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Who's watching your costs?

Management accounting is a constantly evolving practice. But how is it changing? A recent report has highlighted the key factors driving the accounts departments at top corporates.

Four-fifths of respondents cite cost management as crucial to a company's strategic goals, while three-quarters say the economic conditions in 2003 are prompting far greater interest in cost management and transparency.

But the willingness to adopt cost management tools, perhaps surprisingly, remains low. Budgetary procedures and ERP solutions take precedence, and if any cost management tools are adopted, they are invariably grown within the corporate.

This is reinforced by survey results which show that traditional accounting techniques hold sway over more modern applications. Quantative techniques and spreadsheet costing received backing from 76% of respondents, while only a quarter of respondents use the more modern methods of target costing and value-based management.

Cost information, therefore, is crucial. But more worrying for corporates is the finding that there is almost total consensus that costs are distorted. The distorting factors are: overhead allocation costs; shared services; greater product diversity.

The survey, carried out by Ernst & Young and the Institute of Management Accountants (IMA), was completed by over 2,000 senior executives in corporate finance.

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