Advanced Management Accounting

ASSIGNMENT BRIEF

Assignment Question

 

David McDonald, financial analyst for Game Shop, Inc. (GSI), had just hand-delivered invoices to ExcitoVision, Inc. (EVI), one of GSI’s largest customers. He did not have to make such deliveries often, and he hated the task, but he thought this trip was necessary to keep EVI happy. EVI had always been a difficult client to deal with, but the relationship had become much more prickly since GSI had accidentally over-billed EVI for almost $1 million in a recent quarter. The over-billings occurred because of a series of errors, particularly double billings and incorrect calculations of rebates. In fact, GSI almost lost EVI as a customer as a result of this incident. David felt that when he delivered the invoices, he needed to greet the EVI managers “with a bow, and roses and chocolates.” In the past few months, David believed that he had made a lot of progress in mending the relationship with EVI and also with some other companies that had suffered because of errors in GSI’s billing system.

 

GSI management knew that the company’s billing system needed to be improved significantly. In early 2010, top management had assigned David the task of improving GSI’s billing process. He had largely completed the first phase of that task. He had designed new processes, conducted a series of training sessions, and started monitoring billing performance using a new “Billings Scorecard” that contained an extensive array of billing-related performance metrics. David hoped that the new, improved billing system would prove to be effective. The goal was perfection. He noted: “Expectations are high; even one mistake can have huge consequences.”

Company background

 

GSI, founded in 2002, was a leading video game servicing house, providing services to video game publishing companies. GSI converted games from template backgrounds, video, and computer code into finished digital products, mostly DVDs and secure downloadable files. GSI also provided related services such as menu creation, international dubbing, and audio enhancement.

 

GSI’s customers, video game publishing companies, developed or licensed video games, and then financed, distributed, and marketed the games around the world. The video game publishing industry was an oligopoly; it consisted of a handful of very large companies that dominated the market, as well as many much smaller, niche companies. Six game publishing companies accounted for 90% of GSI’s revenue.

 

GSI was divided into 17 profit centres or business units (BUs) (see Exhibit 1). 7 of the BUs were organised around customers, 6 of them focused exclusively on the projects of a single, large customer. The other 10 BUs focused on an area of expertise, such as Creative Content Production and International Dubbing, and worked on projects for numerous customers. The BU managers reported to Kevin Brink, senior vice president of Worldwide Operations and Business Execution, who, in turn, reported to the CEO. Functional departments, such as finance, sales and marketing, legal, and human resources, reported directly to the CEO.

 

The video game industry was dynamic. GSI employees had to work hard to stay on top of increasingly complex and rapidly changing game features, specifications, and requirements. GSI had a reputation both for production quality and for being able to tackle difficult projects. Kevin Brink explained:

 

Throughout our business we try to create a culture of excellence. One of the signs on my wall says, “Perfect, that is all.” Our expectation is perfection, because our reputation can be ruined with just one mistake. Six sigma isn’t good enough. We have to operate at 15 sigma, or we go out of business.

 

Every month Kevin’s office published a 50-page Management Review, which was available to all employees on the company’s intranet. The report consisted of dozens of scorecards, focused primarily on product quality. The report created transparency and allowed employees to learn from the reports of failures. Failures were measured and also addressed with a Corrective Action Report (CAR). The CAR outlined the reason for the failure, named the department and/or individual(s) responsible, and prescribed corrective action. CARs linked to an individual employee became part of that employee’s permanent record.

 

Kevin also managed a World Wide Knowledge Base that gave employees around the world access to the most recent work instructions, checklists, forms, and policies. He discouraged employees from sending outdated emails or storing outdated instructions on their PCs. Often when CARs were issued, the failure was at least partially addressed by updating instructions in the Knowledge Base. Kevin believed in knocking out failure modes with smart controls, or, as he explained, “I minimize discretion so that a process cannot continue until the right choices are made. I try to force things to be right.”

Billings and revenue recognition

 

GSI project managers (PMs) were responsible for managing customer projects from start to finish. Their responsibilities included billing. Most PMs had no financial or technical background. All were high school graduates, and some also had a college degree, usually in a liberal arts field. The best of the PMs were smart generalists who were able to juggle multiple priorities.

 

In addition to the PM, a typical project involved at least eight employees, most of whom had a technical specialty such as video compositing. Projects required quality control personnel as well, usually two focused on the incoming stage of the project and two or three focused on the outgoing stage. Quality control checks were built into the process.

 

GSI’s policy was that no project was to be started without first securing a purchase order (PO) from the customer. The PMs regularly violated that policy, however, with tacit approval from corporate. As one PM explained, “The big customers are temperamental. We don’t want to upset them.” Even starting a project with a PO in hand did not solve all the billing problems. Not all the project contingencies could be foreseen, and overages above the amount specified in the initial purchase order were common in the industry.

 

Revenue was recognized when it was earned. PMs would estimate the amount they would eventually bill for the work that had been done to date and enter it as accrued revenue. Once the project was billed, the amount changed from accrued revenue to an account receivable. Each PM was responsible for tracking time spent on projects, changes to the projects, and overages. Once the project shipped, the PM was also responsible for compiling a billing packet that the billing department sent to the customer for approval and payment.

 

Bills, and in some cases even the billing processes, were tailored to each customer. For example, one customer did not allow overages, so they would not sign a PO until the project was completed. The PO, shipping document, and invoice were all sent to this customer at the same time. In a practice somewhat unique to the industry, many customers were not billed when the project shipped, but were given a period of time to review and approve charges after the project was shipped. The period of time allowed varied by customer. Kevin noted, “Sometimes it’s as difficult to bill the thing as to build the thing.”

Accuracy and timeliness issues

 

Billing accuracy and timeliness had become increasingly important as the company matured. Kevin was concerned that GSI’s reputation for billing was not up to par with its reputation for delivering quality products, and billing problems were causing frictions with important customers. Partly because of the financial reporting and internal control requirements of the Sarbanes-Oxley Act of 2002, most customers were now requesting better invoice accuracy. In addition, as GSI grew, its need for working capital also grew, so it was imperative to get invoices delivered and receivables collected as promptly as possible.

 

Friction with large customers had revealed some billing issues, and there was additional evidence that problems existed. The PM’s accrual estimates could be wildly inaccurate, and there were often several months of accrued revenue sitting on the books. In late 2010, GSI had over $5 million of working capital “trapped in accruals older than 60 days,” almost twice GSI’s average monthly revenue.

The improvement process

 

David was assigned the task of improving the billing system. He was given clear project goals: achieve 98% accuracy in accrued revenue calculations and reduce accruals to a maximum of 30 days of sales. If David’s project was successful, the accrued revenue amount would decrease from over $5 million to $1.3 million.

 

In early 2010, GSI management had a brainstorming session to identify the issues. They found that a lot of controls were missing. As a result, some billings were not being turned in. Many that were turned in were inaccurate. Sometimes customers were double billed. PMs were a major cause of the problems. This was understandable, as Kevin noted, “They are busy people. Sometimes they don’t get all the details right.”

 

To understand all the root causes of the problem, David built a “fault tree” (see Exhibit 2). The purpose of the fault tree was to diagnose the problem in enough detail so that the solutions would follow from the detailed diagnoses. David’s fault tree exercise exposed nearly 100 causes of the inaccuracies and revenue accrual build-ups. These issues could be categorized as system or process issues, customer issues, and management issues.

System/process issues

 

The billing system had several flaws. Billing paperwork could only be submitted once a week, and reports could take upwards of 10 minutes to download onto a PM’s computer. There was also no redundancy in the process. A single employee’s vacation could hold up the entire company’s billing cycle.

 

Theoretically, these issues could be addressed with changes to the system, but both the billing and IT departments were resistant to change. David thought that the billing department’s resistance stemmed both from familiarity and comfort with the existing system and, probably, fear of job loss. Billing department personnel had also been burned once by the IT department when it tried to force a new alpha version of a system on them. This system was untested and full of bugs, so hard feelings had been created. The IT department had always given billing projects low priority. Historically, the IT focus had always been on systems designed to improve operations. Financial systems had always been an afterthought.

Customer issues

 

GSI’s policy was that nothing could be shipped without a PO, but some customers refused to issue a PO. They wanted to make changes along the way and have the bill from GSI reflect what was actually shipped. Even where POs were used, they often quickly became obsolete as changes were made to the work orders. Some customers insisted on a lengthy review process before they would approve a bill even though the order had already shipped. Some projects shipped over a long period of time, upwards of one year, but customers would not accept a bill until the final stage of the project was complete.

 

David accepted that customer behaviour could not be controlled completely, but he also believed that PMs and managers could do more to try to influence customer behaviour. PMs could try to insist on getting a customer PO. They could also try to get authorisation to bill for parts of a job instead of waiting for the entire job to be complete. For example, one BU was able to persuade a customer to pay for international dubbing before the Japanese version, by far the most technical and time-consuming dubbing task, was complete. This shortened the billing cycle on this job from over a year to just four months.

Management issues

 

Perhaps the biggest issue was that many GSI PMs did not track project changes and simply did not turn in billing paperwork in a timely manner. Some just accrued things randomly. For example, they would declare certain tasks as having been completed, forget what they had done in the prior period, and then bill for them again.

 

David discovered several causes of this problem. GSI did not have a set of written billing instructions, and many managers did not know how to use the billing tools available to them. In general, PMs did not understand the importance of correct and timely billing, and often were not aware that there was a problem; they assumed several months of accruals were the norm. Managers were also not terribly motivated to spend time on billing. They were much more focused on production. The problem was aggravated during the busy season when some managers complained that they were already in the office until past 11 p.m. every night making sure orders were shipped. Forced to choose between spending time on shipping or billing issues, they chose shipping.

 

While some of the problems could be seen as failures of specific individuals, David decided to focus on improving the process, rather than focusing on specific individuals’ failures. He provided training sessions that included instruction on billing and time management, and he added detailed billing instructions to the World Wide Knowledge Base.

Billings Scorecard

 

To focus attention on billing performance, David developed a new “Billings Scorecard,” a monthly report that tracked each BU’s billing performance. David hoped the Billings Scorecard would provide increased visibility about billing performance. Many PMs, and even their bosses, had not cared about billing-related performance in large part because it was not measured or reported. He noted, “We are metrics centric in our culture.” David hoped that the scorecard would motivate better billing performance and, in the end, provide the basis for assessing the overall success of his project.

 

The Billings Scorecard (see Exhibit 3) rated each BU’s billing performance in terms of four measures (described below). David converted each of the scores into a 0-to-4-point scale, or “grade.”

1.          Percent of sales invoiced = monthly dollars invoiced/monthly dollars sold

 

A perfect score of 1 would mean that every dollar sold was also invoiced. This measure was converted into a grade by multiplying by 4.

2.          Adjusted number of weeks of sales accrued = accruals/(3 months of sales/13) − approval delay

 

A week of sales was approximated using a 13-week average to smooth the value. The measure was adjusted by an approval delay factor that was specific to each customer. Most customers had an approval delay built into their payment systems that allowed them a certain period of time to approve bills before they could be officially billed. The adjusted number of weeks accrued was calculated by subtracting the weeks a customer was allowed for approval from the number of weeks accrued. For example, if a BU had six weeks of sales accrued, but their customer was allowed three weeks to approve bills, the BU’s adjusted weeks of accruals would be three (i.e. 6 − 3). BUs were allowed one week of slack. For each additional week or fraction thereof, one grade point was subtracted from a perfect 4.0 to convert the measure into a grade. So using the example above, a score of 3 would produce a 2.0 or C grade (i.e. 4 − (3 − 1)).

3.          Percent of sales shipped without a PO = sales shipped without PO/sales shipped

 

This measure was only available for the five BUs that used GSI’s standard order management system. A perfect score for this measure would be 0; i.e. nothing shipped without a PO. The measure was converted to a grade by subtracting it from 1 and multiplying the result by 4.

4.          Percent of accruals less than 30 days old

 

This measure was a rough estimate of accrual aging. A perfect score of 100% (or 1 in decimal points) would mean that all of the accruals on the books were less than 30 days old. The measure was converted to a grade by multiplying the decimal score by 4 (i.e. 75% or 0.75 would yield a score of 3).

 

The four grades were weighted equally to produce an overall average. The scores for each BU were published in an email message that was distributed to all BU directors, vice presidents, and senior vice presidents.

Detention

 

The managers of BUs with a grade of C and below (less than or equal to a 2.0 grade) were called to a “detention” meeting with Tyler Pizer, GSI’s vice president of finance. Kevin and David also attended these meetings. During the detention meetings, the participants went through each accrual in detail to determine what was causing a delay. If the delay was caused by client behavior, the problem was noted and communicated to the sales department. If it was caused by managers who were “too busy to bill,” David would seek a commitment from the BU director to bill during the current period. Sometimes meeting participants uncovered “phantom” accruals, such as a project that had already been billed or a non-billable project with no accruable value.

 

Despite the punitive nomenclature, detention meetings were intended to be productive. Sometimes grades were adjusted if it was determined that the poor grades were either caused by incomplete information or were not the fault of the BU employees. David explained,

 

The purpose of the detention meetings is to understand and correct the issues in the business unit. The Scorecard is a dialogue opener. In fact, often after discussing a particular BU’s performance during detention, we realized that we needed to make a grade change. Sometimes they didn’t deserve the D because we were missing the right information. The detention discussions are part of the measurement system analysis.

 

For example, in June, the BU for Customer 7 received a D grade, mostly because of its very low score on Measure Number 4 (percent of accruals less than 30 days old). But the BU director, Quinton Ruiz, explained that though there was a low percentage of accruals less than 30 days old, 100% of accruals were less than 60 days old. “We fell a little bit behind because of the busy season, but it hasn’t spun too far out of control.” The BU’s grade was adjusted upward by removing the offending items from the calculation.

 

Managers of the Creative International Menu BU complained that it was not possible for them to improve their grade on Measure Number 4. The BU built menus several months in advance of a project completing, but most customers insisted on receiving the bill for menu charges together with the final project. David agreed to factor the menu charges out of Measure Number 4 in the future.

 

The Localization BU had similar issues. They could not bill until an entire project with dozens of languages and elements was complete, but they recognised accruals language by language, piece by piece. Tyler and David ultimately decided that due to the nature of their work, the Localization BU could not be expected to earn a grade above 2.0; it was acceptable for them to have significant unbilled accruals.

 

Sometimes the detention process uncovered simple clerical errors. One BU called into detention had actually turned in a box of invoices that was misplaced by the billing department, so their grade was also adjusted upward.

P-CARs

 

David had one other motivational tool at his disposal; he could issue P-CARs (Process Corrective Action Reports) to managers who made billing errors. P-CARs were used to identify software glitches and broken procedures. The P-CARs described where a process went wrong, who the responsible parties were, and what corrective actions should be prescribed. Unlike CARs, which were administered by the human resources department, P-CARs were not noted in an employee’s personnel file. The focus of a PCAR was on the process, rather than the person. Still, no one who was issued a P-CAR was pleased about it.

 

At the time of the case, David was issuing an average of a few P-CARs per month. He expected that number to decline over time as the broken elements in the processes were repaired. Eventually, he expected most of the errors to come from human mistakes more than from software or process design flaws.

Early results

 

David was generally pleased with the early results of his billing process improvements and, in particular, the BU managers’ responses to the scorecard. He said:

 

Their first reactions might be defensive, but they really do want to understand. They are curious. They want their metrics to go up, and they are intelligent enough to realise that they need to understand the metrics to improve them.

 

David expected that the scorecard grades would eventually be used as a “bonus modifier.” That is, the grades would be considered by managers in making their judgements about performance. In normal economic conditions, PMs earned an average annual bonus of 20% of salary. However, because the recession of 2008–2009 had adversely affected GSI’s performance, nobody within the company had earned any bonuses in the last two years.

 

In the three months since David had implemented the scorecard and related processes, deferred revenue accruals had dropped by half. Billing error rates had dropped to 0.3%, much lower than the 15% error rates of a year earlier. David expected that billing grades for the following month would be improved, partly because the busy season was over, but mostly because the GSI’s CEO had warned BU directors that there would be “dire consequences” if their grades did not increase.

 

David knew that his mission was far from being complete. The scorecard was still new, and he was open to suggestions for refinements. He still wondered if the scorecard was built on the best measures, and if it made sense to weight them all evenly. He was particularly concerned about Measure Number 1 because it was distorted by seasonal sales spikes. For example, the BU for Customer Number 5 had managed to increase its grade to a B− in August, but David knew the improvement was mostly due to declining sales and lagging invoices, not improved billing practices. More generally, David wondered if he would be able to meet his ambitious quantitative project goals without changing customer behaviours. He also wondered if even achievement of those goals would be sufficient in the long run, as the true objective was perfection.

Required:

1. Discuss why billing performance was inferior compared to production performance.
2. Evaluate the controls that were used to improve billing performance.
3. Propose modifications to the controls used to improve billing performance. Formulate specific recommendations.

 

The report should be structured as follows:

 

• Title page
• Executive summary
• Table of contents
• Introduction
• Body of the report
• Conclusion
• List of references
• Appendices may be included for diagrams (which are appropriately referenced)

 

Leadership Term Paper Report Writing Help

The instructions ask for specific pieces of information. The clearest way for me to see that you’re providing the required information is for you to use the outline in the instructions as a template, presenting your responses in a way that follows the numbers and letters of the outline rather than in flowing paragraphs.
The instructions say to provide both 3 and 4 concepts for each part of the leadership process (leader, follower, situation). You only must provide 3.
When choosing a concept, you can be as broad or as narrow as you like. For example, when learning about the situation, we learned about the culture at the broad, national level, culture at the more narrow, organizational level, and how culture affects specific interactions like conversations. Any of those could be used.
The concepts you choose don’t need to come from a particular part of class. For example, we learned about personality when we learned about the leader, but followers have personality, too, so you can talk about personality as a concept that applies to your follower if that’s what fits best for you.
In previous classes, the most points lost in this paper are lost from the final question. You will have discussed 9 concepts in the 3 parts of question 2. All 9 of those concepts must be incorporated into your response to question 3. If you underline them as the instructions say, then you and I both will be sure that you used them all.
Also, what you say about the concepts in question 3 can’t simply be a restatement of what you said in question 2. What I want to see in question 3 is your ability to integrate the information together. For instance, if you use personality as a concept applied to your follower in question 2 and you use organizational culture as a concept applied to the situation in question 2, then in question 3 you might discuss how your follower’s personality fits or doesn’t fit the organizational culture and why that matters for your leadership.
There is no required length for the paper. What matters is that you cover all the parts that need covered

Cultural Influences on Development

STEP 1: Find a person between the ages of 40 and 65 who is from a different cultural background as yourself—someone who themselves or their parents were born outside of your own birth nation. They should be unrelated to you. Keep their information confidential by using pseudonyms, unless they are okay with their information being shared with the class. Include a short introduction detailing their gender, approximate age, occupational status, and cultural background. If you have permission from the interviewee, you may record the interview and post the audio or video into the discussion.
What is your best childhood memory and why?
How does your culture view aging—including things like menopause?
How are the older adults viewed in your culture?
How are marriage and divorce viewed in your culture?
How would you describe the relationship between parents and children in your culture? What is parenting like?
In what ways do you think your cultural background most affected your development?
What is a goal that you would like to accomplish in the next five years and why?
Who is the first person that comes to mind when you think of a role model?
What is a piece of advice that you would offer to someone younger than you?
How is life similar from when you were a teenager as compared with life for teens today? Would you want to trade places with today’s teenagers and live in the world they have grown up in rather than the way that you grew up? Why or why not?
What physical changes have you experienced since your 30s?
In your opinion, how has society changed since your 30s?
Have you noticed a change in how you think since being 40? What about your memory?
Do you think more or less about what happens after death as you grow older

Organisational models

Requirements for an essay
Assessment is an essay of 3,500 words focused on a specific issue of leading educational organizations related to a work place setting most relevant to you professionally enabling the demonstration of a critical understanding of theory and applying this to your current and/or future education leadership and management practice and/or research.
(b) critically discuss theories, approaches, principles and/or skills that they wish to develop in the future around the theory or research about leading educational organizations, based on the learning acquired in the module.