factors impact to the implementing of management accounting in startup in ho chi minh city

MINISTRY OF INDUSTRY AND TRADE INDUSTRIAL UNIVERSITY OF HO CHI MINH CITY NGUYEN HUYEN TRANG FACTORS IMPACT TO THE IMPLEMENTING OF MANAGENT ACCOUNTING IN STARTUP IN HO CHI MINH CITY Major

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MINISTRY OF INDUSTRY AND TRADE

INDUSTRIAL UNIVERSITY OF HO CHI MINH CITY

NGUYEN HUYEN TRANG

FACTORS IMPACT TO THE IMPLEMENTING OF MANAGENT ACCOUNTING IN STARTUP

IN HO CHI MINH CITY

Major: ACCOUNTING Code: 60.34.03.01

MASTER THESIS

HO CHI MINH CITY, 2022

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This M.A thesis was completed at Industrial University of Ho Chi Minh City

Science supervisor: Ph.D Tran Ngoc Hung: This MS thesis was presented at Industrial University of Ho Chi Minh City date month year

The Council assess of Master thesis include:

1 - Chairman 2 - Reviewer No 1 3 - Reviewer No 2 4 - Commissioner 5 - Secretary

ACCOUNTING AND AUDITING

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THE DUTY OF THE MASTER THESIS

Full name: NGUYEN HUYEN TRANG Code: 17001061 Date of birth: 17/04/1993 Address: DakLak Major: Accounting Code: 60.34.03.01

I MASTER THESIS NAME:

Factors impact to the implementing of management accounting in startup in Ho Chi Minh City

MISSIONS AND CONTENT:

Determine the factor impact to the implementing of management accounting in startup in Ho Chi Minh City

Measure the level of each factor

Basing on the researching results, the author suggests solutions to enhance the possibility of management accounting application in startup in Ho Chi Minh City for improving their performance

II DATE OF DELIVERY: The decision No 1874/QĐ-ĐHCN, October 14th, 2019

III TASK COMPLETE DAY: IV SCIENCE SUPERVISOR: Ph.D Tran Ngoc Hung

DEAN FUCULTY OF ACCOUNTING AND AUDITING

HO CHI MINH CITY

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Sincere thanks to the teachers in the Dean of the Faculty of Accounting and Auditing, Dr Tran Ngoc Hung - Principal Lecturer in the Accounting and Auditing Faculty of the Industrial University of Ho Chi Minh City, the Graduate School of the Industrial University of Ho Chi Minh City has guided and created favorable conditions for the writer to complete the thesis

Thank you to the Board of Directors, teachers of the Industrial University of Ho Chi Minh City for creating all favorable conditions for the writer to complete the thesis I would like to thank my parents, colleagues and friends for their encouragement and encouragement throughout the process of writing this thesis

The author sincerely thanks!

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ABSTRACT

This study aims to find out and measure the level of factors affecting the applicability of management accounting techniques in startups in Ho Chi Minh City Data was collected using both quantitative and qualitative methods First, in general research, qualitative methodology was used to find out factors (variables) that can impact the applicability of management accounting techniques in startups in Ho Chi Minh City Second, in detailed research, all variables are measured using a quantitative method by collecting data through sampling and sending questionnaires 300 questionnaires were sent to chief accounts, financial directors, managers and only 236 questionnaires met the criteria for the data analysis The study used a mixed research design approach-a procedure for collecting, analyzing, and “mixing” both quantitative and qualitative research and methods in a single study to understand the research problem Results show that 5 factors affect the applicability of management accounting techniques in startups in Ho Chi Minh City These factors are firm size (FS), CEOs (CE), business strategy (BS), investor (IV), cultural (CL) Based on the results of the study, enhancing the application of MA in the startups should depend mainly on the role of major investors, followed by CEOs skills, perception

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DECLARATION

I hereby declare that this is my own research work The research results and conclusions in the thesis are honest, not copied from any source and in any form References to sources (if any) have been properly cited and cited

M.A CANDIDATE

(Signature)

Nguyen Huyen Trang

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TABLE OF CONTENTS

TABLE OF CONTENTS iv

LIST OF FIGURES vii

LIST OF TABLES viii

ABBREVIATIONS ix

INTRODUCTION 1

CHAPTER 1 LITERATURE REVIEW 5

1.1 Oversea key research 5

1.3 Gap research and the aim of study 14

1.3.1 Determining the gap research 14

1.3.2 The aim of study 14

CHAPTER 2 THEORETICAL FOUNDATIONS ABOUT MANAGEMENT ACCOUNTING AND FACTOR IMPACT TO THE IMPLEMENING OF MANAGEMENT ACCOUNTING IN STARTUP 16

2.1 Management accounting overview 16

2.1.1 Management accounting concepts 16

2.1.2 The role and function of management accounting 17

2.1.3 Content of management accounting 18

2.2 Characteristics of startup 22

2.2.1 Startup concept 22

2.2.2 Characteristics of startup 232.2.3 Current disadvantages, advantages when implementing management in startup 23

2.3 Factor impact to the implementing of management accounting in startup 24

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CHAPTER 4 RESEARCH RESULTS AND DISCUSSION 43

4.1 Quantitative research results 43

4.1.1 Test the reliabilities of scales 43

4.1.2 Exploratory factor analysis 48

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vii

LIST OF FIGURES

Figure 2.1 Figure of factors influencing MCSs according to research by Samagaioa et al (2018) 25Figure 2.2 Figure of factors influencing MCSs according to research by Crespoa et al, (2018) 26Figure 2.3 Figure of factors influencing MCSs according to research by Davila and Foster (2007) 27Figure 3.1 Research framework diagram 34Figure 3.2 Process research diagram 35Figure 3.3 Summary of factor affecting the application of management accounting in start-ups in Ho Chi Minh City 39

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viii

LIST OF TABLES

Table 4.1 Reliability Statistics of Firm size 43

Table 4.2 Item-Total Statistics of Firm size 43

Table 4.3 Reliability Statistics of CEO 44

Table 4.4 Item-Total Statistics of CEO 44

Table 4.5 Reliability Statistics of business strategy 45

Table 4.6 Item-Total Statistics of business strategy 45

Table 4.7 Reliability Statistics of investor 46

Table 4.8 Item-Total Statistics of investor 46

Table 4.9 Reliability Statistics of cultural 46

Table 4.10 Item-Total Statistics of cultural 47

Table 4.11 Reliability Statistics of the possibility of implementing management accounting in Startup in Ho Chi Minh City 47

Table 4.12 Item-Total Statistics of the possibility of implementing management accounting in Startup in Ho Chi Minh City 48

Table 4.13 KMO and Bartlett's Test result 48

Table 4.14 Total Variance Explained result 49

Table 4.15 Rotated Component Matrix result 50

Table 4.16 Correlations result 51

Table 4.17 Coefficients result 52

Table 4.18 Model Summary 53

Table 4.19 Anova analysis 53

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ix

ABBREVIATIONS

ABC Activity based costing

ACCA Chartered Certified Accountant

CEO Chief Executive Officer

CVP Cost volume profit

EFA Exploratory Factor Analysis

IFAC International Federation of Accountant

IMA The Institute of Management Accountants

MACs Management Accounting and Controls

MAPs Management Accounting Practices

MAS Management Accounting Systems

MCSs Management Control Systems

PEU Perceived Environmental Uncertainty

SMA Strategic Management Accounting

SMEs Small and Medium-Sized Enterprises

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According to a Global Entrepreneurship Monitor (GEM) report, a business-based ecosystem assessment and 12 index: (1) Entrepreneurial Finance, (2) Government Policies: support and relevance, (3) Government Policies: Taxes and Bureaucracy, (4) Government entrepreneurship Programs, (5) Entrepreneurship Education at School Stage, (6) Entrepreneurship Education at Post School Stage, (7) R&D Transfer, (8) Commercial and Legal Infrastructure, (9) Internal Market Burdens or Entry Regulation, (10) Internal Market Dynamics, (11) Physical Infrastructures, (12) Cultural and Social Norm In the 2013-2015 period, the Entrepreneurial Finance index for business which located in Vietnam is one of the indicators of change, but this change is negative Specifically, this indicator decreased from 2.4 points to 2.12 points (5 points) In the report of GEM 2017-2018, the Entrepreneurial Finance index for business in Vietnam reached 3.79 points (9 luan van tot nghiep, luan van thac si, luan van cao hoc, luan van tong hop luan van tot nghiep, luan van thac si, luan van cao hoc, luan van tong hop luan van tot nghiep, luan van thac si, luan van cao hoc, luan van tong hop luan van tot nghiep, luan van thac si, luan van cao hoc, luan van tong hopluan van tot nghiep, luan van thac si, luan van cao hoc, luan van tong hop luan van tot nghiep, luan van thac si, luan van cao hoc, luan van tong hopluan van tot nghiep, luan van thac si, luan van cao hoc, luan van tong hop luan van tot nghiep, luan van thac si, luan van cao hoc, luan van tong hop

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points), indicating that the business Entrepreneurial Finance index of Vietnam is one of the indicators of poor and not improved This is considered as one of the main reasons for the high rate of start-up bankruptcy today To improve the financial situation of a start-up business, businesses need to have appropriate business strategies, make quick and accurate decisions, a business plan, and use reasonable capital Beside that, management accounting is an effective tool to support managers in financial management and making economic decisions quickly and reasonably Therefore, startup that want to minimize business risks due to financial problems cannot avoid using management accounting techniques However, startup enterprises have not been fully aware of the role management accounting, which has led to the inability to apply management accounting techniques As a result, the ability of management accounting is not good, business fact financial risks and bankruptcy This makes the rate of startup in Vietnam leave the startup due to financial problems is extremely high, ranked 5/54 country which join GEM This suggests that, nowadays, improving finance for business is one of the urgent requirements to improve the viability of startup Wishing to improve the financial situation and improve the competitiveness of startup, the author research “Factors impact to the implementing of management accounting in startup in Ho Chi Minh City”

2 Research objectives

The purposes of this study are:

To identify and measure factor, which impact to the use of management accounting techniques in startup in Ho Chi Minh City

To discuss and propose some solutions in order to enhance the possibility of implementing management accounting techniques in startup in Ho Chi Minh City

3 Research questions

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5 Contribution of the thesis

- Modeling the factors impact to the implementing of management accounting in startup in Ho Chi Minh City

- By using quantitative methodology, the author determined the measurement and assessment of the factors that impact to the implementing of management accounting in Ho Chi Minh City

6 Structure of thesis

The thesis includes 5 chapters in introduction and appendix:

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Chapter 1: Overview of the use management accounting and related issues

Chapter 2: Theoretical foundations of management accounting and factors impact to the implementing of management accounting

Chapter 3: Research methodology Chapter 4: Findings and discussion

Chapter 5: Conclusions and recommendations

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Through this chapter, the author wants to provide an overview of the thesis-related issue through previous studiex in the world and in Vietnam Then find out the gap to study and prove a part of research problem

1.1 Oversea key research

1.1.1 Overview

Some research about management accounting in different types of businesses

In European countries, research by Juha-Pekka Kallunki, (2008) shows that high portion of Russian firms have adopted some performance measurement and formal control systems, but the adoption rates are lower than those in Western countries Beside that, there are also many authors studying the application of management accounting in European with different fields In Poland, Szychta (2002) presents the scope of application of management accounting concepts and methods in 60 enterprises Author noticed that: “since the early 1990s Polish companies have been implementing methods and techniques of operational management accounting; short-term budgeting, in the form of master budgets for individual responsibility centers, is the most widely used method of accounting for the effects of economic resources management and for accounting methods are used to a greater extent than in smaller companies” The main factors which cause changes in cost and management accounting in Polish companies are increased competition and ownership changes in Polish enterprises In 2010, Ali studies the effects of applying management accounting in manufacturing companies in Istanbul, Turkey The major findings of this study are costing information is most important when manager make pricing decisions The most important three management accounting practices are budgeting, planning and control, and cost-volume-profit analysis luan van tot nghiep, luan van thac si, luan van cao hoc, luan van tong hop luan van tot nghiep, luan van thac si, luan van cao hoc, luan van tong hop luan van tot nghiep, luan van thac si, luan van cao hoc, luan van tong hop luan van tot nghiep, luan van thac si, luan van cao hoc, luan van tong hopluan van tot nghiep, luan van thac si, luan van cao hoc, luan van tong hop luan van tot nghiep, luan van thac si, luan van cao hoc, luan van tong hopluan van tot nghiep, luan van thac si, luan van cao hoc, luan van tong hop luan van tot nghiep, luan van thac si, luan van cao hoc, luan van tong hop

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Decreasing profitability, increasing costs and competition and economic crises are the factors, which significant and positive links to the importance of cost accounting However, the author indicates that new management accounting practices such as strategic planning, and transfer pricing are perceived more important than traditional ones So, Turkey’s companies need to improve themselves in this aspect Cadez & Guilding (2008) examines the effect of strategic choices, market orientation, and company size on strategic management accounting (SMA) and effect of SMA on company performance Authors used structural equation modelling and data collected from a sample of 193 large Slovenian companies to research In addition, the validity of the quantitative data findings has been appraised using qualitative data collected in 10 exploratory interviews This study provides several contributions It provides a conceptual representation of strategic management accounting’s context that extends prior SMA commentaries and draws on quantitative and qualitative empirical data to examine contingency theory based hypotheses concerning SMA By contingency theory, authors identified 4 factors which have relationship with SMA, they are business strategy, deliverate strategy rormulation orientation, market orientation and firm size In addition, another potentially important factor was uncovered by the qualitative interview data, namely the intensity of competition However, research has some limitations Firstly, the proposed model is nevertheless incomplete as there are doubtlessly other significant contingency factors that have not been captured in the model tested Secondly, a shortcoming of the study stem from the use of a single item measure of business strategy

In Asia, research by Duh, et al (2009) on Chinese companies use of 12 management accounting and controls (MACs) indicates that several practices, such as responsibility accounting and cost-volume-profit analysis, remain in common use But the findings also are indication of newer techniques supplanting more traditional ones Besides, there are also many authors studying the application of management accounting in Asia with different fields In 2002, Lin and Yu

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researched on Han Dan Iron and Steel Company in China indicates that the company has adopted a series of management accounting techniques or procedures in its cost control system, including target costing, responsibility accounting, standard costing, flexible budgeting, internal transfer pricing, behavior motivation, performance evaluation, variance analysis, and so on In particular, the system has integrated responsibility accounting and cost control by introducing market mechanisms to substantially reduce production costs and raise profitability The Han Dan experience demonstrates that management accounting can play a positive role in improving business management and profitability in China or other developing countries Nimtrakoon & Tayles (2010) investigate the certain types of management accounting practices (MAPs) that are appropriate to the specific characteristics of Thai companies The study uses survey method to obtain 135 responses from accounting managers of both manufacturing and non-manufacturing industries listed on Stock Exchange of Thailand Perceived environmental uncertainty (PEU), competitive strategy and size were found to have impact on MAPs Firm operating in higher PEU obtain higher benefit from both contemporary and traditional MAPs In line with expectations, firms pursuing prospector strategies perceive higher benefit from contemporary MAPs than those pursuing defender strategies No relationship has been found between competitive strategy and traditional MAPs Larger firms also obtain higher benefit from both contemporary and traditional MAPs than smaller firms The findings confirm the premise that firm’s characteristics reflected in exogenous, strategy, and endogenous variables have influence on the design of management accounting system in organizations Prospector firms and those facing high levels of environment uncertainty should consider increased use of contemporary MAPs Academics and practitioners should note the continuing benefit perceived from traditional MAPs, a feature confirmed in many pieces of international research

Some research about management accounting in Small and Medium-sized Enterprises (SMEs)

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Azudin & Mansor (2017) research on impaction of 3 factors (organizational DNA, business potential, and operational technology) on the application of management accounting practices at small and medium enterprises in Malaysia A total of 310 questionnaires were sent to SMEs in the east coast of Malaysia and 110 were returned However, 8 of them were incomplete and thus, excluded form the final analyses Authors suggest that SMEs could choose any stage of the MAPs to match with their business operation The regression results show that only operational technology (consists of complexity of processing systems, advanced manufacturing technology and total quality management) has a significant positive impact on the MAPs (p-value ¼ 0.005) The other two variables (i.e., organizational DNA and business potential) do not significantly influence the MAPs These findings are inconsistent with the results documented for large companies and thus, future studies are needed to further explore the MAP issues

Some research about management accounting in startup

Sandino (2007) using a survey-based research design, examines the choice of Management Control Systems (MCSs) adoption by 97 startups in the retail industry She finds that all her samples’ companies adopt a set of “basic MCS” including budgets (planning and standards), pricing and inventory control When firms following a cost strategy add managerial tools, they focused on enhancing efficiencies In contrast, when firms following a differentiation strategy, they adopt tools to collect customer information Bustamante (2018) conducted a study to answer the factors that motivate management decisions, whether the capacity and the institution contributed to the formation of strategic management decisions by companies By examining 261 domestic and foreign startups (including 51 countries) participating in a conference program in Chile from 2010 to 2014, the author noted that internal forces, institutional gaps are the factors that influence management decisions at the national and enterprise levels At the same time, there are differences between domestic and foreign enterprise on the impact of these factors The author demonstrates that government-related costs also deserve luan van tot nghiep, luan van thac si, luan van cao hoc, luan van tong hop luan van tot nghiep, luan van thac si, luan van cao hoc, luan van tong hop luan van tot nghiep, luan van thac si, luan van cao hoc, luan van tong hop luan van tot nghiep, luan van thac si, luan van cao hoc, luan van tong hopluan van tot nghiep, luan van thac si, luan van cao hoc, luan van tong hop luan van tot nghiep, luan van thac si, luan van cao hoc, luan van tong hopluan van tot nghiep, luan van thac si, luan van cao hoc, luan van tong hop luan van tot nghiep, luan van thac si, luan van cao hoc, luan van tong hop

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reasonable costs for evaluating strategic management decision Crespo, et al (2018) study about role of internal factors and context as antecedents in the adoption of different types of MCSs Their sample comprised 102 usable responses from Norwegian and Portuguese startups The authors have successfully verified the factors that affect the application of financial MCSs as follows: cultural, international strategy, structure decentralization In another study, Crespo, et al (2018) research about MCSs in Portuguese high-tech startup By 54 usable responses, authors make research to explore how different causal conditions related to internal and external contingency factors combine in explaining the use of MCS, and how these combinations of causal conditions differ when comparing the MCS thar relate to planning with those that relate to evaluation By the cluster analysis and fsQCA, authors examine how external factors (traditional investors, entrepreneurial investors, environmental heterogeneity) and internal factors (cost leadership strategy, differentiation strategy, structure decentralization) impact on adoption total MCS, planning MCS and evaluation MCS in starup

Some research about factors that impact to the implementing of management accounting in startup

Reid & Smith (2000) use a large sample research design (150 companies interviewed) of Scottish microfirm in period 1994-1998 The study’s underlying hypothesis relates the timing of contingent events (cashflow crises, shortfalls of finance and innovation) to the adoption of various management accounting systems Correlation analysis is applied to test this hypothesis They find that it has highlight significant and noteworthy associations between the timing of events and the timing of changes in the firm’s accounting and management practices Granlund & Taipaleenm¨aki (2005) use a case study to duty management accounting systems (MAS) in a sample of new economy firm The data collection process is cross-sectional and qualitative (interviews and e-mails) These authors provide some evidence on the sequencing if adoption of accounting systems They find that budgeting is the first to be used; additional accounting system are present only in luan van tot nghiep, luan van thac si, luan van cao hoc, luan van tong hop luan van tot nghiep, luan van thac si, luan van cao hoc, luan van tong hop luan van tot nghiep, luan van thac si, luan van cao hoc, luan van tong hop luan van tot nghiep, luan van thac si, luan van cao hoc, luan van tong hopluan van tot nghiep, luan van thac si, luan van cao hoc, luan van tong hop luan van tot nghiep, luan van thac si, luan van cao hoc, luan van tong hopluan van tot nghiep, luan van thac si, luan van cao hoc, luan van tong hop luan van tot nghiep, luan van thac si, luan van cao hoc, luan van tong hop

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firms with a strong belief about their future success Davila & Foster (2005, 2007) examine the adoption of MAS and budget By survey 78 startup, they find that size, the presence of venture capital (VC) funding, Chief Executive Officer (CEO) experience, how the CEO interprets management accounting systems and the “requirements” of third parties are associated with faster adoption of operating budgets They also provide descriptive statistics on sequencing, and report that budgets are the first managerial accounting system adopted They further find an association between the adoption of operating budgets and company growth

1.1.2 Consideration

Through the research in the world, the author found that previous studies have shown the process and development of management accounting Changes in management accounting can meet the increasingly diverse needs of businesses In addition, although there have not been mana researchers interested in the reality of applying management accounting in startup, however, with the increasing competition in industry 4.0, there are more and more research about applying management control systems and management accounting to help businesses exists and develops

1.2 Vietnam key research

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- The higher the level of market competition of small and medium enterprises, the higher the feasibility of applying management accounting at enterprises

- Enterprises have the characteristics of supporting corporate culture or business-oriented culture that will increase the feasibility of applying management accounting

- The larger the enterprise scale, the greater the feasibility of applying management accounting

- When the manager / owner of the company appreciates the usefulness of management accounting technical tools, has knowledge of management accounting tools, needs to use management accounting tools will increase the feasibility of applying management accounting

- When the cost of technology investment for organization of management accounting or consulting costs from low experts will increase the feasibility of applying management accounting

- If the enterprise is applying one of the strategies such as producing specialized goods and services at the request of customers, providing after-sales support services or always creating quick changes in production output then the ability to apply management accounting is increased

V.Tam (2017) research on factors affecting cost management and cost accounting in small and medium-sized manufacturing enterprises in Hanoi Through the survey, luan van tot nghiep, luan van thac si, luan van cao hoc, luan van tong hop luan van tot nghiep, luan van thac si, luan van cao hoc, luan van tong hop luan van tot nghiep, luan van thac si, luan van cao hoc, luan van tong hop luan van tot nghiep, luan van thac si, luan van cao hoc, luan van tong hopluan van tot nghiep, luan van thac si, luan van cao hoc, luan van tong hop luan van tot nghiep, luan van thac si, luan van cao hoc, luan van tong hopluan van tot nghiep, luan van thac si, luan van cao hoc, luan van tong hop luan van tot nghiep, luan van thac si, luan van cao hoc, luan van tong hop

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the author has identified 5 factors affecting management accounting at small and medium manufacturing enterprises The above factors include: Management requirements of enterprises, organization of accounting, qualifications of accounting staff in cost management and cost, technological process, law and policies

In 2017, T Yen currently studies the factors affecting the use of management accounting in enterprises in Binh Dinh province The author conducts quantitative research Through 75 satisfactory questionnaires, the author has identified and measured the impact of 3 factors on the application of management accounting: enterprise size, qualifications of accountants and the perception of the owner/operator enterprises Accordingly, the larger the enterprise, the higher the ability to apply management accounting Large-scale enterprises are represented by revenue, number of departments, branches and number of employees Accounting qualifications have a positive influence on the application of management accounting at enterprises in Binh Dinh province Accordingly, accountants with qualifications from intermediate, college, Bachelor of Accounting, accountant, will increase the feasibility of applying management accounting At the same time, the feasibility of the application of management accounting increases when the owner / operator has an understanding and appreciation of the effectiveness of the management accounting technical tools and accept high cost of investment and management accounting

T Tuan (2018) studied the factors affecting the application of management accounting in firms The author relies on random theory to explore and explain the influence of factors on the application of management accounting in Vietnam firms Factors include competitive pressure, decentralization, firm size, professional members 'ownership, information technology, production technology, managers' interest in accounting, government and qualifications of management accounting staff

Some research about the application of management accounting in startup

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According to N Hien (2018), research on some management accounting issues in startup in Vietnam has shown some of the factors that have not been applied in startup in Vietnam Factors analyzed include enterprise size, leadership perspective, management capacity, human resources However, this study has not conducted empirical research to demonstrate that these factors affect the application of managerial accounting in startup in Vietnam

L.Huyen (2018) studies the issue of financial management for startup with the desire to help these businesses overcome the difficult start The author once again reaffirmed the important role of financial management in the survival problem of an enterprise: "Starting a small start even needs the smallest financial management." The author also mentioned some mistakes that startup may encounter in the process of financial management such as: Over reliance on credit, confusion between personal finance and corporate finance, taking personal finance to make up for losses, there is no clear revenue and expenditure system and not enough cash reserves Based on these mistakes, the author proposes some recommendations to limit mistakes However, to implement the above proposals, there is a support tool to help businesses make reasonable and timely decisions

N Suong (2018) conducted a study with a view to deepening the understanding of the current situation and orienting to apply management accounting in Vietnam enterprises in the coming time Based on the theory and inheritance of previous studies, the author stated that the organization of management accounting in Vietnamese enterprises is still inadequate and does not meet the demand for information to support manager decision making For management accounting to operate in Vietnam, the author calls for the support and coordination of cooperation between the State, training and research and management accounting units

1.2.2 Consideration

In Vietnam, the authors study the history and development of management accounting in Vietnam, offer some models of adoption management accounting for

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different type of business and different industries However, there is a lack of qualitative and qualitative research about the factors, which impact the application of management accounting at startup; and offer some solution to improve the ability of apply management accounting in startup

1.3 Gap research and the aim of study

1.3.1 Determining the gap research

By synthesizing and considering prior research in Vietnam and in the world, we have considered that the implementing management accounting in Vietnam SMEs plays a vital role in the successful management (T Hung, 2016) It should contribute to enhance the capable management in Vietnam startup, but in fact the rate of practical use of management accounting in Vietnam SMEs is still exceptionally low, especially for startup

Nowadays in Vietnam there had been some research about the use of management accounting in startup but not use the quantitative and objective methods, so the recommendations still have some limitation due to subjective thinking basing on viewpoint and experiences of researchers

1.3.2 The aim of study

By determining the gap research above, the author inherit and conduct the research about the factors that impact to the implementing of management accounting in startup in Ho Chi Minh City On the other hand, the study will measure by reliable methods about the level of impact of each factor The study will be conducted with steps as below:

1st step: conducting research about current situation of the used of management accounting in startup in Ho Chi Minh City

2nd step: surveying and identified factors impact to the implementing of management accounting in startup in Ho Chi Minh City

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MANAGEMENT ACCOUNTING AND FACTOR IMPACT TO THE IMPLEMENING OF MANAGEMENT ACCOUNTING IN STARTUP

2.1 Management accounting overview

2.1.1 Management accounting concepts

In ordinary language any system of accounting, which assists management in carrying out its functions more efficiently may be termed as management accounting The Institute of Chartered Accounting of England and Wales has stated that “any form of accounting, which enables a business to be conducted more efficiently can be regarded as management accounting” On the same lines, Antony (1956) has stated, “management accounting is concerned with accounting information which is useful to management” However, these definitions are very general in nature Some of the important specific definitions are as follow:

The Institute of Cost and Management Accountants (ICMA), London has defined management accounting as the “application of professional knowledge and skill in the preparation of accounting information in such a way as assist management in the formation of policies and in the planning and control of the operation of the undertakings” The American Accounting Association (AAA) has defined as follows: “Management accounting is the application of appropriate techniques and concepts in processing historical and projected economic data of an entity to assist management in establishing plan for reasonable economic objectives in the making of rational decisions with a view towards these objectives” In 2008, the Institute of Management Accountants (IMA) updated the definition of management accounting as follows: “management accounting is a profession that involves partnering in management decision making, devising planning and performance managements systems, and providing expertise in financial reporting and control to assist management in the formulation and implementation of an organization’s strategy”

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Summary, management accounting is a profession that involves making economic decision of managers Management accounting analysis past data to planning, performance evaluation and operational control to assist management in building and implementation of organization’s strategy

2.1.2 The role and function of management accounting

International Federation of Accountant (IFAC) (1998) defines management accounting as a specialized field of accounting which focuses on information for managerial planning, evaluating and controlling in organization Management accounting refer to tools and techniques specifically designed to provides information that helps managers control activities within the firm, and to decide what products to sell, where to sell them, how to source those products, and which manager to entrust with the company’s resources (IFAC, 1998 and Dennis Caplan 2006) Management accounting literatures continue to suggest the benefits of adopting management accounting in improving business sustainability (Azudin, 2018) by provide various tools, techniques and valuable internal information including for budgeting, profit planning and performance evaluation and operational control

- Planning: for example, deciding what product to make, where and when to make them Determining the materials, labor, other resources that needed to achieve desired output In not-for-profit organizations, management accounting decides which program to fund

- Performance evaluation: evaluating the profitability of individual products and product lines Determining the relative contribution of different managers and different parts of the organization In not-for-profit organizations, management accounting evaluating the effectiveness of managers, departments and programs Operational control: for example, knowing how much work-in-process in on the factory floor, and what stages completion to assist the liner manager in identifying bottlenecks and maintaining a smooth flow of production

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2.1.3 Content of management accounting

Management accounting system is information system, which provides information to enhance making decisions for creating value and controlling resources It helps to make a comprehensive information system including regular information and special information for evaluating, measuring, planning and controlling one or more specific product or service So, management accounting system is impossible to provide all kind of information management, instead of, some kinds of information must be gone seeking advisory from outside parties (Langfield-Smith, 2012)

According to the Chartered Certified Accountant (ACCA) (ACCA F5 – 2016) the content of management accounting can include four parts: (i) specialist cost and management accounting techniques, (ii) decision-making techniques, (iii) budgeting and control, (iv) performance measurement and control

2.1.3.1 Specialist cost and management accounting techniques

Specialist cost and management accounting techniques provide cost information based on strategic information and marketing to held business develop and create a sustainable competitive advantage According to ACCA (ACCA F5 – 2016) management accounting techniques include: activity-based costing (ABC), Target costing, and so on

 Activity based costing (ABC) is a costing method that first assigns costs to

activities and then to goods and services based on how much each good or service uses the activities Four steps are used to determine the cost of goods and services using ABC: (1) Identify and classify the activities related to the company’s produce; (2) Estimate the cost of activities identified in step 1; (3) Calculate a cost-driver rate for each activity; (4) Assign activities costs to products

 Target costing is a pricing method designed to enhance a company’s ability

to compete, especially in markets for new or emerging products It’s the process of determining the maximum allowable cost for a new product and then developing a

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Cost volume profit (CVP) analysis helps managers understand the relationships

among cost, volume and profit It focuses on how profits are affected by five factors: selling prices, sales volume, unit variable costs, total fixed costs and mix of products sold Because of that, CVP analysis is a vital tool in many business decisions It includes what products and services to offer, what price to charge, what marketing strategy to use, what cost structure to maintain

Limiting factor refer to the constraints in availability of production resources (e.g.,

shortages in labor, machine hours or materials) that prevent a business from maximizing its sales Once a scarce resource is identified, the company can carry out a limiting factor analysis using 4 steps Firstly, calculate the contribution per unit for each product (contribution per unit = selling price – total variable cost) Secondly, Calculate the contribution per unit of the scarce resource for each product (contribution per unit of the scarce resource = contribution per unit / unit of limiting factor) Thirdly, rank the products in order of the contribution per unit of the scarce resource (product which earn the highest contribution for every unit of the scarce resource, is given priority in the production plan) Finally, allocate resources using the ranking

Pricing decisions is the process of determining the “right” price for a good or service An awareness of the concept of elasticity can assist management with pricing decisions Price elasticity of demand is a measure of the extent of change in market demand for a good in response to a change in its price It is measured as:

(2-2)

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In circumstances of inelastic demand (if the absolute value is less than 1), prices should be increased because revenues will increase, and total costs will reduce (because quantities sold will reduce) In circumstances of elastic demand (if the absolute value is greater than 1), increases in prices will bring decreases in revenue and decreases in price will bring increases in revenue Management therefore has to decide whether the increase/decrease in costs will be less than/greater than the increases/decreases in revenue

There are some methods in pricing decision They follow:

Cost plus pricing involves adding a markup to the cost of goods and services to arrive at a selling price It is measured as:

Selling price = (1 + Markup percentage) × Cost (2-3)

Market penetration pricing is a policy of low prices when a product is first launched

in order to achieve high sales volumes and hence gain a significant market share

Market skimming pricing involves charging high prices when a product is first

launched and spending heavily on advertising and promotion to obtain sales so as to exploit any price insensitivity in the market As the product moves into later stages of its life cycle, prices can be reduced in order to remain competitive

2.1.3.3 Budgeting and control

Budgetary systems and types: a budget is a detailed plan, expressed in quantitative

terms, that specifies how an organization will acquire and use resources during particular period time A budget system comprises the procedures used to develop a budget It has 5 purposes: planning, facilitating, communication and coordination, allocating resources, managing financial and operational performance, evaluating

performance and providing incentives

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2.1.3.4 Performance measurement and control

Management information systems: The aim of the information system in a

business is to provide management with the information that they need in order to take good decisions and in order to monitor the progress of the company Information systems include three level: strategic planning, management control and operational control The aim of the management information system is to convert data into information that is useful for managers at all levels but is particularly useful at the level of management control

Performance measurement is a numeric outcome of an analysis that indicates how

well an organization is achieving its objectives These measurements can be used to examine the performance of all aspects of a business, including the accounting, engineering, finance, marketing, materials management, production, research, and sales departments Performance measurement may be divided into two groups: financial performance indicators and non-financial performance indicators

Financial performance indicators analyze profitability, liquidity and risk Changes

in cost structures, the competitive environment and the manufacturing environment

have lead to an increased use of non-financial performance indicators

A balanced scorecard is an integrated system of performance measures designed to

support an organization’s strategy The various measures in a balanced scorecard should be linked on a plausible cause-and-effect basis from the very lowest level up through the organization’s ultimate objectives Balanced scorecard approach to performance measurement emphasizes the need to provide management with a set of information which covers all relevant areas of performance in an objective and unbiased fashion The information provided may be both financial and non-financial and cover areas such as profitability, customer satisfaction, internal efficiency and innovation The balanced scorecard focuses on four different perspectives, as follows: Customer perspective, Internal perspective, Innovation and learning perspective and financial perspective

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In Vietnam, the most popular view is that starting a business is the beginning of a career and creates a foundation for a career According to the latest opinion presented in the Draft Law on Small and Medium Enterprises Support, startup are considered as the process of implementing business ideas, including the process of establishing and operating businesses within 5 years from the date of being granted the first registration certificate, unlisted on the stock market

According to Mr Pham Thanh Hung, Vice Chairman of Cen-group Century Group, Vice Chairman of Board of Directors of Century Real Estate Investment and Development Company (CENNINVEST) - in the program "Cafe startup," startup a new business, so the new factor is considered particularly important

Startup is a new business that establishes, manufactures and supplies products and services that currently are not offered or offered at a low level in the market Startups are often novel, high-risk but have great potential for profit

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2.2.2 Characteristics of startup

In general, startup in Ho Chi Minh city have some specific characteristics as below: - There are many startups who stop at bold, passionate, enthusiastic business ideas and knowledgeable about many areas of operation But they lack the knowledge of financial management (L Huyen, 2018)

- Size: in general, startup which are small companies, looking for suitable business models and have not established the organizational structure (Hong N.T et al, 2017)

The capacity of startup is limited (T Chieu, 2016), (L Huyen, 2018)

2.2.3 Current disadvantages, advantages when implementing management in startup

In general, with stable political regime, almost of startup have not been affected by the change from micro-macro economic policy Moreover, Vietnam increasingly participates in many trade associations such as APEC, ASEAN plus, etc This will create so many business opportunities for startup in Ho Chi Minh City Besides, Vietnam labor forces are young, well-trained in universities, colleges This will help startup will bring new blood into management board of enterprises with reasonable prices Mr Giang, Chairman of the Creative Business Working Group of Private Economic Forum (VPSF) analyzed: Currently technology is very cheap We are inheriting many achievements, the foundation of technology and startup can be tested, applications to solve many problems when starting a business Currently, with the attention of the Government and the authorities, startup not only have a favorable legal environment but also organized a lot of creative startup forums or bright startup create more and more closely, in the right direction and right objects However, there are still some disadvantages due to the global business difficulty, so startup also face to challenges and difficulty The difficulty not only comes from outside but also from inside enterprises due to lack of management capability Such as, the first difficulty is about organizing, connecting quality human resources, luan van tot nghiep, luan van thac si, luan van cao hoc, luan van tong hop luan van tot nghiep, luan van thac si, luan van cao hoc, luan van tong hop luan van tot nghiep, luan van thac si, luan van cao hoc, luan van tong hop luan van tot nghiep, luan van thac si, luan van cao hoc, luan van tong hopluan van tot nghiep, luan van thac si, luan van cao hoc, luan van tong hop luan van tot nghiep, luan van thac si, luan van cao hoc, luan van tong hopluan van tot nghiep, luan van thac si, luan van cao hoc, luan van tong hop luan van tot nghiep, luan van thac si, luan van cao hoc, luan van tong hop

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because most startup have limited capital, not enough to recruit talents In addition, most entrepreneurs have not been fully perfected about skills, knowledge of communication, marketing, market, structure, management accounting skills If there is only a pure platform of technology, it cannot produce a successful products and successful startups

2.3 Factor impact to the implementing of management accounting in startup

Management accounting is a part of Financial MCSs, so the author research, determine the factors that impact to the implementing of Financial MCSs, find answer to question how they affect the implementing of management accounting From the research about startup in the world, the author synthesizes and identified some factor models impact to the implementing of Financial MCSs:

According to the research of Samagaioa et al (2018) about MCSs in Portuguese high-tech startup, the authors tested 5 factors that influence the application of MCSs as follows: traditional investors, entrepreneurial investors, cost leadership strategy, differentiation strategy, structure decentralization

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According to the research of Davila and Foster (2007) about 78 early-stage startups The authors tested 3 factors that influence the application of MCS as follows: According to the research of Davila and Foster (2007) about 78 early-stage startup The authors tested 3 factors that influence the application of MCS as follows: company size, CEOs, venture capital (VC)

Figure 2.2 Figure of factors influencing MCSs according to research by Crespoa et al, (2018)

Application of Financial MCSs Structure

decentralization

International strategy

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Firstly, company size is associated with the presence of management accounting Large firms have the resources to impact more complex management accounting techniques than small firms (Hung, 2016) Most startup are small and medium-sized, so the capital is limited, while to have a good accounting system, especially luan van tot nghiep, luan van thac si, luan van cao hoc, luan van tong hop luan van tot nghiep, luan van thac si, luan van cao hoc, luan van tong hop luan van tot nghiep, luan van thac si, luan van cao hoc, luan van tong hop luan van tot nghiep, luan van thac si, luan van cao hoc, luan van tong hopluan van tot nghiep, luan van thac si, luan van cao hoc, luan van tong hop luan van tot nghiep, luan van thac si, luan van cao hoc, luan van tong hopluan van tot nghiep, luan van thac si, luan van cao hoc, luan van tong hop luan van tot nghiep, luan van thac si, luan van cao hoc, luan van tong hop

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the management accounting system to provide effective information for managers, startup need to invest a big fee to train management accounting staff and other expenses for the application of management accounting So, few startups have the ability to invest for this or if so, it always compares the cost and effectiveness of management accounting (N Hien, 2018)

Secondly, CEOs is also associate to management accounting adoption Experience and their perception of management accounting as good management practice They can vastly and exactly decide if they use information by management accounting techniques Besides that, CEOs have lower adoption of management accounting as likely as management accounting are more likely to be replaced

Thirdly, structure decentralization has a significant positive effect on the adoption

of management accounting (Crespon, 2018; Samagaioa et al, 2018) Structure decentralization related to the interloper of decision making to another levels of management in business In startups, human resource has many limitations, so low-level managers with experience and good knowledge of management accounting are entitled to make decision when startup impact structure decentralization

Fourthly, traditional investor are credit institutions, government institutions, and other external sources which invest startups Startups that are not invested by traditional investors often apply management accounting techniques to evaluate performance

Fifthly, entrepreneurial investor are business angels or venture capital firms as financing sources which invest startups Startups that are not funded by start-up investors often apply management accounting techniques to planning

Sixly, when research about factor cost leadership strategy, there are differences in the results of the author’s research Samagaioa et al (2018) indicated that cost leadership strategy has significant effect on adoption of management accounting This is explained that when startups impact cost leadership strategy, they often use management accounting systems (planning) to support their cost optimization