Practical Difficulties In Installing a costing system

Practical Difficulties In Installing a costing system

A cost accountant may face a number of practical difficulties in the process of installing a cost
accounting system. They are :
1. Lack of Support fromTopManagement : Inmost of the cases, one important practical difficulty is lack of enthusiasm and support from top management because they are not fully convinced about the benefits from the system. The system is often introduced by managing director or chairman without consulting the departmental heads, because of which the departmental managers treat it as an interference in their work.

2. Resistance from the Existing Accounting staff : Whenever a new system is introduced resistance is natural. The existing accounting staff may feel that theywould lose their importance and it is a threat to their position in the organisation.
3. Resistance and non-cooperation at other levels of organisation : Production staff like foremen, supervisors and other staff and people at different levels in other departments may also resist the introduction of costing system because of their fears that there will be additional paper work and they may be subjected to additional controls due to this system.
4. Shortage of Trained staff : There may be a shortage of trained and well qualified staff. The work of costing department which involves cost analysis, cost control and cost reduction cannot be handled without the availability of trained staff.
5. High cost of operating the system: Unless the costing system is properly designed according to the requirements of each case specially, the cost of operating the system may be heavy.

6. Failing to keep the system up-to-date : The world has become competitive and the needs of business and industry are fast changing. But, in many cases, there is a failure to keep the system up-to-date so as to make it suitable to the changing needs of business and industry.

Steps to Overcome Practical Difficulties :

The above practical difficulties involved in installing a costing system and during its operation can be avoided by due care. The following steps are suggested to overcome those difficulties :

i) Support from the top management : There must be wholehearted support and commitment to the system from the top management, before the installation of cost accounting system and during its operation. This will create cost consciousness and interest in cost improvement among various people in the organisation.
ii) Utility to the existing staff : The existing accounting staff should be convinced about the need to supplement the existing financial accounting system. They should be informed and convinced about changes going to take place in their jobs and the new opportunities going to be created for them because of the new system.
iii) Creating confidence in workers : Workers, Confidence in the system should be created so as to get their cooperation before steps are taken to put the system in practice. For this purpose, various employees should be properly educated regarding the benefits which can be obtained from such a system.
iv) Imparting Training to Existing Accounting staff : The existing staff working in the accounting department of the organisation must be given proper training in costing methods and techniques. The help of the institute of cost and works Accountants of India may be taken for this purpose.
v) Designing of the system to the requirements of the organisation : The costing system should be installed and operated as per the requirements of a concern, avoiding additional unnecessary work as far as possible. Because of this, the system may not entail heavy cost on the concern.

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