PRACTICE NOTE Maturity of Cost Management Systems in Organisation

By Rajendra Patil and Anil Kshatriya

Cost accounting is generally viewed as a manufacturing industry specific function. The service industry gives lesser emphasis on the adoption of mature cost management systems. Business managers across industries tend to assume that since the price is decided by the market, there is little need for investing time and resources in creating and maintaining elaborate costing systems.

Irrespective of whether there is a statutory requirement for statutory reporting of costs (as in the case of India, Pakistan and Bangladesh), very few organisations undertake the study of maturity of their prevailing cost management systems.

This study shows that Activity Based Costing (ABC) and Activity Based Management (ABM) are of greater significance for organisations who aspire to remain relevant and profitable in today’s hyper competitive business environment.

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