
• Analytical Procedures
• Taxes
• Internal Control Design
• Leadership and facilitation
• Financial Analysis
• Risk management
• Working capital management

ASSISTANT ACCOUNTANT

Duties

• Receivables reconciliation
• Payables Reconciliation
• Inventory Reconciliation
• Bank & Cash Reconciliation
• General Journal Entries
• Creditors & Debtors Controlling

Skills & Education

• ACCA/BComm
• 5+ years’ experience Assistant accountant

DATA ENTRY CLERK

CASHIER CREDIT & DEBTORS CONTROLLER
• Sales Invoicing
• Purchases • Sales Receipts • Debtors Management
• Credit notes • Cash Expenses • Creditors Management
• Debit Notes • Bank Deposits • Checks all transactions
• Cashbooks Maintenance
Skills & Education Skills & Education
Skills & Education • Last year ACCA/Full BComm
• Part ACCA/BComm
• • Extrovert
• 2+ years’ experience Diploma in Accounting
• • 4+ years’ experience
• Data Entry Math’s & English
• • Prior experience in debt
• Meticulous 2+ years’ experience
management
LEADERSHIP STYLE

I have a participative management approach and I lead through setting high standards of excellence
and leading by example. I believe in

A Participative Approach – To give my subordinates a sense of ownership to the work and decisions
that are made, I consult on issues that I can and take their advice into consideration when making
decisions.

Direction & Communication (Management by Objectives)- I create and foster a culture of open and
honest communication. This allows an efficient two-way communication system. I also believe that
the critical part of leadership is giving direction to my subordinates. I create goals and explain to
them why those goals are important and how they contribute to the bigger picture (strategic
objectives).

Performance based compensation- I am a heavy supporter of performance-based pay. I conduct

peer and performance reviews and try to reward good performance if that decision is in my control.

Teamwork and collaboration – I believe in fostering healthy and harmonious relationships. Less
friction and conflicts get the work done quickly and efficiently. Therefore, I try to encourage the
building of informal work relationships

Intrinsic Rewards -To make sure my subordinates enjoy their work and see opportunities for growth
,I usually assign once off challenging tasks to top performing staff. This reduces monotony and
increases motivation.