Management Accounting Practices- a Case Study on Small Scale Construction Companies

Abstract

Management accounting is the theory based system that defines, assess, evaluate, present and transmit financial data and information to executives with the aim to achieve the mission and visions of an organization. As the corporate world is facing a constant change to survive in the competitive environment an organization must focus on their management accounting policies and practices. Here in this report we aim to compare the management accounting practices between two small scale construction companies running their operations in Bangladesh. They are- Archives Solutions and Star Delta Engineers Limited This report aims to achieve a better understanding of the Management Accounting practices in small-scale construction companies and conducting a comparative analysis between two individual companies to understand how these practices affect the company performance over time. The study will cover a time frame of overall two year period from 2018 to 2019. There has been many studies on the cost accounting practices in the construction industry but according to the literature very few works have been done focusing on the managerial accounting practices in the small scale companies. In Bangladesh, to achieve successful completion of the projects large scale companies collaborate with the small construction companies through sub-contracting process. The purpose behind this is to diversify the working capital burden among the companies. So the small scale construction companies hold a very significant position in the construction industry of Bangladesh. Understanding how these companies manage to use the management control system to attain ultimate outcomes, can give us a better understanding of how business runs in the construction industry at large. As a large share of the market is held by the small-scale companies in the Construction Industry in Bangladesh, studying the management control system used in these companies through two Sample Company and their process of attaining growth in the long run will give us understanding about how business runs in the practical world. In terms of evaluating the Management practices induced by accounting information, I have use Management Control System Framework suggested by Malmi and Brown their research paper in 2008. Where the analysis focus on five separate areas -1) Planning 2) Cybernetic Control mechanism 3) Cultural Control mechanism 4) Administrative Control mechanism 5) reward and compensation system and Financial Ratio analysis along with other descriptive statistics measures. Being a more experienced firm, Star Delta has a more structure and defined management system, where Archives Solutions is still experimenting and going with the flow with a view to find the best possible norms and management practices. Still based on corporate returns, they are doing better than Star delta. So it can be said that Archives Solutions has a prospect in future, if they can incorporate an effective and precise management control system in the organization.