Table of Contents

Introduction........................................................................................................................2

1) Introduction and overview of the current financial position of the chosen

organization - ACL Cables PLC.........................................................................................3

1.1 Introduction to the company.................................................................................3

1.2 Overview of the current financial position............................................................4

LO4 - Compare ways in which organizations could use management accounting to

respond to financial problems............................................................................................6

2) The importance of management accounting systems in identifying financial problems

- P5....................................................................................................................................6

LO3 - Explain the use of planning tools used in management accounting.......................7

3) Evaluate the different planning tools used for budgetary control and solving financial
problems for the organization. (P4)...................................................................................7

3.1 Planning tools used for budgetary control...............................................................7

3.2 Planning tools used for solving financial problems..................................................8

Strategic Planning Tools................................................................................................8

Conclusion.........................................................................................................................9

References.......................................................................................................................10
Introduction
1) Introduction and overview of the current financial
position of the chosen organization - ACL Cables PLC

1.1 Introduction to the company

“ACL Cables PLC is the largest manufacturer of cables in Sri Lanka having pioneered
the industry in 1962. ACL holds 45% share of the local market and produce the widest
range of cables in Sri Lanka. Today, ACL has grown to be a Group of companies
holding 70% share of the cable market in Sri Lanka.

ACL is the most sought – after brand of cables in Sri Lanka, having supplied 80% of the
requirements of Duty Free projects owned by overseas investors and approved by the
Board of Investment, beating foreign supplies of cables. All leading factories, hotels,
commercial buildings and warehouses have used ACL Cables.” (Acl.lk, 2019)

Vision: “To be the preferred brand of electric cables in the region, whilst strengthening
the dominant position in Sri Lanka.” (Acl.lk, 2019)

Mission:

 “To expand our range of products and services in the fields of electrification.
 To be the most competitive in chosen global markets and to achieve continuous
growth.
 To create an environment that will inculcate a feeling of ownership in our people
and their families.
 To create a Company that will be in the forefront of technology and win the
admiration of our customers, suppliers, shareholders and the community.” (Acl.lk,
2019)
 1.2 Overview of the current financial position
Below are some of the financial documents that provide an overview of company’s
financial position:
Income generation activities of the organization for the previous financial year have
started in April 2017. Above are the scanned financial statements of the business for the
period ending 31st March 2018. The company has obtained a GP of Rs.1,064,459,000
for the previous financial year.

LO4 - Compare ways in which organizations could use

management accounting to respond to financial problems.

2) The importance of management accounting systems in

identifying financial problems - P5
“An effective management accounting system reaches into all departments of a
business: finance, IT, marketing, human resources, operations and sales. In addition to
using typical financial data, managerial accounting can also include non-financial
information such as cash on hand, current sales reports, number of sales calls per day,
order backlog, delivery deadline dates, aging status of accounts receivables and
payables, and current inventory levels of raw materials and finished products.”
(Bizfluent.com, 2018) Above explains about a modern management accounting system
which integrates with most of the functions in the organization.

Comparison of how organizations adapting to management accounting systems

to respond to financial problems.

New business conditions have evolved over the past decade where information has
been considered as the most important resource for measuring the financial
performance of the organization identifying the direct financial problems. In the present
many organizations are adapting to these management accounting systems because
they provide accurate and statistical financial information of the company such as;
  Debt to equity
 Accounts payable to inventory the capital structure of the company indicating the
proportion of debt and equity utilized for the financing of assets.
 Percentage of accounts payable outstanding to the inventory level of the
enterprise (Parmenter, 2015).
 Profitability ratios - Gross profit margin, selling cost %, Administrative cost %,
Total operating cost %, Finance cost % and Net profit margin that percentage of
sales which a company has left to pay its operating cost and makes a profit.
 The ability of the enterprise to remain solvent used for the availability of day-to-
day requirements.

ACL cables PLC itself has adapted to these systems in order to monitor their financial
performance and tackle down financial problems. They follow a combination of
management accounting systems which consists of job-costing systems, inventory
management systems and price-optimizing systems.

The job order costing system is used when the various products and categories of
cables produced are sufficiently different from each other and each has a significant
cost. Inventory management systems (IMS) are used to track products, inventory,
orders, etc. Price-optimizing systems are used to monitor demand variations at different
price levels and then combine that data with information on costs and inventory levels to
recommend prices that will improve profits.

ACL Cables PLC mostly uses job costing and the other systems work around it
simultaneously. Their competitors Kelani Cables and Ruhunu Cables are also moving to
these systems to respond to financial problems. When comparing ACL Cables PLC has
adapted to these systems ahead of their competitors and they have achieved a 70%
market share in their industry. In my opinion by adapting to management accounting
systems companies can build effective strategies to tackle down their financial
problems. The development of strategies require effective and timely reporting, full
disclosure of financial positions and are responsibly owned and governed.
LO3 - Explain the use of planning tools used in
management accounting.

3) Evaluate the different planning tools used for

budgetary control and solving financial problems for the
organization. (P4)

3.1 Planning tools used for budgetary control

 

Planning tools Applications SCORO

“SCORO provides management of Sew port with multiple budgets and instead of using
different tools for managing finance, work and clients it behaves as a single solution for
budgetary control. It also combines budgeting with CRM and online project
management which in turn helps in the management of the entire business in one single
solution and access to the entire financial database at one place only.”

Advantages

 Provides a comprehensive solution for work management

 Great integration
 Supports for mobile
 Time saving

Disadvantages

 Takes time to import data

 Complicating to train many users
Costing system Overview

“This is a costing system which is concerned with the recording of cost of the product
based on actual cost of material, labor and overhead incurred on the product which is
allocated on the basis of the actual quantity of the allocation base seen during the
reporting period. This is the simple costing system which does not require any pre-
planning of the standard cost. The cost estimated on the basis of actual costing system
helps the management to prepare the budgets and set targeted standards in order to
achieve the objectives of enterprise which are practical to achieve. It does not take into
account any budgeted amounts or standards rather it makes utilization of actual cost
data.”

Advantages

 Monitor and control the cost elements of the organization

 Provides the overview on future costs for decision making process
 Gives accurate information on inventory valuation

Disadvantages

 Possibility of occurring frequent revisions of updates and system checks

(maintenance)
 Expensive comparing with other controlling methods
 Difficulties in standard setting process
3.2 Planning tools used for solving financial problems
Bench Marking

“Benchmarking is the systematic process of comparing business processes and

performance metrics to industry best practices in terms of quality, time, and cost
dimensions, and making such comparisons the basis to do things better, faster, and
cheaper.” (Smallbusiness.chron.com, 2019)

Advantages

 “Lowering Labor Costs - One advantage of benchmarking may be lower labor

costs. For example, a small manufacturing company may study how a top
competitor uses robots for several basic plant functions. These robots may help
the competitor save a significant amount of money on labor costs. Company
managers may obtain information on these robotics systems through the
competitor's website or online articles.
 Improving Product Quality - Companies may also use benchmarking to improve
product quality. Engineers sometimes purchase leading competitors' products.
They may then take them apart, study them and determine how the competitors'
products outlast or outperform others in the industry. Chemical engineers may
study food or cleaning products in a similar manner.
 Increasing Sales and Profits - A company that uses benchmarking to improve its
functions, operations, products and services may enjoy increases in sales and
profits. Customers are likely to notice these improvements. The benchmarking
company may also promote is improvements through company brochures, its
sales reps, magazine and television ads. These efforts are likely to increase
sales, especially among core customers.” (Smallbusiness.chron.com, 2019)

Disadvantages

 Remains inadequate to measure the overall effectiveness of operations metrics

 Does not consider the circumstances under which the competitors attained
Benchmarking standards
 Danger of complacency and arrogance
Balanced Score Card

The Balanced Scorecard (or balance score card) is a strategic performance

measurement model which is developed by Robert Kaplan and David Norton. Its
objective is to translate an organization’s mission and vision into actual (operational)
actions (strategic planning). (ToolsHero, 2019)

Advantages

 Innovation and process improvement methods are highlighted while paying high
attention to the customers
 No requirement of complex training in implementation
 Provides a single page chart highlighting targets of relevant fields

Disadvantages

 Financial analysis regarding economic values and risk management is omitted

 Possibility of occurring intersectional problems within the model
 Time consumption for proper balance score card

Strategic Planning Tools

PESTLE Analysis

Organizations need to identify external factors within their environment that could have
an impact on their activities. PESTLE Analysis is a tool mostly used in organizations to
identify the macro environmental factors. These factors cannot be controlled, but should
forecast and adapt to the changes of each factor.

A manufacturing organization such as ACL Cables PLC operates within a macro

environment which influences the external environment that impacts business
operations.
PESTLE Acronyms:

 Political
 Economical
 Social
 Technological
 Legal
 Environmental

Political Factors
The political environment can be one of the less predictable elements in the marketing
environment of the organization. Strategic level decision makers need to monitor the
decisions and changes of the political environment because those can profoundly affect
an organization’s marketing. Some of the Political factors are as follows:

 Government Stability
  Foreign Trade regulations
 Tax policies

Discussion of the impact of Political Factors on the organization:

 Provide a legal framework and a stable environment for the organization to work
within. (Rules and regulations for the manufacturing industry)

 The approach of the economic policy conducted by the government is of

particular relevance to the business. (e.g. – tax policies and other incentives
being developed which might affect the market and the organization) Positivity
and negativity of this factor depends on the policies different governments follow.

 Tax policies affect consumer buying power which directly affects the price of the
products.

Economic Factors

Economic environment is primarily about the level of demand in the economy and is the
most visible aspect in the macro environment. These economic factors are of concern to
management accountants because they are likely to influence costs, prices and profits.
Some of the Economic factors are as follows:
 • Inflation rate
• Global shift in economy
• Unemployment rate

Discussion of the impact of Economic Factors on the organization:

 Unemployment rate affects the demand of services offered by the company. The
decrease in the unemployment rate indicates more people receiving a steady
income and they are able to make discretionary spending on products with a high
profit margin which is a positive impact on ACL Cables PLC.
 “Inflation refers to an overall increase in the Consumer Price Index (CPI), which
is a weighted average of prices for different goods. The set of goods that make
up the index depends on which are considered representative of a common
consumption basket.” (FocusEconomics | Economic Forecasts from the World's
Leading Economists, 2019) Inflation rate affect the price of products of the entire
Cable manufacturing sector. Increase of inflation rate is a very negative impact
on ACL Cables PLC.
Social Factors

This element is the most challenging element to evaluate for the management
accountants in the organization. Social and cultural change manifests itself in changing
tastes, purchasing behaviour and priority of customers. Management accountants need
to understand and identify these changing trends. Some of the Social factors are as
follows:

• Changes in life style & trends

• Population demographics
• Global shift in social power

Discussion of the impact of Social Factors on the organization:

 Population demographics determine service preferences or buying behaviours of

local businessmen. “Sri Lanka is growing at a rate of 0.913% annually and
houses people from many different ethnicities and religions, which gives the
country a multi-cultural and multi-ethnic identity. Sri Lanka is the 58th most
populous country in the world.” (Worldpopulationreview.com, 2019). ACL Cables
PLC need to target consumers with similar demographic characteristics in order
to maximize sales and profits. If identified properly this factor can be positive for
the company.
 Due to the global shift in social and economic power, people move to urban
areas. This leads to a rise of buildings and houses which results increase of
sales for cables and similar products.
Technological Factors

This environmental factor is changing rapidly management accountants need to

understand how technological development might affect them. Some of the
technological factors are as follows:

• Cyber security
• Digital revolution on production and consumption
• Social Technologies

Discussion of the impact of Technological Factors on the organization:

 Having taken steps for cyber security reduces the risk of security breaches which
results in preventing financial losses and reputational damage. As a production
company have a risk of being hacked so these steps taken have a positive
impact on ACL Cables PLC
 Social Technologies have dominated the modern service sector because through
these networks (Instagram and LinkedIn) the organization has reached a large
amount of customers directly.
Legal Factors

Changes in the political environment often lead to changes in the legal environment and
in the existing law enforced. The legal environment sets the basic rules for how the
business should operate in society. Some of the Legal factors are as follows:

• Employment Law
• Consumer Law
• Health & safety Law

Discussion of the impact of Legal Factors on the organization:

 Laws on manufacturing sector dictate the advertising and marketing in the

organization may convey when attempting to sway consumers to purchase
services. Having too many restrictions is a negative impact on the organization.
Environmental Factors

This macro factor is concerned of issues as to how the organization interacts with and
affects the natural environment or the ecology. Some of the Environmental factors are
as follows:

 Weather changes
 Energy availability and cost
 Environmental protection legislation

Discussion of the impact of Technological Factors on the organization:

 Energy availability and cost affects the prices of products offered in the company.
ACL Cables PLC needs to be aware of any relevant regulations and take the
necessary steps to avoid environmental legal pitfalls.
SWOT Analysis
SWOT analysis is a tool used to evaluate a company's competitive position by
identifying its strengths, weaknesses, opportunities and threats.

ACL Cables PLC should use this analysis not only to identify but to develop effective
strategies.

Strengths

Strengths are the unique strong points of an organization. There are few strengths ACL
Cables PLC possesses they are:

 Strong brand recognition – Market leader with 75% market share

 ACL Cables PLC has online web portal and intranets
(http://www.acl.lk/company_overview)
Weaknesses

Weaknesses are minus points areas which an organization should improve on. There
are few weaknesses ACL Cables PLC possesses they are:

 Tactical issues in performance in the Market-Place

 High staff turnover

Opportunities

Opportunities are the chances for improving the market by identifying and adapting to
the macro environmental factors.

 Extension of service branches across the country

 Growth of modern trends of entrepreneurship due to urbanization
Threats

Threats are the risks that can affect the organization and its operations. These also
should be identified from the macro environment.

 Economic Downturn
 Intense competition with competitive companies (Kelani cables, Ruhunu cables)
  Government policies and price standards

Conclusion
In conclusion ACL cables PLC has adapted to management accounting systems in
order to monitor their financial performance and tackle down financial problems. ACL
Cables PLC mostly uses job costing and the other systems work around it
simultaneously.
Planning tools are used for budgetary control and resolving financial problems such as;
SCORO, Costing system overview, bench marking and balanced score card. Different
strategic planning tools as PESTLE analysis and SWOT analysis are used to identify
external and internal factors within their environment that could have an impact on their
activities.

References
Acl.lk. (2019). ACL Cables PLC - The Largest Manufacturer of Cables in Sri Lanka.
[online] Available at: http://www.acl.lk/company_overview [Accessed 4 Jun. 2019].
Smallbusiness.chron.com. (2019). The Advantages of Benchmarking for an
Organization. [online] Available at: https://smallbusiness.chron.com/advantages-
benchmarking-organization-30952.html [Accessed 6 Jun. 2019].

ToolsHero. (2019). Balanced Scorecard model template by Kaplan and Norton |

ToolsHero. [online] Available at: https://www.toolshero.com/strategy/balanced-
scorecard/ [Accessed 6 Jun. 2019].

Slideshare.net. (2019). Management accounting. [online] Available at:

https://www.slideshare.net/parkeressaysupport/management-accounting-79410974
[Accessed 6 Jun. 2019].