Practical Difficulties in Installing a Cost Accounting System
There is no doubt that cost accounting is a valuable tool for providing in-depth information to the each level of management. This helps them in their strategic decision making process. But, in practical life, there are various obstacles for the installation of costing system such as:
Lack of support from top level management
In order to get maximum benefit from any project, it is necessary it is owned and supported by the top level of the management. If the strategic level management is interested and aware of the benefits of the costing system, it can give approval for the expenditure of the installation of the costing system. If top level is not taking interest in the installation of the costing system, other hierarchy in the organization will also behave unprofessionally for the costing system.
Heavy Cost
The installation of the costing system may require heavy investment. So, a cost benefit analysis is necessary before going ahead. New costing system such as ERP implementation requires heavy investment and also training of the staff also requires training cost. It may result in deviating from the key activities of the business.
Resistance from existing staff
The current staff of accounts and finance department within the organization might be reluctant from using the costing system. Either they have less skill, experience and fear of losing the job. So, a change agent officer must be appointed to properly oversea the implementation of the costing system.
Shortage of Time
The time is money, so existing staff might have to put their existing work aside in order to learn the new costing system. This may result in back-log of the work and delayed in the preparation of various typesof production reports for the management‘s decision making.