Improving accounting information system of universal Vietnam steel building company limited

From that, I evaluate to find out the potential problem is Poor in managing accounting information which influencing significant to company’s accounting process; Secondly, informing theo

-

NGUYEN THI NHAM

IMPROVING ACCOUNTING INFORMATION SYSTEM OF

UNIVERSAL VIETNAM STEEL BUILDING

-

NGUYEN THI NHAM

IMPROVING ACCOUNTING INFORMATION SYSTEM OF

UNIVERSAL VIETNAM STEEL BUILDING

COMPANY LIMITED

MASTER OF BUSINESS ADMINISTRATION

SUPERVISOR: PROF PHAM PHU QUOC

Ho Chi Minh City – Year 2017

FOR DEGREE OF MASTER of BUSINESS ADMINISTRATION

The thesis proposal title: IMPROVING ACCOUNTING INFORMATION SYSTEM OF UNIVERSAL VIETNAM STEEL BUILDINGS COMPANY LIMITED

Student Name: Nguyen Thi Nham

Supervisor: Dr Pham Phu Quoc

Meet requirement for submitting

Not meet requirement for submitting

2 Content of in-depth interviews

3 Verify the potential problem

PART III – CAUSE VALIDATION

PART IV – SOLUTION AND ACTION PLAN

EXECUTIVE SUMMARY

The purpose of this thesis is to assist Universal Vietnam Steel Building Company Limited in identifying and resolving potential problem of accounting department The initial symptoms of the company’s accounting department come from the record of yearly meeting of Board of Director with accounting department, this documents mentioned following symptoms: (1) Negative cash fund in accounting reports; (2) Duplicate payment in Accounts Payable; (3) Wrong liabilities in liabilities report; (4) Late in payment for supplier; (5) Forgot to pay insurance 4 months for insurance office and (6) Tax penalty From the initial symptoms, I apply the process of Problem identification – Solution decision – Organization of action (P-S-O) to identify problems, find solutions and contribute action plan to improve above situation Fistly, I identify current problems by using necessary accounting theories as a basic to conduct in-depth interview with 5 peoples who are working in Vienam head office The interview found out two problems in accounting department, there are (1) Poor in managing accounting information and (2) Poor in accounting internal control From that, I evaluate to find out the potential problem is Poor in managing accounting information which influencing significant to company’s accounting process; Secondly, informing theories to take into account the causes of potential problem, include: (1) lack of clearly accounting procedure; (2) overlapping in accountant position; (3) poor in the leadership of BOD and (4) poor in accountant’s competences From these causes, by evaluating current situation in the company, I found out the potential cause is Lack of clearly accounting procedure Thirdly, I propose possible alternatives and select the most appropriate alternative for solving the problem of the company; Lastly, I plan the effective actions for implementing the selected alternative - organize the procedure of accounting information system

PART I – INTRODUCTION

1 Company background

Universal Vietnam Steel Buildings Co., Ltd (US Buildings) is a domestic company which manufactures in pre – steel building business in Asia Pacific market It was established on August 2016 with the register capital is VND 5,000,000,000, the capital had increased into VND 10,000,000,000 on January 2017

Although US Buildings is not the first pre-steel building company in the Vietnamese market, US Buildings always strive to develop sustainably and together with Vietnam

"Towards the future" US Buildings has been and will continue to provide high quality products and perfect after-sales service to bring the highest satisfaction to customers as well as contribute positively to the development of the pre-steel building industry and Vietnam country

Since its founding, US Buildings has grown steadily and continuously, not only in terms

of production scale but also sales At present, US Buildings holds the positive position

in the pre-steel building market in Vietnam US Buildings 's cumulative sales are over 2.000.000 tons, and the products have a large market share From 5 employees in the first day of establishment, up to now the number of employees of the company has reached around 30 peoples working in three countries, there are Vietnam, Thailand and Cambodia

Until December 31th, 2017, the company has 9 completed projects and 5 projects are in process The total income from beginning until now is about VND 34,000,000,000 and the profit gained is VND 8,000,000,000

In addition to the business activities, US Buildings always strives to contribute positively into the National budget by completing well the tax payment as well as contributing to promoting the sustainable development of Vietnam’s community and society with many long-term, practical and meaningful activities

Throughout the history of establishment and development, with the continuous efforts

of all US Buildings employees, suppliers and partners, US Buildings has achieved great achievements and continuously growing, fulfilling its mission to customers, contributing significantly to the pre-steel building industry and Vietnam society

The mission of the company is to be one of the best organizations in Pre-Engineered Steel Building industry, focus on both product quality and customer’s benefit The priority mission of the company is to provide the most excellent solution for Pre-Engineered Steel Building products With the slogan “Durable Like Steel”, the company intend to offer customers the most safety and durable steel structure

Beside the pre-buildings industry, the company intends to broaden their business in supplying solution for civil construction, interior design and open a plant to manufacture steel structure in Vietnam market

Internal structure

The internal structure of the company is a functional structure, is showed in the graphic

as follow:

Graphic 1: Internal structure in Universal Vietnam Steel Buildings Company

The internal structure of US Buildings is fairly simple, because most management functions focus on a business manager This structure is suitable with the company in early stage of development because it is compact The power is focused on leader, therefore, the decisions can be made and implemented immediately Currently, US Buildings is in process of recruiting many other employees and recontribute internal structure with the key are sharing responsibility into the other persons for the long-term development

Director

Sale Department DepartmentEngineer DepartmentPurchasing Marketing

Department

Finance Accounting Department Vice Director

-2 Company symptoms

For one year of operation, US Buildings faced with many difficult problems coming from the external environment such as finding market segment, attracting customers and developing their products Besides, the internal factors also influenced significantly to the operation of the company, there are recruiting suitable employees, making rational decisions in business and managing departments To evaluate the result of company activities through one year of operation, Board of Director organized a yearly meeting with all departments focusing on evaluating business activity, employee’s competence and performance of each department Through the record of meeting, I summarized the important recommends of accounting department as bellow:

In previous year, accounting department take a significant role into the development of

US Buildings, proven by the positive performances in resolving timely accounting tasks, supporting passionately the other departments and keeping in touch with potential customers, suppliers and government authorities However, the operation of accounting department is unable to avoid mistakes affected negatively to the activity of company, the meeting evaluated and identified the negative symptoms of accounting department need to improve which were summarized as following:

(1) Negative cash balance was showed in accounting reports

Obviously, the balance of cash account can’t in a negative number on accounting report, however, the financial statement of year 2017 showed a negative cash balance and the cash account in the general ledger has a credit balance The credit or negative balance

in the general ledger cash account is caused by (1) recording inexactly cash transactions

in the general ledger cash account; (2) the amount received is not recorded while the payment is recorded; (3) the accountants recorded transaction in the accounting books without coinciding with the actual incurred amount due to missing data or loss of receipts and expenses; (4) missing the comparison and controlling in cash balance in period The bellow table shows the different between current cash balance in balance sheet and actual cash balance in internal cash book:

Cash on hand - 399.380.976 115.452.000 514.832.976 Cash in bank 2.725.438.406 2.540.435.020 - 185.003.386

Table 1 – Different of cash balance in balance sheet and cash book/bank record (VND)

Above table showed the weakness of accounting department in recording and following accounting data Both items cash on hand and cash in bank recorded inexactly in general ledger leads to data inaccuracies in balance sheet

(2) Double payment for one invoice of supplier

In year 2017, the accounting department occurred one case of double payment In details, on July 10th, 2017, the company paid for Tan Co Joint Stock Company with amount VND23,000,000 for Invoice No.0000181 issued on July 3th, 2017 However, on November 23th, 2017, Tan Co JSC continued to request of payment for invoice above, accounting department paid again and leads to double pay for invoice No.0000181 of Tan Co JSC Some days after secondly paid date, US Buildings accountant checked liabilities and detected that the company paid twice for Tan Co JSC This situation is caused by (1) unchecking of accountant when paying for supplier of payment accountant; (2) poor in control payment information of accounting department From above case, we can see that US Buildings is ineffective in managing liabilities results in loss of company fund Currently, accounting department just focus on payment liabilities based on requires of other departments and manage liabilities sporadically and disjointed, therefore, the balance of liabilities is inexactly

(3) Wrong liabilities in liabilities report

At December 31th,2017, some suppliers include Phan Long Ltd., Vina-Japan Ltd., Hong Phuc Ltd., Tan Co Ltd., Thep Ba Vina Ltd., sent the the comparison of liabilities to US Buildings and required to provide liabilities balance However, the current number of liabilities balance of each supplier in company reports is different with the number

which was given by suppliers The different of supplier liabilities was showed as following:

Suppliers Supplier’s data US Buildings’s data Different (+/-)

Phan Long Ltd 46,845,000 23,040,000

-.23.805.000 Vina- Japan Ltd 1,350,744,803 1.252.753.487 -

.97.991.316 Hong Phuc Ltd 26,400,000 0 -

.26.400.000 Tan Co Ltd 57,420,000 78,463,473 21.043.473 Thep Ba Vina Ltd 88,532,292 22,528,594 -

Table 2 – Different of liabilities in US Buidings’s data and supplier data (VND)

From above table, we can see that only 5 suppliers accounted for 65.70% total liability

of the company, and these supplier’s liabilities were unfollowed leads to inexactly balance of liabilities in US Buildings’s data The different between company data and supplier data for 5 above suppliers is VND193,156,541, in which the company data recorded liabilities for those suppliers is VND1,376,785,554, however, following the supplier’s data, this item currently is VND1,569,942,095 This situation affected negatively to the operation of the company because it related to payment If the liabilities balance is inexactly, the payment for supplier will be lower/higher than the actual payment If paying higher, it results in loss of company money, in which if paying lower,

it leads to disputing with suppliers To improve this situation accounting department

should recheck all the contract value with suppliers, check the data from bank record and actual cash book to verify the actual liabilities

(4) Late in payment for supplier

Many cases occurred in Year 2017 with paying late, paying late created negative repercussions to the relationship between the company and suppliers The bellow data showed the age of Phan Long Ltd and penalty from paying late at December 31th, 2017 which calculated from suppliers:

Invoice No Amount of

liabilities

Day of paying late

Penalty interest

Amount of late penalty

Table 3 – The penalty of paying late for Phan Long Ltd (VND)

The paying late for Phan Long company leads to loss VND258,336 of penalty and affect

to the reputation of the company Besides, the company business in steel industry, the suppliers of this type of business are limited, therefore, paying late influence negatively

to the evaluation from the supplier about the company, therefore, the company will be difficult to use their services again Besides, it could impact negatively on purchasing staffs who working directly with suppliers

(5) Forgot to pay insurance 4 months for insurance office

Recently, the company received from insurance office the notification of paying late insurance of employees 4 months: September, October, November and December Detail of the notification as following:

Debt notification of Phu Nhuan insurance office

Pursuant to the results of contributing social insurance, health insurance, unemployment insurance, unemployment insurance (C12-TS sample) in December 2017, to the present time the insurance debt amount of US Buildings as bellow:

Total amount of debt: VND134,069,723

Paying late penalty: VND530,648

Until December 31th,2017 the company paid: VND0

Total insurance debt the company need to pay: VND134,600,371

Paying late insurance created the penalty of VND530,648 and affect negatively to the reputation of the company with insurance office as well as other government authorities

(6) Tax penalty

Tax penalty in Year 2017 came from declaring and paying late personal income tax In details, the company declared PIT of Year 2016, Quarter 1, Quarter 2 of Year 2017 late over 100 days, it created the penalty amount as bellow:

(1) Penalty for late payment VND212,105

(2) Administrative violations penalty for

late payment

VND3,920,000

Total penalty need to pay VND 4,132,105

Table 4 – Tax penalty at July 31th, 2017 of US Buildings

Paying late make loss VND4,132,105 for the company This situation affect negatively

to company profile in tax office and influent to the reputation of company under the suppliers and customers In real, some domestic projects need the information of accounting report, if the investors see any penalty in accounting report, the opportunity for co-operation with them will be narrowed

From the above symptoms, I realized that the accounting department of the company has the problem in managing the accounting information system Obviously, if the company were good in managing accounting information, the financial information of the company must be accurately However, the above evidences showed us that the current financial information is inaccurate and useless for manager in making decision Therefore, in next parts, I will use theories and research to find out actual problems related to accounting system to improve above negatives

PART II – PROBLEM IDENTIFICATION

From the symptoms which mentioned in previous items, I realized that these symptoms are just the tip of the iceberg seen from the surface In order to having an overview of accounting department’s problem, I conduct the in-depth interviews with 5 members belong to US Buildings include Director, Chief accountant, one sale, one engineer, one purchaser of the company These interviews help me look up the other symptoms as well

as verify the possible problems in accounting department of the company

An accounting information system is one that accumulates, stores, and processes financial and accounting information The system generates reports that are used to make decisions regarding how an organization is to be run These reports are also used

by outsiders to evaluate lending and investment opportunities with the firm The key components of the system are:

 The policies and procedures governing how information is collected

 The internal controls used to ensure that information is recorded correctly

 The training employed to ensure that users operate the system correctly

 The software and integrated database used to store and process information

 The hardware on which the software and database is stored [2]

The accounting information system is a collection of resources, such as people and equipment, which are designed to alter financial data and other data into information to

be communicated to various decision makers [3]

The accounting information system is a set of interrelated activities, documents, and technologies designed to collect data, process, and report information to a diverse group

of internal and external decision makers within the organization [4]

Accounting information system is a system to collect, record, store, and process the data to generate information for decision makers [5]

There are six components of Accounting Information Systems [6] namely: (1) The people who use the system, (2) The procedures and instructions use to collect, process, and store data, (3) The data about the organization and its business activities, (4) The software used to process the data, (5) The information technology infrastructure, including the computers, peripheral devices, and network communication devices used

in the AIS; and (6) The internal controls and security measures that safeguard AIS data O'brien & Marakas [7] states that the components are interrelated, all items working together (interrelated) to achieve a common goal by accepting inputs and produce outputs through a transformation process that organized

Dimension implementation of accounting information systems in this research are: transaction processing system [8] and the integration of the component system [9]

From the theories of accounting information system, I summarize the process of accounting system in the following table:

Graphic 2: The process of accounting information system

The process of accounting information system mentioned five important factors: people, procedure, technology, software and internal control In which:

People: People include the peoples who are creating, processing and using accounting

system and the information from accounting department;

Procedure: The procedure is instructions of the company related to accounting works

include collecting document, processing accounting data and reporting for manager Accounting procedures dictate how companies record and report their financial information and provide companies with basic understanding of how to record information for internal and external business use

Output

Accounting information

Information Technology: Information Technology (IT) deals with the application of

computers and telecommunications equipment to store, retrieve, transmit and manipulate data This may also be described as anything that renders data, information,

or perceived knowledge in any visual format through any multimedia distribution mechanism

Software: Accounting software describes a type of application software that records

and processes accounting transactions within functional modules such as accounts payable, accounts receivable, general ledger, payroll, and trial balance It functions as

an accounting information system Accounting software can help to increase the

accuracy of your records by reducing or eliminating human errors in calculation

Internal control: Internal controls in accounting are procedures that are put in place

within an organization to ensure business is carried out in an orderly, effective and accurate manner Internal controls play a critical role not only in public companies but also in private companies, because internal controls establish safeguards to an organization’s assets and minimize the opportunities of committing fraud and allowing

errors to go undetected in an organization’s daily operations

2 Content of in-depth interviews

Based on the theories of accounting information system which was showed in previous items, I conducted the in-depth interviews about accounting system in Universal

Vietnam Steel Building Co., Ltd, the contents of survey was presented as below:

2.1 List of interviewees

4 Nguyen Xuan Khanh 31 Engineer

Table 5 – List of members joined in-depth interview

2.2 Interview guide

Interview guide was built based on theorical basis about accounting system, which

showed in Article 1, Part II, includes 10 questions related to 4 basic factors of

accounting department : People, Procedure, Information Technology, Software, Internal Control The major content of interview questions are showed as follow (See all

interview guides in Appendix 1):

People - Do you feel satisfy or unsatisfied with the competence of

company’s accountant? Why? Can you list the strengths and weakness of current accountant?

- Do you think the methods of management in accounting department of the manager are suitable or not with the company? Can you list the strengths and weakness of current accounting manager?

Procedure - What are your recommend of current accounting procedures in

your company?

Software - Does your company use software support for accounting process?

If not, what tools your company used for accounting process?

Verify problem

questions

- Can you give me some unsatisfactions which you face when you work in (/with) accounting department?

- Which of potential problem in accounting department do you think affecting greatly to the business?

- Which causes of above potential problem do you think?

- Can you give some solutions in order to improve the current accounting system?

2.3 Result of interviews

The content of interviews was transferred into transcripts (See in Appendix 2) to

simplize the synthesis of interviews From that, I summarized the significant points

which affect to current operation of accounting department (See in Appendix 3)

From the information which collected from interviews, I found out some problems which exist in the accountant system of the company:

(1) Poor in managing accounting information

Most of the important accounting information currently is inexactly, there are negative cash fund, wrong liabilities and double payment for supplier Accounting information take a significant role in making decision of Board of Director, in the current case, the Director can’t use accounting data for making decision, it affect directly to the effective

of business Accounting information systems (AIS) play a crucial role in the strategic position of an organization [10] AIS is a system of collection, storage, and processing

of financial and accounting data to be used by decision makers [11] Management information systems (MIS) are responsible for collecting and disseminating information MIS and its most important component, i.e AIS, are systematic methods for timely collection, categorization, and analysis of information for managers and decision makers [12] Effective use of reliable information systems can help organizations reach an optimal state, as it allows for understanding competitors and provides other competitive advantages [13]

(2) Poor in accounting internal control

At the present, the accounting department is poor in accounting internal control It is evident that the company can’t control the balance of cash on hand, advance amount,

account receivables as well as account payables In additional, the company did not reconcile the balance of cash in bank between internal record and bank statement Therefore, the current information in financial statements are incorrect and does not reflect accurately the financial situation of the company, lead to the manager can’t make decision based on current financial information

When it comes to controlling activities, Board of Director did not have any checking in period, so that, they can’t catch the financial situation of the company in time to make decision This lead to loose in management and lost control of financial information, if this situation occurs in long time, the company would be difficult to control financial information as well as would spend much time and resources to recover the accounting information system

About storage documents, the company save documents based on the habit, did not have any marking and linking between documents and accounting records The storage document situation is messy and cleanliness In other words, the company always saves this type of document into other file which saves the other ones Therefore, it is difficult

to look for documents and also easy to loss vouchers and documents

3 Verify the potential problem

Through the result of in-depth interview and supported theories, we can see the current situation of accounting information system depending on factors: the people, the procedures, the software and the internal controls and security From that, we found out two possible problem exists in the company: (1) Poor in managing accounting information and (2) Poor in accounting internal control Compare with the current situation of the company, two mentioned problem effect equally to the current situation

in accounting department of the company Poor in managing accounting information make the accounting data inaccurate and inadequacy affect negatively to decision making, budgeting, planning and supplier communication In which Poor in accounting internal control also affect directly to the effective of accounting system, the securities and the accuracy of accounting information However, in the scope of this thesis, I

choose problem (1) Poor in managing accounting information as a potential problem

because it affect directly to accounting department and close with current symptoms of accounting department of US Buildings Therefore, in the scope of this thesis I will focus

on chosen potential problem to find out the possible causes and find out the reasonable solutions to innovate and improve the accounting information system

PART III - CAUSES VALIDATION

As mentioned in previous part, the potential problem of accounting department is Poor

in managing accounting information Therefore, this part focus on finding out the possible causes which contributed this potential problem

Aggregating from interviews in Part II, I summarize and give out the possible causes related to problem as following:

(1) Lack of clearly accounting procedure

The company does not have any procedures and instructions in accounting department, therefore, all accounting works were done basing on the experiences of accountant Actually, the company did not have any judgment about the competence of accountant,

so that it is difficult to assess the reasonableness of accounting works done

(2) Overlapping in accountant position

In accounting department, the outstanding of employees is shown as following graphic:

Graphic 3: The structure of accounting department and responsibilities of each position

Currently, the accounting department has two persons There are chief accountant and general accountant Chief accountant is also Vice Director of the company, who advices

to Director in making decision When it comes to general accountant, the company has merely one general accountant whom does all works related to accounting, from receiving documents from other department to recording, reporting and storage documents Because general accountant does too much works, therefore, result in overlapping and handling works ineffectively

(3) Poor in the leadership of BOD

The leadership of Board of Director affect significant to the performance of accounting department McShane and Glino [14] define leadership as the process of influencing, motivating and enabling others to contribute toward the effectiveness and success of organizations of which they are members Leaders apply various forms of influence to

Chief accountant

Checking documents

directly from general

accountant before giving

for Director; Directly

ensure that members have the motivation and clarity of roles to achieve certain goals Leaders also arrange the work environment, such as allocating resources and altering patterns of communication, so employees can achieve organizational goals more easily Leadership is the ability to inspire confidence and to motivate individuals in achieving organizational goals Leaders influence people to do things

through the use of power and authority An effective leader makes a positive impact on the organization in terms of productivity and morale [15] Yukl [16] defines leadership

is the process of influencing others to understand and agree about what needs to be done and how to do it, and the process of facilitating individual and collective efforts to accomplish shared objectives The definition includes efforts not only to influence and facilitate the current work of the group or organization, but also to ensure that it is prepared to meet future challenges Leader effectiveness is occasionally measured in terms of the leader’s contribution to the quality of group processes, as perceived by followers or by outside observers According to House et al [17] leadership is the ability

of an individual to influence, motivate, and make other people are able to contribute for the sake of effectiveness and success of the organization Schermerhorn et al [18] define leadership as the process of influencing others to understand and agree on what needs

to be done and how to do it, and is the process of facilitating individual and collective efforts to achieve common goals

According Hellriegel and Slocum [19], leadership is the process of developing ideas and vision, execute the ideas and vision along with members of other organizations and to make difficult decisions about human and other resources There are four types of dimensions into leadership styles are as follows: (1) the directive leader lets subordinates know what is expected of them, schedules work to be done, and gives specific guidance

on how to accomplish tasks; (2) the supportive leader is friendly and shows concern for the needs of subordinates; (3) the participative leader consults with subordinates and uses their suggestions before making a decision; and (4) the achievement oriented leader sets challenging goals and expects subordinates to perform at their highest level [20]

(4) Poor in accountant’s competences

David McClelland [21] as a psychologist in the field of competence, defined competency is a personal characteristics, motive, behavior or knowledge which proven

to boost excellent job While Spencer and Spencer [22] defined competency as A

competency is an underlying characteristic of an individual that is causally related to criterion-referenced effective and/ or superior performance in a job or situation Underlying characteristic means the competency is a fairly deep and enduring part of the person's personality and can Predict behavior in a wide variety of situational job task Causally related means that a competency causes or Predicts behavior and performance Criterion- referenced means that the competency actually predicts who does something well or poorly, as measured on specific criterion or standard

Das et.al [23] stated that Competency is one of the most essential concepts for business

to Achieve Success in any of the day to day job responsibilities performance from task management to recruiting, from training and development

In a definition discussed above we conclude that there are two types of competence: (a) individual competencies (knowledge, skills and abilities of the individual); and the organization competence (the collective character at the organizational level) Ennis [24] defined the competency as the capability of applying or using knowledge, skills, abilities, behaviors, and personal characteristics to successfully perform critical work tasks, specific functions, or, operate in a given role or position From the definition above it can be concluded that competence is a character or motive both individual and organizations to achieve superior job performance Therefore, the competence of accountants is competencies possessed by accountants in this case relates to the processing of financial reporting as well as accounting information

 VERIFY POTENTIAL CAUSE

Based on above possible causes, I designed a small survey to define the potential causes Following are the outstanding of survey which I conducted

- Objectives of survey: Finding out the potential causes which resulted in the problem

“poor in managing accounting information” of the company

- Method of survey:

Method of data collection: I used questionnaire to survey participants

Method of data analysis: I created the question under the interval scale, therefore, to simplify the analysis, I collected the survey results of 12 participants by manual method

in an Excel file Then, we calculated the mean, standard deviation and Coefficient of

Variation (CV) of each factors based on the formulas which showed in Appendix 4

The mean and the standard deviation are the two important indexes in statistics and analysis The mean shows the average value of a set of numbers, in which the standard deviation and Coefficient of Variation are a measure of how spread out numbers are

- Scope of survey: all staffs of company who are working in Vietnam office, include 12 participants

- Survey limitations:

As in every study, this dissertation has the following limitations:

• The size of the sample was small;

• Limited by skilled interviewers, as well as errors;

• Limited by knowledge of interviewees about research topic;

• Some participants completed the questionnaire without carefully reading, affect

to the result of research

- Content of survey: I designed the questionnaire whose contents are showed as bellow: Can you evaluate the influence level of possible causes to the problem in accounting department? (From 1 to 5 correspond to the increase in influence level)

A Lack of clearly accounting procedure

B Overlapping task in accounting position

C Poor in the leadership of BOD

D Poor in accountant’s competences

- Result of survey

Based on the survey result, we collected the answer of attendees in a manual way, we

have the answer of 12 attendees as in Appendix 5

From the table, I calculated the mean and standard deviation of each possible cause A,

B, C and D The table showed us that the highest mean values 4.25 belonging to the

cause A Lack of clearly accounting procedure, this number presented that the

participants have the high agreement in the cause A In which, the peak of standard deviation is 0.74 belonging to the cause B Overlapping task in accountant position, which showed that the wide different between the answers of each participant

From the above figure, The cause - Lack of clearly accounting procedure has the highest mean and has less fluctuation in standard deviation, it means that most of company members think that the major causes results in current potential problem in accounting department of the company come from Lack of clearly accounting procedure Therefore, there is no doubt that among 4 possible causes, the potential cause of accounting

department is Lack of clearly accounting procedure The shortage of clearly

accounting procedure accounted for a wide range of influence proportion into current circumstance in organization

Through the process of finding out the potential causes of potential problem, I summarized the overall of symptom, problems as well as causes in the final cause – effect map as following:

- Inaccurate financial information such as balance of cash on hand,

in bank; balance of receivables, payables and advance;

Inaccurate financial statements

-> Manager can not use for making decision

- Save documents based on habit, without linking with reports ->

Easy to loss documents

Graphic 4: Final cause and effect map in accounting department of Universal Vietnam Steel Building Company Limited

Poor in the leadership of BOD

Poor in accountant’s competences

Late payment for

suppliers Wrong liabilities

Poor in accounting internal control

Overlapping in accountant position

Poor in managing accounting information

Lack of clearly accounting procedure

Potential problem Potential cause

Negative cash fund

Double payment

Tax penalty

Missing in recording transaction

PART III – SOLUTION AND ACTION PLAN

1 Solution

Among possible causes (1) Lack of clearly accounting procedure; (2) Overlapping task

in accounting position; (3) Poor in the leadership of BOD; (4) Poor in accountant’s

competences, the previous part found out the potential problem, there are Lack of

clearly accounting procedure To resolve most effective the current problem in

accounting department of the company, the company should care all possible causes to find out the suitable alternatives for the company However, in the scope of this thesis,

to solve company problem, I find out the solutions based on the potential causes – Lack

of clearly accounting procedure because this causes have a great effect to potential problem Therefore, resolving these causes means that resolving the large proportion of company problem

Use the reference of suitable theories and actual experience I summarized the suitable solutions which help to resolve potential causes as following:

(1) The company must organize the accounting structure with the interface

between financial accounting and management accounting

In simple term, the company should divide the accounting department into two parts: (1) financial accounting and (2) management accounting This division should be implemented in order to separating clearly the responsibility of each parts, so that each part will focus on their tasks to get highest effective in work However, two parts should

be combined together to avoid overlapping and delaying in processing and supplying of information for other parties

(2) The company should establish the system of rotation accounting voucher

between each department to serve the process of management accounting as well

as financial accounting

First of all, it is necessary to design the unified forms of voucher which are specialized for each period of accounting process In each form, the company should give some compulsory items such as prepared by, reviewed by, confirmed by In additional, the company should mark vouchers in order and link with the periodic reports to avoid loss

of vouchers For each process of rotation accounting voucher, the company should issue the procedures and instructions in order to unifying the using of these accounting vouchers

(3) The company should build the system of accounting account towards

providing management information In other words, the account of management

accounting should be formed to track each entity following the requirement of manager

In Vietnam, The Ministry of Finance issued the basic system of accounting account, based on it, the company should detail the available accounting accounts in the direction

of management requirements For example, the company should detail the administration expenses into two sub-accounts in order to able to track fixed expenses and variable expenses which are suitable with the requirements of managers If this method was conducted, the managing of accounting information would be improved and the company would optimize in using the accounting information

(4) The company should design the reports towards providing management

information All types of report, include detail reports, general ledgers, balance sheet,

income statement, ect of the system of financial accounting are meaningful for use in management accounting The form of management report system is not mandatory according to given forms which issued by Government, based on the management purpose of executives, the company will establish the suitable forms of report server for monitoring and providing information to managers

(5) The company should categorize the expenses according to behavior of

them It means, besides the detailed division of accounting objects, the company should

classify the expenses into variable expenses, fixed expenses and mixed expenses For mixed expenses, the company must to follow and divide into small parts for each object which are responsible for expenses In addition, depending on the purpose and requirement of each decision-making of manager, the expenses must be classified as

controllable expenses and uncontrollable expenses, opportunity expenses and sinking expenses

(6) The company should organize the reporting system which is used for

management accounting also The system of management report should be designed

in a flexible, non – uniform and compliant manner similar with financial reports However, these reports are still within the internal control From the characteristics of business and the requirements of manager, the following types of reports are required: (1) The demand of information and reporting for the planning function of manager; (2) The demand of information and reporting for the checking function of manager; (3) The needs of information and reporting server for the decision – making function of manager At the same time, the company should organize the application of information technology and accounting software so that it cans quickly analysis, process information, report in time and ensure the usefulness of accounting information

- Accounting department structure: divide

into two parts: financial accounting and

management accounting

- Scope of work

- Accounting position and responsibility

for each position

- Job requirement for each position

Detail processes are contributed for special process such as:

+ Payment process + Advance process + Calculate payroll any pay salary For each process, it should have following content:

+ The summarize graph of process;

- Types of vouchers, reports which are

compulsory in accounting department

- Who are in charge of checking the

documents and reports which are

prepared by lower position?

+ Description of each period in process; + Form of required documents

+ Who are responsible for each period of process

Step 2: Design the form of required documents

The basic form of documents is available in the circular of accounting regime (Circular

200 for large company or Circular 133 for small company) which issued by The Ministry

of Finance However, the company should not use the forms similar with these given forms, depending on the requirements of manager, the company should redesign the new forms of vouchers or documents which are most suitable for the company The forms of document should follow to the detail processes which were contributed in Step 1 There are some necessary forms need use in accounting department for each detail process:

pay salary

- Payment voucher

- Receipt

- Request of payment Request of advance - Time sheet

Advance clearance - Payroll

For each form, the designer should add some items towards the requirements of managing There are:

1 No of voucher /document

2 Prepared by/ position/ date

3 Reviewed by/ position/date

4 Confirmed by/position/date