ENHANCING THE EFFICIENCY OF ORGANIZING INVENTORY BUDGETS FOR THE VIETNAMESE MANUFACTURING ENTERPRISES IN THE INTEGRATION PERIOD NÂNG CAO HIỆU QUẢ TỔ CHỨC XÂY DỰNG DỰ TOÁN HÀNG TỒN KHO TẠI CÁC DOANH NG[.]
INTERNATIONAL CONFERENCE FOR YOUNG RESEARCHERS IN ECONOMICS & BUSINESS 2020 ICYREB 2020 ENHANCING THE EFFICIENCY OF ORGANIZING INVENTORY BUDGETS FOR THE VIETNAMESE MANUFACTURING ENTERPRISES IN THE INTEGRATION PERIOD NÂNG CAO HIỆU QUẢ TỔ CHỨC XÂY DỰNG DỰ TOÁN HÀNG TỒN KHO TẠI CÁC DOANH NGHIỆP SẢN XUẤT VIỆT NAM TRONG THỜI KỲ HỘI NHẬP PhD, Huong Thao Phan - Thuongmai University thaoktcb@gmail.com Abstract The research has truly reflected the actual implementation of organizing inventory budget which is used as a basis to provide a system of solutions associated with the needs of management These include building assessment systems, estimating inventory, organizing information and controlling activities of management accounting for inventory, and especially optimizing infor- mation to help managements in the decision-making process On the other hand, a manufacturer size with suitable inventory plans, information needs for different levels of management, and qualifications of accountants in the Vietnamese manufacturing enterprises are determined by ap- plying qualitative, quantiative methods and analyzing relevant data and level of influence on the implementation of organizing inventory budgets The findings of the study revealed that employees lack proper training and education and that there is poor inventory control planning, lack of staff communication Respondents also indicated that there are no common strategies in place to con- trol inventories Keywords: budget, manufacturing enterprise, inventory, management accounting, organize Tóm tắt Tổ chức xây dựng dự tốn hàng tồn kho công cụ quan trọng nhà quản trị thực chức hoạch định kiểm soát hoạt động doanh nghiệp Lập dự toán hàng tồn kho hoạt động cần thiết quan trọng nhằm phác thảo tương lai, giúp doanh nghiệp phát triển hướng đưa kế hoạch thực phù hợp để đạt mục tiêu chiến lược Bài viết tập trung làm rõ vai trò tổ chức xây dựng dự toán hàng tồn kho doanh nghiệp sản xuất, thực trạng xây dựng dự toán hàng tồn kho doanh nghiệp sản xuất Việt Nam Trên sở đó, tác giả đưa số đề xuất hoàn thiện tổ chức xây dựng dự toán hàng tồn kho nhằm nâng cao hiệu quản lý hàng tồn kho nhà quản trị doanh nghiệp Từ khóa: dự tốn, doanh nghiệp sản xuất, hàng tồn kho, kế toán quản trị, tổ chức 1074 INTERNATIONAL CONFERENCE FOR YOUNG RESEARCHERS IN ECONOMICS & BUSINESS 2020 ICYREB 2020 The role of organizing inventory budget in manufacturing enterprises Inventories can account for 40% -50% of a business’s total capital; up to 33% of company assets and 90% of working capital (N.T.P.Dung, 2013) Inventory helps businesses achieve economic efficiency of large output; balance supply and demand; support production specialization; cope with fluctuations of demand, order cycle and above all, they act as a “stepping stone” between stages in the supply chain Therefore, good control of inventory is always a very important and an essential issue in enterprises To achieve the above goal, it is necessary to have an effective combination between functional departments in the enterprise, in which accounting is an indispensable important management tool for the administrators (Naidoo et al, 2011) Organizing management accounting for inventory, especially for inventory budget in a scientific and reasonable way will help enterprises promote the process of rotation inventory; improve the efficiency of inventory management The role of organizing inventory budget in manufacturing businesses is demonstrated in the following aspects: - Organizing inventory budget provides information to support the control of production and business activities of enterprises The arising economic transactions related to the inventory are recorded in the reports and compared with the budgets of inventory that were made earlier The inventory budget information helps administrators of all levels to control and evaluate activities in a diverse, detailed, timely manner and are suitable to the needs of users (Nzuza, 2014) In addition, the inventory budget system will have to collect and provide information about different situations with different options so that the administrator can consider and make the best and most effective decision - Organizing inventory budget (IB) provides information to support management control With the information in the IB, the administrator considers the mobilization and uses of the unit’s resources effectively to meet the goals of the management of IB With the information on the report of performance fluctuations, the administrator will recognize the implementation status of the criteria on the inventory at the management levels; fluctuations in performance compared to plan goals On the other hand, proper IB can lead to an increse in competitiveness and market share of small producers (Akcali, 2008) Well-organized IB are also the foundation for an organization’s success and growth as an organization’s overall profit is tied to the volume of products produced and consumed (N.T.P.Dung, 2013) - The efficience of organizing IB can also provide information for strategic planning and detailed plans for enterprises Through the system of IBs, the Board of Directors will receive the expected information on the financial situation, efficient of production and business of each department in the unit Thereby, senior managers can plan operational strategies for the whole unit 1075 INTERNATIONAL CONFERENCE FOR YOUNG RESEARCHERS IN ECONOMICS & BUSINESS 2020 ICYREB 2020 Source: Ivanov (2010) Chart 1: Model of synthesis of inventory budget Research methodology Qualitative research: is conducted through theoretical research and previous studies related to the construction and organizing inventory budget, at the same time combined with surveys and consultation of some experts who are managers, accountants in production enterprises in Hanoi city, Bac Ninh province, Phu Tho province to identify and determine the contents of organizing inventory budgets in those enterprises A qualitative research method explores the attitudes, behaviour and experiences through methods such as open-ended questions, interviews, and focus groups It attempts to get a broad opinion and comprehensive understanding of the phenomenon from the views of participants Briefly, Welman et al (2011: 87) explain that a qualitative research has its own set of strength and disadvantages Its strength includes creating a better understanding of the responses whereas its disadvantage is that its time consuming Quantiative method: is conducted through the method of directly distributing questionnaires combined with sending online surveys (via google.docs) In this article, the author conducted research based on 41 manufacturing enterprises (ME) in the fields of paper, food, confectionery in VietNam in the period between 2017 and 2019 with the support of SPSS 22.0 software According to Welman et al (2011: 87), a quantitative research method is descriptive in nature and is used to answer questions about the relationships amongst measured variables The analysis arrays from creating simple tables that show the frequency of occurrence through establishing statistical relationships between measured variables (independent variable and dependent variable) of the study Process of collecting information: Interviewing some accounting experts at some production enterprises to get preliminary comments on issues: the process of collecting, processing, synthesizing, providing inventory accounting information to the managers 1076 INTERNATIONAL CONFERENCE FOR YOUNG RESEARCHERS IN ECONOMICS & BUSINESS 2020 ICYREB 2020 With predominantly closed-ended questions and only two open-ended questions, the questionnaire was divided into three sections and consisted of 26 questions, with the levels of measurement consisting of nominal and ordinal types of questions Through a forum on the Internet, for a period of months (from October 2019 to December 2019), 295 responses were obtained The sampling method used is non-random sampling - convenient sampling for commercial enterprises in the research scope Through screening and analysis, the author used 189 results from different types of enterprises Members responding to the questionnaire are mainly from the accounting department (73%), in which there are 23 chief accountants (12%), 38 general accountants (20%) and 60 accountants (31.7%) Regarding the level of knowledge of the respondents to the questionnaire: About 93% of the respondents said they know about inventory accounting in enterprises, of which 16% are very knowledgeable About 7% of respondents to the questionnaire not know much about it in enterprises, these are people who not directly work as accountants, nor directly use information from accounting, so this is also appropriate physical All responses missing data were removed from the results of the analysis Facts about organizing inventory budget of manufacturing enterprises in VietNam According to the results of the author’s analysis, 15/41 ME (accounting for 36.76%) are interested in building IB In organizing IB, surveyed companies have had certain interest in the value chain of inventory Table shows the percentage of enterprises making inventory budgets Table 1: The percentage of enterprises making inventory budgets Valid Yes Frequency Percent 43 63.24 No Total 25 68 36.76 100.0 Valid Percent Cumulative Percent 36.76 36.76 63.24 100 100.0 There are 8/41 businesses focus on issues in the IB process which are: (1) Establishing, calculating how to ensure timely product delivery to customers and (2) Do not store too much because it will cause capital stagnation, increase in maintenance costs and lead to low capital efficiency; and vice versa, if the reserve is small, it will affect the consumption of the business The proportion of inventory budgets are shown in table Table 2: The proportion of inventory budgets in enterprises Valid Material budget Production budget Storage budget Finished goods budget 36.6 Valid Percent 36.6 Cumulative Percent 36.6 36.6 36.6 36.6 Frequency Percent 25 36.6 25 25 17 1077 24.4 36.6 24.4 36.6 24.4 INTERNATIONAL CONFERENCE FOR YOUNG RESEARCHERS IN ECONOMICS & BUSINESS 2020 ICYREB 2020 It can be seen that the accounting department along with a number of other departments in the ME has completed the inventory standards, thereby building the system of IB The MEs have set up a relatively appropriate process of planning and estimating inventory Organizing IB is an very useful initial foundation for estimating business costs in MEs In fact, surveyed companies have established standards, but only stop at the standard of quantity not yet price standard If any enterprise has set price standard, those standards are not often updated with the volatility of the market On the other hand, the adjustment of technical standard is mainly based on practical experience, lack of science-based analysis, not updating with actual production conditions The proportion of inventory standards are illustrated in table Table 3: The proportion of inventory standards in enterprises Valid Material standard Fuel standard Spare parts consumption Minimum inventory Type of Standard Raw materials consumption Spare parts consumption Fuel consumption Minimum inventory of raw materials Frequency Percent Valid Percent Cumulative Percent 20 29.3 29.3 29.3 40 40 17 58.5 58.5 24.4 Contents Regulates the consumption of main raw materials, the average consumption of catalysts, water, and electricity per product 58.5 58.5 24.4 58.5 58.5 24.4 Applied ratio 58,5% Regulates the consumption of spare parts in maintenance and repair activities 29,3% Regulates the consumption of gasoline, oil for the operation and maintenance of vehicles, machinery and equipment 58,5% Regulates the minimum level of raw materials to be stored in the warehouse to meet arising cases 24,4% (Source: Author’s survey) Currently, there are still many MEs (63.24%) that have not yet made a detailed and complete IB, very few enterprises convert material and technical standards which are being implemented in their units into standards or anticipated costs Besides, the figure of raw material budget is often fixed for a certain level of activity, enterprises have not made a flexible budget for many different levels of activity In order to make a reasonable IB at the end-of-period, businesses often rely on the statistical method of experience, and at the same time based on on-going projects and contracts The determination of the number 1078 INTERNATIONAL CONFERENCE FOR YOUNG RESEARCHERS IN ECONOMICS & BUSINESS 2020 ICYREB 2020 of goods to be ordered each time, the time of ordering and the safety reservation are mainly based on the experience of the departments in the business Therefore, the difference between the implementation and the budget has not met the management’s information needs in the construction of business plans to promote inventory rotation, improve the efficiency of inventory management of the business Based on the fact about organizing inventory budget of manufacturing enterprises in VietNam, it points out that the accounting department along with a number of other departments in businesses have completed inventory standards thereby making an inventory budget system Enterprises have all set up the process according to the relatively appropriate steps to develop plans and estimates of cooperative relations However, the fact also shows that enterprises have built standards but only stop at the quantity standard but have not built a price standard If any enterprise has set price standard, those are often not updated with the volatility of the market Currently, there are still many MEs that have not yet conducted detailed and complete inventory budgets, very few enterprises convert the material and technical standards that are being implemented in their units into cost standard or budget cost On the other hand, the budget of raw materials production is often fixed for a certain level of activity, enterprises have not built flexible budgets for many different level of activities Therefore, the information about the difference between the implementation and the budget has not met the information needs of the administrators Some proposals to complete inventory budgets in the Vietnamese manufacturing enterprises * Organizing material standards The organization of building raw materials standard system is an effective tool to manage the cost of inventory costs on the basis of eliminating the irrationality and inefficiency of production and business activities The system is designed to reflect future performance levels, not past performance levels, and serves as the basis for department reports and assessment of the performance of the responsibility centers Organizing raw materials standard system should pay attention to the following issues: Regarding the basis of standard construction: The standard of raw materials needed to be used is determined on the basis of the output - input relationship (pure technical relationship between direct raw materials and output products) Specifically: the technical standards of the products provided by the Technical Department, IB from the previous periods provided by the Accounting Department, through surveying, statistics of the actual situation Regarding the standard organizing department: The raw material standards are determined by the technical design department and the sales department In order to ensure that the standards are set accurately and scientifically, enterprises need to select employees with good qualifications and ability of long experience Regarding the time of organizing standard: built for each business period Regarding the content of raw materials standards: standards are divided into categories: - Standard of raw material quantity: is the standard reflecting the amount of raw materials 1079 INTERNATIONAL CONFERENCE FOR YOUNG RESEARCHERS IN ECONOMICS & BUSINESS 2020 ICYREB 2020 consumed per unit of product and unavoidable losses The amount of raw materials consumed for a product is an important data to set raw material costs in the budget period - Standard of raw material price: is the standard reflecting the raw material purchase price including raw material price plus the cost of purchasing and minus the allowable discount Standard of raw material price is determined by the Purchasing department The Supply department needs to choose high quality raw material suppliers with the most reasonable prices On the basis of combining information between past analysis and research on future price volatility trends provided by management accounting, the administrator will choose a reasonable expected price for the raw materials used by businesses Regarding the method of building the standard of raw materials: Enterprises can organize to build the standards according to one of three methods: experience statistics, technical economics or direct testing Depending on their specific conditions, enterprises choose to apply the appropriate methods to build the raw material standards in accordance with the reality * Organizing inventory budget The IB is understood as the detailed, meticulous and comprehensive calculations, budget, and coordination of the inventory, how to mobilize and use the inventory to perform a certain volume of work in a given period of time which is represented by a system of quantity and value indicators (Doan Ngoc Que, 2015) Organizing IB will help businesses be proactive in production and business, anticipate difficulties in implementing their goals, limit the costs of backlog, warehouse costs, and management costs IB is one of the production and business budget of a business and is dominated by the consumption budget to determine the amount of inventory at the end of the period to serve decisions on production and consumption At the same time, IB also dominates and is inversely related to production budget The MEs can apply the general process for IB in stages in table as follows: Budget stages Table 4: General process for making inventory budget in manufacturing businesses Processes Step 1: Determine the target of consupmtion of the whole business Based on the forecast of domestic and international market demand, the regulations on import and export that were actually Achieved in the previous period, the potentials and goals of their enterprises in the next period, the business department will anticipate production by each type that the Stage 1: Preparing business can achieve in the planning period On the basis of the target of inventory budget the expected consumption and the ability to store a product, management reviews and approves the target Step 2: Prepare personnel for inventory budget On the basis of the approved production and business goals, the Board of Directors needs to set up a separate department specializing in making budget for the enterprise These staff members are in the Management Accounting Department and are controlled and managed by the Accounting Department 1080 ... research based on 41 manufacturing enterprises (ME) in the fields of paper, food, confectionery in VietNam in the period between 2017 and 2019 with the support of SPSS 22.0 software According to Welman... results of the analysis Facts about organizing inventory budget of manufacturing enterprises in VietNam According to the results of the author’s analysis, 15/41 ME (accounting for 36.76%) are interested... business Based on the fact about organizing inventory budget of manufacturing enterprises in VietNam, it points out that the accounting department along with a number of other departments in businesses