Financial Budgeting for Travis Perkins

In the statements made by Johnson and Kaplan explained that corporate accounting management systems are inadequate for today's environment. According to them, in this fast changing environment with advanced technological changes and in the vigorous global and domestic competition and vastly growing information processing capabilities these management accounting systems do not provide timely information for process control, product costing and performance evaluation activity of managers. In today's environment the businesses have become so complex that internal management accounting system are not that accurate. These internal management accounting systems are designed after the world war and it lacks in replacing the pre world war accounting systems. The corporate management accounting systems designed for financial reporting, tax purposes with latest information and accounting purposes. But today's information is not arriving at correct time, too aggregated and too fragmented. Due to this there has been a decrease in productive as it analysis even very small issues to critical issues which normally take a long time. It is also responsible for making wrong decisions in product sourcing, product mixing, product pricing because it relates all the product cost to simple arbitrary measures. The corporate accounting management system has decreased the long term thinking and decreased the long term investments as well. People started to concentrate more on short term monthly profit and loss statements. This does not promote a strong and healthy company for a long period of time which is most essential.

Already many accountants tried to change the standard cost system because it did not give proper information. The standard cost accounting system which we use today is outdated. We have to design a new system which takes into account the latest information and more flexible so that it gives a correct output which will be more accurate and reliable. In a company if they follow the lean principles it helps in maintaining quality and reduce inventories which is a negative according to the current accounting standards. So the new system should also incorporate all these principles within it so that best practices are followed in the system. Operation managers, engineers should also be consulted and their views should be incorporated without any conflicts and with the help of technology it has to be easier to practice in all types of environment.