1. Technical Accounting Skills
Having acquired professional skills in this area, I could employ technical skills that include knowing how to classify and record transactions, and how accounting entries will affect the company's financial statements. These are necessities for effective auditing that could see no wastage of the company funds. Even more important than general knowledge of technical accounting is the ability to be able to conduct accounting research and find solutions to accounting issues.
2. Attention to Detail
Accounting transactions can be and are always complex. Paying ultimate attention to accounting details is necessary for the organization to relevant to maintain financial soundness of this company. At personal level of understanding, I know I have the skills relevant to complement keenness whenever derails surface.
3. Communication of Financial Information
Accounting and finance requires a unique way of being channeled. While generally regarded as a subject for those who are good at numbers, in reality, communicating accounting information verbally and in writing is just as important as, if not more important than, the recording of numeric transactions. Skill in writing and communicating financial information is necessary for small-business owners for multiple reasons. External users of the financial statements, such as bank lenders, creditors, or potential investors, will expect that the owner can explain how the financial statements reflect the economic reality of the company. Further, small-business managers may wish to use financial information when coaching and training employees, especially sales staff and company management.
4. Evaluation of Financial Information
A small-business owner who wishes to take advantage of the benefits of managerial accounting will need to understand how to evaluate financial information collected on his own company. Managerial accounting is used to evaluate data for making internal business decisions. A small-business owner who is able to evaluate this information effectively can make more data-driven decisions. If a small-business owner is not able to analyze this data appropriately, he may make decisions that are not in the best interest of the company.
STRATEGIES TO INCREASE REVENUE INCLUDING INCORPORATION OF BUDGETING RATIO
Some of the strategies that I suppose could be relevant and necessary towards the success of the company covers both the external and internal factors. They incorporate activities that indulges both the sales aspect of the operations, manufacturing processes, management aspect as well distribution structures. I propose the strategies be as fit and appropriate for future organization’s success.
1. Review of the Pricing Strategies
Durango manufacturing company must develop better pricing policies that will ensure that the Payback Periods (PBP) for capital investments is at a short duration. The company’s product is price sensitive, hence paying special attention to the pricing strategies is very necessary. The company needs to establish what its competitors are offering in terms of pricing and shift along the favorable price variance to achieve the strategy. The price variance shouldn’t however compromise on the quality. The price variance should also consider the existing organizational goals and objectives.
2. Expansion of distribution channels
Shifting beyond the current distribution structure could pose a positive influence on the organizations revenue. Location variance as far as distribution is concerned will significantly boost the company’s sales and revenues without requiring any changes to your marketing or pricing. Feasibility study is relevant before expanding the existing distribution channels. I can propose the platforms below to help create an awareness as a promotion strategy for the new distribution channels. Online selling, direct mail, wholesalers, retailers, distributors and outside sales representatives whose main role will be to project how each method can affect your sales volumes, profit margins and total profits. Accounting Rate of Returns also known as Average Rate of Returns (ARR) as a budgeting ratio that doesn’t take into account time value for money but returns generated from the proposed capital investment is necessary for this strategy due to its consideration for end outcome financially.
3. Diversification of offering
The company should diversify its production to suit the current market demands. Revenue objectives are majorly dependent on how flexible the production process is. I could as myself Durango Company is flexible enough to change with the changing demands and quality requirements. Injecting new products to a saturated market could give the company sales a new dimension hence. This could translate to increased revenue. Internal Rate of Returns (IRR) application will be appropriate here since it will help check on the production diversification that has higher rate of returns other than the present value. This will help determine which project is most effective and with higher returns rate.
4. Development of strategic relationships
Strategic relationships are important for an organization to be successful in terms of financial performance. This incorporates upstream downstream integration of the chain participants thus involving them in decision making hence reaching the financial objectives. In other consideration, the more people you can get through different relationship ladders to promote your product or service, the more sales and revenues you’ll have.
5. Increase Your Marketing
Durango Manufacturing Company can major on marketing procedures to expand their market base. Market segmentation and product differentiation in terms of market requirements are necessary for increasing the overall sales maximization of returns on investments. An obvious way to increase sales is to boost your marketing. Quantity doesn’t necessarily mean quality, so careful planning, test-marketing and monitoring your results maximizes your sales. I suggest that the company should conduct a thorough market research and run myriad adverts to help increase the sales. Quality as well should never be compromised. Considering the budgeting ratio like Net Present Value (NPV) will be relevant since it will help Durango as an organization to review and formulate financial objectives to determine their current state and where they want to be in future.
CONSIDERATION FOR OUTSOURCING MANUFACTURING OPERATIONS
As per my own understanding of Outsourcing, it can be described is an apportionment of certain minor work activities in a business given to another organization, for the organization to focus on major activities. At times may use in house professionals, but considering that most occasions its temporary its preferable to use outsourcing. Once outsourced the service provider takes responsibility and risk of the business activities. For the suggestion of incorporating outsourcing in the company operational programs, I still remain indifferent until I see how the production situation works but my decision will be influenced by the following.
As an experts in finance and accounting sector I could give weight to supposal of incorporating outsourcing within the company operations for the following reasons: optimized Operational and Recruitment costs, Outsourcing eludes the need to hire individuals in-house; hence recruitment and operational costs can be minimized to a great extent. Rapidity and Proficiency, it is outsourced to persons with specialized skills and have the able machinery to run the activity effectively. Concentrating on major process rather than the less major activities, Outsourcing the supporting processes gives the organization adequate time maximize on their core business process. Risk-spreading one of the most crucial factors determining the outcome of a campaign is risk-analysis. Outsourcing certain components of your business process helps the organization to shift certain responsibilities because outsourced vendor is a specialist, they plan your risk-mitigating factors better.
It may also object and ignore the idea of outsourcing when the prevailing financial situation doesn’t support its adoption. This can be because of the following reasons; Poor Synchrony on the deliverables, In case you do not choose a right partner for outsourcing, problem areas include stretched delivery time frames and sub-standard quality output . At times it is easier to regulate these factors inside an organization rather than with an outsourced partner. Unseen costs, Although outsourcing most of the times is cost-effective at times the unforeseen costs involved in signing a contract while signing a contract across international boundaries may pose a serious threat. Risk of exposing confidential data, when an organization outsources HR, Payroll and Recruitment services, may risk exposure to a third party. Absence of customer focus: An outsourced vendor may be catering to the expertise-needs of multiple organizations at a time, the outsourced organization may neglect the organizations objectives.
DEPARTMENTS THAT SHOULD USE PROCESS, JOB ORDER AND ACTIVITY BASED COSTING
a. Production department
Cost accounting is relevant in all aspect in production departments. Cost apportionment and allocation for every component of production must be determined to help establish their contribution margin per unit. Production department is cots center and should be given the right weight for the overall success of the organization. Process, job order and activity based costing are all appropriate costing approaches for this department. It assist in establishing all the costs of production required by accountants to calculate profits which in turn is a requirement by the accounting standards and regulatory bodies.
b. Sales department
Process, job order and activity based costing are also necessary in sales department in establishing financial soundness in Durango Manufacturing Company. Costs allocation in sales department has a direct impact on the revenue hence should be considered closely. Process, job order and activity based costing are appropriate when the company is in dire quest for eliminating unwarranted costs. Distribution costs, costs related to legal requirements, need for intermediaries and costs incurred in dealing with customer requirements are supposed to be incorporated in the company accounting set up. Attention paid and care given to the sales department as far as costing is concerned may reflect how much costs could be reduced and eliminated.
c. Procurement department
Procurement is always deemed to be a profit making center hence talking of Durango Company finance loci, procurement department must be given a fair consideration. It involves acquisition of goods and services at the most responsible price. It incorporates negotiation, contractual agreements complemented with performance clause. The cost of acquisition of goods and services translates to the pricing status and profitability. Costing should be done and allocated to every activity that is involved in this department. As per my idea of primal sanity, I find procurement department among the ones which need to incorporate process, job order and activity based costing. This is because about of 30% of the organizations finances are allocated to goods and services acquisition hence optimizing these costs may bring about increased profitability.
PREDICTION OF THE FUTURE ECONOMIC ENVIRONMENT
When the above strategies are implemented, with addition to my skills and knowledge, I have the moral impetus to confirm that Durango Manufacturing Company will be experiencing financial performance stardom in the next five years compared to the last two years. This is because, all are channeled towards achieving a favorable economic environment. Incorporating IT control systems in the operations of the company will curb fraudulent activities that always come with decreased profit margins. It however dispirits my prophesy as to how the whole system will come into terms with these proposed changes and more of it troubles my prediction since I still know not on how the top management will view the recommendations and give it the relevant support for implementation.
When support for implementation of the above discussed strategy is available, I can predict that the company will be in a state of profit making and will have both competitive advantage and reputational stardom. Increased revenue for the organization will indicate a considerable growth in terms of performance for the company.
POTENTIAL FOR FRAUD DUE TO LACK OF IT CONTROLS
Computer crime is a thriving industry in the 21st century, and the Internet has helped turn the industry international: a hacker in Rumania or China, for example, can target a computer in Des Moines, Iowa. Knowing the different ways cyber crooks can target you is the first step to protecting yourself.
a) Hacking
Computer hackers use a variety of tricks to break into computer networks. Trojan horse viruses are one method of hacking. Hackers also exploit known vulnerabilities in computer systems or "back doors" installed by administrators for easy access to the network. Users' simple, easy-to-guess passwords let hackers gain entry, too. Once a hacker gains access, he may steal data for identity theft, or simply damage the system.
b) Cyber-Harassment
Cyber stalking and cyberbullying aren't about stealing money or identities. They're personal attacks, targeting someone online just as some bullies and stalkers target victims offline. Harassment can range from posting someone's personal information online to threats of violence, rape or murder against the victim.
c) Phishing
Phishing emails are written to trick you into divulging your bank or credit card information. A typical phishing email informs you that someone's tried to access your bank account illegally so you won't be able to withdraw money until you log in and prove your identity. The link in the email sends you to a fake website to enter your data, giving the phishers everything they need to drain your bank account.
HOW TECHNOLOGY COULD AID IN FRAUD PREVENTION
Technology has opened the door to new and more pervasive forms of fraud. But because computers aren’t subject to the foibles of emotion and what we like to call intuition they can also help protect us. Here’s how leading fraud researchers, neuroscientists, psychiatrists, and computer scientists think technology can be put to work to fight fraud however it occurs in person, online, or over the phone.
a) Truth Filters
A similar approach could help combat fraud by flagging false statements on social media. (Disinformation creates opportunities for con artists to profit. In 2015, for instance, a scammer posted a fake Bloomberg article with news of a Twitter buyout offer—moving markets and making a little cash in the process.) Kalina Bontcheva, a computer scientist who researches natural-language processing at the University of Sheffield, in England, is leading a project that examines streams of social data to identify rumors and estimate their veracity by analyzing the semantics, cross-referencing information with trusted sources (such as PubMed, for medical information), identifying the point of origin and pattern of dissemination, and the like. Bontcheva is part of a research collaboration called Pheme, which plans to flag misleading tweets and posts and classify them by severity: speculation, controversy, misinformation, or disinformation.
b) Enhanced Lie Detection
No method of fraud prevention will be perfect. “You can put seven locks on your door, fingerprint technology, a retinal display. And you forget to close the window,” Moran Cerf, a professor of business and neuroscience at Northwestern University and a former hacker, said. “The only way to prevent fraud completely is to eliminate humans from the process. They are the weakest link.” When scammers do make it through our safeguards, new lie-detection techniques could prove useful after the fact. Over the past few years, methods that involve analyzing fleeting facial expressions or screening for a certain pheromone associated with stress have shown promising results.
c) In-the-Moment Warnings
“It’s not far off that our smartphone or watch is listening in to all of our conversations and understanding them,” said Emigh. “It opens up the possibility of employing [fraud-prevention] technology across lots of in-person domains, not just e-mail.” Imagine, he said, that a fraud-prevention company has enough data on your behavior—where you are, what you’re doing (an increasingly likely reality, given the ever-expanding capabilities of cellphones and the peoples’ willingness to trade personal privacy for convenience), and so on—to be able to give a heads-up anytime someone tries to take advantage of you.
d) Suspicious Story Lines
Spam filters are supposed to block e-mail scams from ever reaching us, but criminals have learned to circumvent them by personalizing their notes with information gleaned from the Internet and by grooming victims over time. In response, a company called Zap Fraud is turning to natural-language analytics: Instead of flagging key words, it looks for narrative patterns symptomatic of fraud. For instance, a message could contain a statement of surprise, the mention of a sum of money, and a call to action. “Those are the hallmark expressions of one particular fraud e-mail,” Markus Jakobsson, the company’s founder said. “There’s a tremendous number of (spam) e-mails, but a small number of story lines.” In the future, this technology could go beyond e-mail filtering to also flag text messages, interactions on social media, messages on dating sites, even years-long “friendships.
e) Spotting Trends
Another approach comes from Big Data combing statistics to find patterns that should tip us off to fraud. By analyzing all the companies that sell a certain kind of product, for instance, you could flag anything anomalous—one firm’s sudden spike in canceled contracts, for example—that might indicate sketchy activity. The method is similar to the one employed for credit-card fraud alerts—if you don’t usually travel abroad and suddenly buy groceries in Panama, your transaction is flagged—but on a much bigger scale. A company called Sift Science is attempting something along these lines; it uses proprietary algorithms to analyze data trends and discern patterns of possible fraud.
References
Accounting All-in-One for Dummies, by Kenneth Boyd, Lita Epstein, Mark P. Holtzman, Frimette Kass-Shraibman, Maire Loughran, Vijay S. Sampath, John A. Tracy, Tage C. Tracy, Jill Gilbert Welytok
Charles T. Horngren, Srikant M. Datar, and George Foster Cost Accounting: A Managerial Emphasis
Howard Schilit and Jeremy Perler Financial Shenanigans: How to Detect Accounting Gimmicks " Fraud in Financial Reports
Jerry J. Weygandt, Paul D. Kimmel, and Donald E. Kieso Financial Accounting: Ifrs,
Jerry J. Weygandt, Paul D. Kimmel, and Donald E. Kieso Accounting Principles
John A. Tracy, How to Read a Financial Report: Wringing Vital Signs Out of the Numbers, by
Stig Brodersen and Preston Pysh., Warren Buffett Accounting Book: Reading Financial Statements for Value Investing Buffett Book Edition,
Thomas R. Ittelson , Financial Statements: A Step-by-Step Guide to Understanding and Creating Financial Reports,
