(Luận văn) weak cost control at vietnam airport ground services company limited – tan son nhat branch

t to ng UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business hi ep w n lo ad ju y th yi pl n ua al Nguyen Thi Ha Anh n va ll fu oi m at nh WEAK COST CONTROL AT VIETNAM AIRPORT GROUND SERVICES COMPANY LIMITED – TAN SON NHAT BRANCH z z k jm ht vb om l.c gm n a Lu MASTER OF BUSINESS ADMINISTRATION n va y te re th Ho Chi Minh City – Year 2020 t to ng hi UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business ep w n lo ad ju y th yi pl ua al n Nguyen Thi Ha Anh n va ll fu oi m at nh WEAK COST CONTROL AT VIETNAM AIRPORT GROUND SERVICES COMPANY LIMITED – TAN SON NHAT BRANCH z z k jm ht vb om l.c gm MASTER OF BUSINESS ADMINISTRATION n a Lu n va SUPERVISOR: DR TRAN PHUONG THAO y te re th Ho Chi Minh City – Year 2020 t to Table of Contents ng EXECUTIVE SUMMARY .1 hi ep PROBLEM CONTEXT 1.1 Background of Vietnam Airport Ground Services Company Limited – Tan Son Nhat Branch (VIAGS TSN) w Symptoms: n 1.2 lo A decline of Gross profit 1.2.2 Increase of Operating Cost ad 1.2.1 y th ju PROBLEM IDENTIFICATION: yi 2.1 Possible problems: pl Poor outside purchasing services cost negotiation 2.1.2 Ineffective fixed asset investment: 2.1.3 Weak cost control n ua al 2.1.1 va n 2.2 Main problem validation 13 ll fu 2.3 Problem definition and consequences: 16 Problem definition: 16 2.3.2 Consequences 17 oi m 2.3.1 nh at CAUSE VALIDATION: 18 z 3.1 Potential causes: 18 z Ineffective cost budgeting: 19 3.1.2 Incomplete standard cost system: 19 3.1.3 Weak cost variance analysis: 19 k jm ht Cause validation: 20 gm 3.2 vb 3.1.1 3.2.1 Real causes: 20 om l.c 3.2.2 Main causes: 24 SUGGESTED SOLUTIONS 25 Alternative solutions: 25 a Lu 4.1 The first solution: Cost classification 25 4.1.2 The second solution: Cost control throughout cost centers: 29 n 4.1.1 4.3 Action plan in the organization 31 Summary of research methods in the study: 32 5.2 Interview guide: 33 th 5.1 y SUPPORTING INFORMATION: 32 te re Solution selection: 30 n va 4.2 t to 5.3 Interview transcripts: 34 ng REFERENCES: .43 hi ep w n lo ad ju y th yi pl n ua al n va ll fu oi m at nh z z k jm ht vb om l.c gm n a Lu n va y te re th t to ACKNOWLEDGEMENTS ng Firstly, I would like to acknowledge all who supported me during the time of thesis hi ep Secondly, I would like to express my gratitude to my Supervisor – Dr Tran Phuong Thao who has supported me during the time doing this thesis Without the guidance and support from w n Supervisor, my thesis can not be completed promptly lo Thirdly, I would like to thank to my colleagues at work for their support ad And finally, I would like to express my deep sense of gratitude to my family members for y th ju sympathizing and encouraging me to complete my Master program yi pl n ua al n va ll fu oi m at nh z z k jm ht vb om l.c gm n a Lu n va y te re th t to LIST OF FIGURES ng Figure 1: VIAGS TSN structure hi ep Figure 2: Business performance from 2017 to 2019 Figure 3: Production and business performance evaluation report w Figure 4: Initial Cause – effect Map n lo Figure 5: Fish bone diagram of main problem at VIAGS TSN ad Figure 6: Final Cause – effect Map ju y th LIST OF TABLES yi pl ua al Table 1: VIAGS TSN business performance from 2017 to 2019 n Table 2: VIAGS TSN business performance ratio (ROS) from 2017 to 2019 va Table 3: VIAGS TSN business performance ratio from 2017 to 2019 n ll fu Table 4: VIAGS TSN cost for production & business detail from 2017 to 2019 oi m Table 5: New fixed assets investment in 2019 Table 6: Fuel consumption standard according to operating hours at nh Table 7: VIAGS TSN fuel cost from 2017 to 2019 z z k jm ht vb om l.c gm n a Lu n va y te re th t to ng EXECUTIVE SUMMARY hi ep w In the context of the current developed and competitive economy, all businesses set goals n lo for production, business and sustainable development Finding the optimal financial solution for ad the sustainable development strategy in this period is always the most difficult problem for small y th and medium enterprises today Therefore, according to experts, one of the measures that every ju yi business must take into account is managing and saving costs more and more effectively called pl cost control so that its products and services quality and price are more suitable for customers al n ua Cost controll and cost savings are the most effective way to control your business's operations n va The purpose of the thesis is to find out the main problem that VIAGS TSN is facing - the fu problem of cost control and the main cause of cost control in the company In-depth interview with ll two managers of two main departments of the company - the accounting department and the sale m oi and planning department are conducted to understand and identify the main reasons of poor cost nh control at VIAGS TSN From there the author will propose the solution to solve the problem most z z k jm ht vb at effectively om l.c gm n a Lu n va y te re th t to PROBLEM CONTEXT ng 1.1 Background of Vietnam Airport Ground Services Company Limited – Tan Son Nhat hi ep Branch (VIAGS TSN) w Vietnam Airport Ground Services Company Limited (VIAGS) is established on Jan 01st 2016 n lo on the basis of merging three ground service providers NIAGS, DIAGS and TIAGS ad 1993: Noi Bai, Da Nang and Tan Son Nhat Airport Ground Services Founded - 2016: Launching VIAGS brand on the basis of merging ground services companies ju y th - The charter capital of the Company is VND 250 billion and the sole owner is Vietnam Airlines yi pl Corporation - JSC VIAGS TSN is a branch of VIAGS at Tan Son Nhat Airport operating in carrier al ua industry, major in ground handling services Due to the unique nature of the ground handling n services, Vietnam just have companies operates in this industry: VIAGS, SAGS, HGS VIAGS va n is considered the biggest and successful ground handling company with revenue more than 2.000 ll fu billion dong per year Main customers of the company are international and domestic airlines like oi m Vietnam airline, Air France airline, China airline, etc,…Main revenue of company comes from nh ground handling services includes: station management services, passenger and baggage handling at services, ramp services, load control services, support services that serve arrival and departure z z flight of customer airlines Beside that, VIAGS also provides other services like baggage delivery, ht vb training services, welcome services at Tan Son Nhat airport jm VIAGS TSN is the branch has the biggest size about revenue, cost, labor in branches with k nearly 1.000 billion dong per year and 1.600 employees gm The organization chart of VIAGS TSN: om l.c Passenger services center Operation center Ramp services center Aircraft services center Maintenance services center n Sale and planning department va Human Resources Department n Accounting deparment a Lu Board of director y te re th Figure 1: VIAGS TSN structure (Source: Human Resources Department of VIAGS TSN) t to 1.2 Symptoms: ng hi 1.2.1 A decline of Gross profit ep Unit: million dong Annual growth w 2019 2017 287,510 299,111 n 2018 lo ad EBIT 270,326 2019-2018 2018-2017 2019/2018 2018/2017 -17,184 -11,601 -5.98% -3.88% y th Table 1: VIAGS TSN business performance from 2017 to 2019 ju yi (Source: VIAGS TSN financial statement of the year 2017, 2018, 2019) pl ua al Table shows that business performance of the company is quite good, EBIT (earning before interest and taxes) from 2017 to 2019 is stable with the amount of nearly 270 billion dong These n n va figures reflect bright picture with good operation result However, when make an analysis more fu deeply about annual growth, these figures show annual growth of company is not good EBIT of ll 2019 decreased 17,18 billion dong with 5.98% compare to 2018 EBIT of 2018 decreased 11,6 m oi billion dong, with 3,88% compare to 2017 From above data, we can see that gross profit of nh company have trend to drop significantly at z To see more clearly about profit picture of the company, in the table 2, it indicated that during z vb three years from 2017 to 2019, return on sales ratio (ROS) of the company tend to decrease while jm ht sales of the company increase steadily ROS in 2017 is 0.32, in 2018 decrease to 0.3 and in 2019 continue decrease to 0.27 k 0.32 Table 2: VIAGS TSN bussiness performance ratio (ROS) from 2017 to 2019 n va (Source: VIAGS TSN financial statement of the year 2017, 2018, 2019) n a Lu 0.30 om 0.27 2017 l.c 2018 gm ROS 2019 y te re th t to 1.2.2 Increase of Operating Cost ng hi ep 2019 % 2018 % 2017 w n Gross sales 989,015 100% 953,134 100% 924,387 Annual growth 2019- 2018% 2019- 20182018 2017 2018 2017 (%) (%) 100% 35,881 28,747 3.76% 3.11% 718,689 73% 665,624 70% 625,276 68% 53,065 EBIT y th 27% 287,510 30% 299,111 32% lo Operating Cost ad ju 270,326 40,348 7.97% 6.45% yi pl al ua Table 3: VIAGS TSN business performance ratio from 2017 to 2019 n (Source: VIAGS TSN financial statement of the year 2017,2018, 2019) n va ll fu The table shows that operating cost of the company increased significantly from 2017 to m 2019, cost increase rate is 6,45% of 2018 and 7.97% of 2019 while sale increase rate is 3.11% and oi 3.76% These rates reflect that cost is increasing incommensurately with sales Increase nh at significantly of cost lead profit growth decrease The percentage of operating cost to gross sale z increased steadily over years with 68% in 2017, 70% in 2018 and increase to 73% in 2019 z vb Moreover, the figure is a line chart show the trend of sale growth, cost growth and gross margin jm ht Gross sale increases from 2017 to 2019 and cost also increase accordingly, however, trend of cost k increase is more slope than sale growth and gross margin have trend to decrease gm In production and business activities, company must always pay attention to strengthening the l.c management and control of production and business cost incurred, because if company uses n a Lu show that VIAGS TSN are having many problems need solving om unbalanced cost, unreasonable cost incurred will reduce the profit of company These symptoms n va y te re th t to ng Disadvantage: hi - Information received from the cost center may not be objective ep Easy to collect information w - Benefits: n Easily find the cause of cost variances lo - ad Improve the responsibility for cost control of cost centers - Reduce work for senior executives ju y th - yi Cost: Labor cost for build cost centres (labor cost for cost control team) - Cost for taking part in course about cost centres in cost control to get background pl - ua al n knowledge va Cost for documents about cost center in cost control - Traning cost for cost centre managers n - ll fu 90.000.000 at Build up a cost control team Estimating cost (VND) nh Description oi m No z z (Team: members – accountant (3 persons – Taking part in course about cost centres in cost Training cost for cost centre managers (labor cost, 1.000.0000 a Lu Documents about cost center in cost control om l.c members (short term course in about days) gm control to get background knowledge for 6.000.000 k jm Cost: 15 million person ht vb planning dep (3 persons) 10.000.000 n document) n 107.000.000 va Total cost y te re Solution selection: th 4.2 In summary, based on the two solutions presented above, it is crucial to validate and choose the most appropriate solution 30 t to According to human and capital resources of VIAGS TSN and via indepth interview with ng Mr Hau and Mr Kien, also based on advantages, disadvantages, benefits and cosst of two solutions, hi the author proposed the first solution: Cost classification of the company in many different ways ep for the purpose cost control and management decision making This solution optimally solve the w main cause weak cost variance analysis which lead to poor cost control at VIAGS TSN Costs of n lo VIAGS TSN have many different types, however, in current, they are simply classified for ad financial accounting purposes, the collection of actual cost information to analyze cost variance in y th cost control is very difficult, leading to difficulties for managers to make the right decisions ju yi Benefit of cost of classification in many kinds helps executives analyze cost easily, identify each pl analytical method for each type of cost Recognition correctly of the appropriateness of different al ua types of costs for analysis to make a decision to choose the best option in the situations Moreover, n accuracy information from the first solution which made by executives responsible analyze cost va n variances will be more objective than from the second solution which made by cost centre fu managers Therefore, having a cost system that has been classified for different purposes will help ll oi m VIAGS TSN to have clear and accurate information for cost control needs at Action plan in the organization nh 4.3 z In order to implement the first solution, the author proposed an detailed action plan as below: z ht vb Objective: Outline a detailed list of tasks that the company needs to implement the selected jm solution, makes a timeline for the tasks, identify the resources to use, and the personnel involved k Personnel in charge: Accounting department and sale and planning department gm Implementation time: The action plan is expected to last about months, starting from om l.c July 1, 2020 to September 30, 2020 Action plan for the first solution: Activities n accounting, sale 1st July 2020- th July 2020 va control team Manager of Timeline n Preparation Get approval from the board for set up a cost Participants a Lu Process Manager of th July 2020 – th July 2020 y th Conducting Set up a cost control team department te re and planning accounting, sale 31 t to Process Activities Participants Timeline ng and planning hi ep department th July 2020 – 12th July w Accounting dep background knowledge Planning dep 2020 Accounting dep 13 Planning dep 2020 Accounting dep 13rd July 2020 – 15 th July Planning dep 2020 Accounting dep 16th July 2020 – 18 th July Planning dep 2020 Determine specific methods of analyzing the Accounting dep 19 cost variances for each cost item Planning dep 2020 n Register an cost analysis training course to get lo ad Cost classification for all cost items ju y th yi Cost classification by behavior: fixed cost, pl variable cost, semi-variable cost al n ua Cost classification by management decision making: Differential Cost, Opportunity Cost, rd July 2020 – 18th July va n Sunk Cost, Normal Cost, Abnormal Cost, fu ll Controlllable cost, No-controlllable cost oi m at nh Set up flexible analytical reports Accounting dep th th 18 July 2020 – 17th Sep Sep 2020 – 23th Sep z 2020 z Planning dep vb Accounting dep jm ht Made analysis for the latest report Test Planning dep th Sep 2020 – 26 th Sep Sep 2020 – 30 th Sep 2020 k Evaluate the quality of the report compared to Planning dep before applying this method Accounting dep 27 th gm Evaluation 24 2020 om l.c n a Lu SUPPORTING INFORMATION: 5.1 Summary of research methods in the study: y propose appropriate solutions for the company th Two types of data applied in this study: - te re find out the main problem and the main cause of the ineffective management of receivables and n va This study uses qualitative research methods to collect data and stakeholder’s perspectives to Primary data: Qualitative research 32 t to - Secondary data: financial reports, literatures in journals and researches ng Type of research tools to collect primary data: in-depth interview and focus group (Manager hi of accounting department accountant – Mr Hau, manager of sale and planning department, ep executives of sale and planning department) Interview guide: w 5.2 n lo ad Research objectives: to explore the main problem lead to increase in cost of VIAGS TSN y th over years, find out the main cause and propose the most appropriate solution to solve it ju Duration time: 10 – 20 minutes/ interview yi Interviewees: pl Mr Hau – Manager of accounting department of VIAGS TSN - Mr Kien – Manager of Sale and Planning department of VIAGS TSN n ua al - Objectives – minutes Approaching to the current ll Overall information Timing fu Key sessions n No va Overall discussion framework: m oi situation of the business at nh VIAGS TSN at Identifying main problem Identifying main problem and main cause that leads to the symptom – 10 minutes z z vb lead to main problem Finding out the most appropriate solution among om l.c alternative solutions – 10 minutes gm Choosing best solution k jm ht Identifying main cause that n a Lu n va Question guideline: y te re th 33 t to Manager of ng hi No Question accounting ep department sale and planning department Could you introduce about yourself (name, age, w Manager of n lo working experience, ) and position you are working ju yi x x x x pl years,…) al ua Could you share your opinion about business n performance in recent years? va What are the potential problems that lead to the issue n x Could you tell me about your company? (company background, business performance, growth over x y th x ad in? x ll fu cost increase in recent years? m What is the main problem that leads to this issue? x x Who is responsible for cost control at the company? x x What are potential causes that lead to the main x x x x oi at nh z In your opinion, which is the best solution for the problem that VIAGS TSN is facing with? x x x om l.c gm 10 x k Do you have any solution to solve the main cause? jm ht What is the main cause that leads to main problem? vb z problem? Interview transcripts: n va Duration for each respondent: 10 - 20 minutes n Time for interviewing: 9:00 AM - 24 January 2020 a Lu 5.3 y th City In-depth interviewee 1: - te re Location: VIAGS TSN office – 49 Truong Son, Ward 2, Tan Binh District, Ho Chi Minh Interviewer: Nguyen Thi Ha Anh 34 t to ng hi ep Interviewee: Mr Hau - Title: Manager of accounting department of VIAGS TSN - Age: 46 years old - Working experience: over 20 years in accounting service, 16 years at VIAGS TSN - w Ha Anh: Good morning, Mr Hau! First of all, I would like to say thanks for spending time for n lo the appointment with me this morning I am here for discussing with you in order to define ad problems that your company is facing with y th Mr Hau: Ok You can ask me about what you concern ju yi Ha Anh: Could you give me some information about your company? pl Mr Hau: Ok Ha Anh My company is Vietnam Airport Ground Services Company Limited – al ua Tan Son Nhat Branch It is a branch of VIAGS at Tan Son Nhat airport It is established on Jan n 01st 2016 on the basis of merging three ground service providers NIAGS, DIAGS and va n TIAGS TIAGS is previous named of VIAGS TSN, established in 1993 and located at Tan Son ll fu Nhat Airport The company’s business is providing ground handling services for airlines that at Ha Anh: Could you tell me about yourself? nh include indirect and direct divisions oi m operating at Tan Son Nhat Airport My company has more than 1.700 employees, departments z z Mr Hau: I had had more than 20 years experience in accounting service, and start to work at ht vb VIAGS TSN from 2014 In current, I’m general manager of accounting department k years? jm Ha Anh: Could you share your opinions, evaluations about business performance in recent gm Mr Hau: VIAGS TSN is operating with good business result, but profit growth is not high In om l.c order to know why profit growth is not high, we consider two factors: revenue and cost VIAGS TSN's revenue has grown steadily over recent years, but cost also increased significantly compare a Lu to revenue growth, leading to profit growth is not high Therefore, rising cost is an issue that the n company needs to pay attention in the coming period material cost, repair cost, fixed asset depreciation, outside purchasing services cost and other cost 35 th proportion and the fluctuations of those cost groups over the years For example: employees cost, y of all, we need to look at the company's cost structure, what types of cost account for the largest te re Mr Hau: To lead to the issue of increase cost over recent years, there are many reasons First n va Ha Anh: What are the potential problems that lead to the issue cost increase in recent years? t to According to data from the financial statements over the years, the cost groups such as fixed asset ng depreciation, outside purchasing services cost, labor outsourcing cost, and other cost all increase hi According to my analysis, some of the problems leading to the increase in costs are due to the ep ineffective investment in some fixed assets leading to an increase in depreciation cost, an increase w in outside purchasing services cost, in which the cost group regarding to airport fee accounts for a n lo large proportion of the increase, but the problem in this cost item is the ability to negotiate prices ad with the exclusive provider of airport services such as ACV - Airport Coporation of Vietnam In y th addition, outside purchasing services cost and the remaining cost increased but didn’t focus to ju yi analyze to know the reason of this increase Is the increase in these cost items reasonable pl compatible with the growth rate of revenue? This question raises us to consider the third issue al n cost increase at VIAGS TSN ua The issue of weak cost control of the company In my opinion, these are the issues that lead to va n Ha Anh: Why you think that Poor outside purchasing services cost negotiation is the ll fu problem? oi m Mr Hau: outside purchasing services cost accounts for a large proportion of the company In nh which the cost group regarding to airport fee accounts for the highest proportion This increase is at due to airport fee In recent years, airport fee have almost increased The reason is that the service z z provider is an exclusive supplier - ACV At Tan Son Nhat airport, due to the specific nature of the vb aviation industry, only ACV is allowed to provide this service to companies operating the TSN ht jm Airport Therefore, the price control depends on this supplier In other words, VIAGS TSN's ability k to negotiate a price is poor Because airport fee accounts for a large proportion of the company's gm service purchase structure, the slight increase in prices of these services also results in a significant om l.c cost increase for the company So this is a problem to solve if you want to control the cost increase Ha Anh: Why you think that poor ineffective fixed asset investment is the problem? a Lu Mr Hau: This is a prominent issue, which is quite clear in 2019 In 2019, a number of n investment projects on fixed assets are implemented to provide new services to increase sales Like problem here is the ineffective investment in fixed assets, the weakness in investment planning 36 th customers to sign contracts for these new services is difficult, not meeting the original plan So the y and start to record depreciation cost, the related revenue received was not as expected Finding te re the depreciation costs of fixed assets However, after completing the investment to put into use n va investing in a number of passenger transportation buses - Xinfa leads to a significant increase in t to Ha Anh: How about weak cost control? Why you think it is also the problem at VIAGS ng TSN? hi Mr Hau: In addition to the two clear issues mentioned above, the cost items also increased, but ep the cause of those cost increases, the company has not yet to identify and not implement in-depth w analysis to find the cause Whether in these cost increase, what is the reasonable increase, what is n lo the unreasonable increase The question makes me consider about a problem in controlling cost ad That is weak and ineffective cost control y th Ha Anh: What is the main problem that leads to this issue? ju yi Mr Hau: In my opinion, two issues of ineffective investment are not high negotiation ability pl with exclusive suppliers is not the main issue of the company The ineffective investment has made al ua it clear that everyone recognizes it, the planning and investment department will learn from this n experience and overcome this problem by strictly controlling it before approving the project, va n consider about their effectiveness The issue of price negotiation for exclusive suppliers, this is a fu difficulty, the company needs to strengthen the bargaining power and the issue of mutual benefit ll oi m for this supplier In addition, the Ministry of Transport is completing the information, price and nh exchange regulations with some specific services at the airport, which also helps the company to at control this cost And from my point of view, the important issue the company now needs to solve z z is the cost control of company, regarding the process, the system, how it is done To analyze how vb costs fluctuate, rationally or unreasonably, are frequent or irregularly increased, be positive or ht jm negative We need a good and complete cost control system Currently, the company also has a k division of planning and cost control specialists However, this control is still performed in a om l.c Ha Anh: Who is responsible for cost control at the company? gm simple, subjective and systematic manner, leading to ineffective results Mr Hau: Currently, the business planning department is responsible for planning and n Ha Anh: What are potential causes that lead to the main problem? a Lu controlling implementation costs the reasons include: Ineffective cost planning / cost budgeting, incomplete standard cost system, 37 th are many weakness In my opinion, the causes at the company leading to weak cost control today, y controlling cost In every period of cost control process that VIAGS TSN have conducting, there te re cost control in the company that include cost planning, actual cost, analyze variance and n va Mr Hau: To analyze the causes of poor cost control, we have to consider about the process of t to weakness in cost variance analysis The current budgeting of the company is really ineffective, ng most evident in the fact that the annual budget often needs to be adjusted several times to fit the hi actual production and business situation The second reason I want to mention is that the ep company's standard cost system is not complete, which makes it difficult to control costs standard w cost system is an effective tool to control like as analyze fluctuation between actual cost and n lo standard cost to find out the reason of that fluctuation to make decision for the next period ad However, at VIAGS TSN, standard cost system is incomplete, some set of standard still have not y th high accuracy, applying these cost standard to cost control still have not get high reliable The ju yi standard team of the company have being checking, revise and update standard system to improve pl it’s quality The third reason is the actual cost control: it is the analysis and evaluation of the al ua expenses made, compared to the budget plan, compared to increase and decrease compared to the n previous period, to find out the cause of the fluctuations is reasonable or not to be able to make va n decisions to implement in the next period to ensure the planned profit At present, this cost analysis fu is conducted in a simple and subjective manner ll oi m Ha Anh: What is the main cause that leads to main problem? nh at Mr Hau: In my analysis, weakness in actual cost fluctuation compared to standard cost and z cost budgeting analyze is the main cause of the company's cost control Cost control is the most z ht vb important step in cost control The analysis and evaluation plays a very important role However, jm because the experts who undertake this job are young, have no experience in analyzing, evaluating k and understanding about the company, this evaluation and evaluation has not yet achieved good gm results Subjective assessments of experts may lead to the omission of some important information l.c before it is transferred to managers to make a decision In addition, due to the interaction and om cooperation to get information between divisions such as business planning department, a Lu accounting department, human resources department, it has not been really effective, leading to n the analysis and assessment of the cost of implementation For the above reasons, I would like to va emphasize the reason why the current cost control of the company is not doing well, which is the y te re cost control n main reason the company needs to focus on solving if it wants to solve the problem of increasing th Ha Anh: Do you have any solution to solve the main cause? 38 t to Mr Hau: In my opinion, three causes lead to weak cost control problem at VIAGS TSN like ng unrealistic goals set for the budget, incomplete standard cost system and poor cost variance hi analysis, the main cause is poor cost variance analysis Poor cost variance analysis will greatly ep affect cost control Due to not going into the analysis of variance of each item of production costs, w it has not yet mentioned the variance of factors that make waste or save production costs in reality, n lo not yet showing the responsibility of each part of the production performance process Therefore, ad information has not been provided to managers to contribute to the proposed solutions, remedies y th exist, develop new operational plans, exploit potential possibilities, and save costs to improve ju yi business performance Executives are having difficulty in analyzing costs fluctuations, they pl not have a clear method to analyze whether such fluctuations are reasonable or unreasonable, the ua al causes of fluctuations n Ha Anh: In your opinion, which is the best solution for the problem that VIAGS TSN is facing va n with? fu Mr Hau: In my opinion, Cost classification of the company in many different ways for the ll oi m purpose cost control and management decision making is the best solution For example when nh classifying cost into variable cost, fixed cost, we can apply appropriate analysis method is the most at optimal Because this solution have some advantage like having clear analysis method for each z z type of cost, identify specific causes for cost variance more easily and improving the sharing of vb information between the accounting department and sale and planning department This solution ht k VIAGS TSN jm optimally solve the main causes weak cost variance analysis which lead to poor cost control at gm Ha Anh: That’s all my question for you Thank you so much for your share and your - Age: 46 years old - Working experience: over 10 years at VIAGS TSN th Title: Manager of Sale and Planning Department of VIAGS TSN y - te re Interviewee: Mr Kien n - va Interviewer: Nguyen Thi Ha Anh n - a Lu In-depth interviewee 2: om Mr Hau: You are welcome l.c cooperation 39 t to Ha Anh: Good morning, Mr Kien! Could you introduce something about yourself and the position ng you are working in this company? hi Mr Kien: Good morning, Ha Anh! I have been in VIAGS TSN since 2008, I have been working ep for years in the executive center and have moved to the planning and sales department as the w head of business planning since 2016 n lo Ha Anh: Could you share your opinions, evaluations about business performance in recent years? ad Mr Kien: In recent years, the business results of the company have achieved good results y th However, there is a concern that profit growth rate is not as expected of the company According ju yi to the analysis, the problem here is that costs are increasing sharply over the years pl Ha Anh: What are the potential problems that lead to the issue cost increase in recent years? al ua Mr Kien: In my opinion, the problems that have caused a sharp increase in costs over recent years n are due to the following issues: A problem the company had faced is the investment in fixed assets va n is not really efficient, leading to waste and increased depreciation cost The ineffective investment fu in 2019 is a prominent problem of the company The investment projects have been implemented ll oi m but the revenue brought back is not corresponding and not reached to the planning result This is nh a weakness in investment planning and needs to be handle In addition, I also realize that the at company is really having trouble controlling costs At the moment, the business planning z z department I am in charge of this task, but actually the executing experts are not effective I am vb considering re-establishing a process and system to make this cost control appropriate and timely ht k Ha Anh: What is the main problem that leads to this issue? jm so that the management can make the right decision so as not to lead to increased costs control gm Mr Kien: Costs are increasing over the years and the rate of cost increase is quite high The om l.c company's main costs have increased significantly such as outside purchasing service cost, fixed asset depreciation due to new investment, airport payments Some problems regarding cost a Lu increase like ineffective fixed asset investment, poor outside service cost negotiation VIAGS TSN n need to improve However, in general, the biggest problem the company need to focus is cost adjustment are done by planning executive based on experience and periodically monthly This 40 th clear and specific cost control system In the current, cost planning, cost analysis, and cost y the cause of the cost increase in details of cost items Accordingly, the company need to have a te re or in other words, if the cost increase lead to business efficiency, the company needs to analyze n va control In order to determine whether this cost increase is actually proportional to the sale increase t to makes it difficult for managers to capture information in a timely manner and there will be cases ng where subjective judgment of executives makes managers lack information to make decisions hi Planning and evaluation are also inaccurate due to the lack of connection among department ep Therefore, the main problem of the company's cost increase is not having an effective cost control w system yet.” n lo Ha Anh: Who is responsible for cost control at the company? ad Mr Kien: My department y th Ha Anh: What are potential causes that lead to the main problem? ju yi Mr Kien: Further analysis of the causes of poor cost control, I found that in stages, the work pl of cost control has a cause One of causes for poor cost control at VIAGS TSN is the cause of al ua budgeting Due to the inadequate cost budget, the specific cause is in adjusting to appove cost n budget of head office in cost budgeting process When the head office – VIAGS considered and va n adjusted to approve the annual cost budget of VIAGS TSN branch with the goal to achieve the fu expected profit for the whole company, some cost budget items are adjusted inadequately ll oi m Because of high target profit, VIAGS implemented to adjust to cut cost budget significantly that nh mean unrealistic goals set for the budget cost These budget figures are not consistent with the at company's production and business situation, which leads to the fact that VIAGS TSN has to z z suggest VIAGS to adjust the budget accordingly Because the adjustment led to cost control of vb VIAGS TSN in some items has not been effective, because when making budget data adjustments, ht jm it is more practical than the plan Moreover, because the budget data is not appropriate, there is no k reliable estimation to make the actual cost assessment for the company to analyze and control gm The second reason is that the analysis and evaluation of implementation costs have not been good om l.c It may be because my executives is not working well, it is still simple, without going into detailed analysis, the core cause of the cost increase comes from Is it really a good increase or not? In a Lu 2018, there were also a number of negative cases of fuel storekeepers leading to increased fuel n costs However, this has been going on for a long time without leadership being informed In 2019, y performed well to detect it This is the cause that needs to be resolved if we not want to continue te re proves that the cost increase is not reasonable, but the cost control evaluation department has not n va this was discovered because the accounting department discovered some book problems This th the negative cases Ha Anh: What is the main cause that leads to main problem? 41 t to Mr Kien: As far as I have judged this, I think the main reason for the poor cost control lies in the ng cost analysis and evaluation If this stage is well implemented, cost increase will be better hi controlled Variance cost incurred due to many reasons, both subjective and objective Managers ep correctly identify the causes of variance in order to propose the right and timely solution to rectify w or promote those variances in the direction of the enterprise In order to that, businesses need n lo to analyze cost variance between reality and standards (standard cost, budget cost, ) to allow ad company to control costs And for the analysis to be effective, there must be a clear method, y th reducing the subjective nature of individual in the analysis ju yi Ha Anh: Do you have any solution to solve the main cause? pl Mr Kien: As far as I know, the accounting department is implementing management accounting al ua software combining the production and business plan I came across some of the accounting n management software content and I think this is what the company should focus on for better cost va n control The clear and detailed system reports will help leaders like us get timely information to fu make the right decision The application of IT to work will increase productivity and efficiency ll oi m In addition, this software can connect information between related departments, accounting at effective nh software, revenue control software, and planning software that will help the analysis to be z z Ha Anh: In your opinion, which is the best solution for the problem that VIAGS TSN is facing ht vb with? jm Mr Kien: I think classifying cost in order to have specific methods for cost items is the best k solution to solve the cause – weak cost variance analysis in cost control Costs of VIAGS TSN gm have many different types, however, in current, they are simply classified for financial accounting om l.c purposes, the collection of actual cost information to analyze cost variance in cost control is very difficult, leading to difficulties for managers to make the right decisions Morever, accuracy a Lu information from the first solution which made by executives responsible analyze cost variances n will be more objective than from the second solution which made by cost centre managers n va Therefore, having a cost system that has been classified for different purposes will help VIAGS te re TSN to have clear and accurate information for cost control need y th 42 REFERENCES: (1) Helen Rogers, Ray Fells, Successful buyer-supplier relationships: The role of negotiations Journal of Strategic Contracting and Negotiation 2018 1-16 (2) Fama, E., & French, K (2000) Forecasting profitability and earning The Journal of Business,73(2), 161–175 (3) Eriotis, N., Frangouli, Z., & Ventoura, Z (2002) Profit margin and capital structure: An empirical relationship Journal of Applied Business Research,18(2), 85–88 (4) Günther, T W., & Gäbler, S (2014) Antecedents of the adoption and success of strategic cost management methods: A meta-analytic investigation Journal of Business Economics, 84(2), 145–190 (5) Anderson, M., Asdemir, O., & Tripathy, A (2013) Use of precedent and antecedent information in strategic cost management Journal of Business Research, 66(5), 643– 650 43 t to (13) Stiner, D E (1992) Applied cost control American Association of Cost ng Engineers.Transactions of the American Association of Cost Engineers, 1, hi ep (14) Vorster, M (2008) How to use budget variances Construction Equipment, 111(6), 68 w Lepadatu, G V (2012) MANAGEMENT ASPECTS OF BUDGETING n (15) lo Ocneanu, L., & Bucsa, R C (2012) Advantages of using standard cost method in y th (16) ad COSTS Metalurgia International, 17(2), 72-75 Winicur, B (1993) A standard for cost accounting The National Public yi (17) ju managerial accounting Economy Transdisciplinarity Cognition, 15(1), 96-102 pl ua (18) al Accountant, 38(7), VanZante, N R (2007) Helping students see the "big picture" of variance n Jorgensen, D (1998) Cost classification studies: Using federal tax law to n (19) va analysis Management Accounting Quarterly, 8(3), 39-40,42-47 fu ll subsidize building costs The Tax Adviser, 29(2), 78-76 oi m (20) Mak, Y T., & Roush, M L (1994) Flexible budgeting and variance analysis in nh at an activity-based costing environment Accounting Horizons, 8(2), 93 Hoffman, T (1999) Profit centers vs cost centers Computerworld, 33(31), 47 (22) Portz, K., & Lere, J C (2010) Cost center practices in Germany and the united z (21) z ht vb k Journal of Business, 25(1), 45-51 jm states: Impact of country differences on managerial accounting practices American om l.c gm n a Lu n va y te re th 44