Comprehensive Study on Strategic Management Accounting Techniques in Jordan Banks

 

Mohammad A. Shehadeh*

Department of accounting, Irbid National University, Irbid, Jordan.

 

ABSTRACT:

There are many types of Strategic Management Accounting Techniques (SMA) that are used in many companies around the world. These techniques are ABC, COQ, SCM, VCC, BSC, EMA, benchmarking, CPA, valuation of customer assets, competitor position monitoring, competitor cost assessment, and customer lifetime value, Life Cycle Costing (LCC),Target cost, Attribute cost. In this paper, we make a comprehensive study on managements cost techniques that are used in Jordan Banks. We held our methodology by questionnaires that have been sent to one of the biggest banks in Jordan in which is the Jordan Housing bank. The results shows that 5 of 15 SMA that have the strong agree of usage, while 2 have partial agree of usage in this bank.

 

 

 

INTRODUCTION:

In last three decades and more. Management accounting has performed distinct steps toward novel dimensions and areas through different types of innovation techniques.

 

These techniques have supervised to make succession in many issues in banks and companies including, minimizing lead-time, innovation in designing process and product, improving quality and enhancing performance, reducing cost.

 

The researches in the field of management accounting operation and practices developments have produced a new way towards the formulation of strategic dimensional training within the strategic management accounting (SMA), in which the most tools of modern management accounting included in this context. There are many benefits will be achieved from adopting SMA

 

techniques in companies like strategic decision making, strategic costing, strategic planning, competitor accounting and customer accounting, and performance and control management [1] -[4].

 

There are many studies in different countries that have been focused on the adoption and benefits derived from strategically management accounting technique. These countries are Jordan, Turkey, Egypt, Italy, Slovenia, U.K., U.S., Australia, Greece and Finland [5-14]. These studies have mentioned a type of techniques that adopted by public companies. On other hand, other studies showed the mount of slow of developed countries to apply some techniques [15]. Actually, they believed that the private companies are more interested in adopting the SMA techniques rather than the public companies.

 

Because of the importance of applying management accounting techniques in private companies and banks, we have decided to explore the extent of usage of the strategic management accounting techniques in Jordan banks.  The aims of this study are: (1) to make a deep study about the usage of SMA techniques that are used by Jordan Banks; (2) to determine the highest and lowest usage of SMA techniques in these banks. We organized this study as follows: section 1 presents introductions, section 2 shows objectives, section 3 presents literature review, section 4 presents data set and the results, and we conclude in section 5.

 

OBJECTIVES:

The aim of this study is to make a deep study on SMA techniques that are used in Jordan banks:

1-  To build a questionnaire and to send it to Jordan Housing bank.

2-  To determine the highest and lowest usage of SMA techniques in Jordan banks.

3-  The answer sheet in questionnaire contains different levels of answering such as (agree, partial agree, not agree, and strong agree).

 

LITERATURE REVIEW:

Al-Khadash et al. [5] have proposed a study on strategic management accounting techniques that are used in Amman industrial companies. Authors have been focused on three types of companies, including, companies under liquidation, companies under foundation phase, and companies have not been traded within Amman Stock Exchange during 2003. They have sent a questionnaire to 56 companies. The results showed that at least one of the following strategic is used in these companies, including, ABC, TQM, and JIT.

 

Sliman S. Alsoboa et al. [16] have proposed a comprehensive study on strategic management accounting techniques that are used in Jordanian Private Industrial Companies (JPIC).  They have sent a questionnaire to 44 companies that own capital more than half a million JD to determine which management accounting techniques are used in them. The results showed that 12 out of 19 SMA techniques are used and adopted by JPIC.  These techniques are COQ, VCC, ABC, EMA, SCM, BSC, competitor cost assessment, benchmarking, CPA, customer lifetime value, valuation of customer assets, and competitor position monitoring.

 

Hanim BT Fadzill Et Al. [17] have proposed a deep research about ABC management accounting technique in Jordanian Manufacturing Companies. The study took from 22/10/2010 to 9/12/2010 in which they have sent a questionnaire to 62 company and made personal interviews with phone calls.  The results showed that 48 companies were not adopted an ABC technique while 14 companies were used this technique.

 

Ramljak et al. [18] have made a deep study on strategic management accounting techniques in Croatia's' companies.   They have sent the questionnaire to largest 400 companies  by sending emails, and making  phone calls. The results after deep analyses  showed that 5.7%  of these companies had used activity based costing technique, 9.1 % of these companies had used life cycle costing, 6.1% of these companies had used environmental costing techniques, and 39.4% of these companies had used quality costing technique.

 

Sliman A. et al. [19] have proposed a comprehensive study on usage of strategic costing techniques on Jordanian Listed Manufacturing Companies (JLMC)). They have sent 91 questionnaires, just sixteen of them were returned and used. The study showed that the rate of responded is considered high and it about 65.5%. The questionnaire aimed to make a deep study on usage of Strategic Costing Techniques (SCT) in JLMC. The results showed that VCC and TC achieved the highest usage, COQ, ABC, and LCC achieved medium usage, while attribute costing achieved the lowest usage. 

 

There are many types of management accounting techniques that are used in many companies in different area of this world. Next we summarize a few of them:

 

•     Life Cycle Costing (LCC):  this technique is based on evaluation of all cost in product life cycle, including, operating, procuring, maintaining, and ultimately disposing [20].

 

•     Cost of quality (COQ): this technique depends on the sum of price that paid to prevent the product of failing-poor quality and to prevent service failure of the product. Also the company determines the amount of this cost to control effectively in order to keep competitive advantage [21].

 

•     Activity based costing (ABC): this technique depends on activities performed by the company in which reflected on the end causes of indirect costs, (more than one cost pool) [22].

 

•     Target costing (TA): this technique is defined as cost management technique for cutting off the over its life cycle by the help of the engineering, production, marketing, research and design, and accounting departments [23].

 

•     Value chain costing (VCC): this technique is called on the internal activities or processes lead to design, market, product, and support, its product and deliver: involving after-sale services. Value chain cost is ate that support and allocation cost to those activities. Also, VCC is used to assist companies in amount reducing time, and costs, developing strategic position, and in evaluates competitive cost [24].

 

•     Attribute costing: this technique mainly is based on the idea of improve the product features to increase customer desirability to the product [25].

•     Strategic cost management (SCM) : in general speak, this technique depends on using of cost information exactly directed at one or more of  four steps of SMT: developing and holding out tactics to implement strategies, formulating strategies, implementing and developing controls to monitor the success of objectives, and formulating strategies [26].

 

•     Competitor cost assessment: this technique mainly is based on estimation contains continually updated forecast of competitor's costs per product [27].

 

•     Customer profitability analysis (CPA):   in general speak, this techniques is fit out a solution to customer profitability by estimating problem and giving the direct solution for it [28].

 

•     Benchmarking: this technique focuses on comparing the practices of organizations  performances  to achieve the goal amelioration. Benchmarking confirms external strategic (ES) about competitors [29].

 

•     Customer lifetime value (CLV): majorly, it is used to estimate the benefits of product from its lifetime value [30].

 

•     Balanced scorecard (BSC): this technique is referred as organization performance can be showed from four different major views.  Two of these views are contributed to improved financial performance for organization and stakeholders. These views are responsible for turn lead to value to the customers, internal business learning and process, and growth business seek to better business processes.

 

METHODOLOGY:

The aim of our work is to make a deep comprehensive study about strategic managements accounting techniques that are used in Jordan banks. The questionnaire was sent to the Housing bank in Jordan. It is the one of the biggest banks in Jordan in which its own capital exceeded 2 billion JD. Our questioner consists of two parts: the first part contains the general characteristics and information of respondents includes education level, job, and experience. In addition, part two include 15 SMA techniques.  The main aim of the second part is to take the information about the usage of these techniques in which it ranged as following: strong agree, agree, not strongly agree, partial agree, and not agree.

 

DATA SET AND THE RESULTS:

In this section we discuss the questioner results.  Table 1 shows the general characteristics and information about the respondents in Housing bank al Housn branch at Jordan/ Alhousn in which it contains two general managers and two financial managers.

 

Table 1. The general characteristics and information about the respondents

 

 

We have built a questionnaire that is a similar to questionnaire mentioned in [16]. Table 2 shows our questionnaire in which it consists of 15 strategic account management techniques that are used in banks. The results shows that Benchmarking, CPA, CLV, LCC, and attribute cost have the strong agree of usage. Furthermore ABC and EMA have partially agree, while the others takes the agree percent of usages.

 

 

Table 2. The percentage of usage for 15 strategic account management techniques in Jordan Housing bank.

CONCLUSION:

The aim of our paper is to make a comprehensive study on managements cost techniques that are used in Jordan Banks. We have sent a questionnaire to biggest bank in Jordan in which is the Jordan Housing bank. The results reveals that 5 out of 15 SMA techniques that are strongly applied in these banks while 2 out of 15 SMA techniques applied it partially. In future we will make a comparative study between Jordan banks and foreign banks in term of strategic management accounting techniques.

 

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