Barclay is a universal banks established in 1690 is world's 10 largest banking and financial services group with operations in over 50 countries and around 48 million customers. It is organized with in 2 business clusters comprises corporate and investment banking and global retail banking with 7 business units under these clusters
The major product and services of Barclay are Barclay banks, Retail banks, Private equity, Barclay capital, Barclay card, Barclay wealth, Barclay private client international limited, Barclay corporate. The major competitors of the Barclay are Royal bank of Scotland, HSBC, Lloyds banking group and standard chartered bank. The retail and commercial banking markets are mainly captured by standard chartered, Lloyds bank, royal group of Scotland and Spanish owned Santander. The major policies of the Barclay ids to merge and acquire the banks in Asia and South East Asia to give competition for the standard chartered bank which is the main player in the subcontinent. Customer retention and optimum resource orientation along with considering customers as the primary producers concept with primary emphasis on the customer satisfaction and loyalty .Barclay is also planning to diversification of the banking sectors with aggressive and innovative marketing and technological method.
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The major process of the bank can be divided into three types
Partial decision Model
This model focuses either on the assets and investment decision or composition of the liabilities structure of the organisation. In partial decision model banks and components are modeled separately
Portfolio Theory based Model
This model focuses on both the assets and liabilities of the firm .This model also examine the relationship of the assets and liabilities which helps in efficient selection of portfolio.
Model based on the production of services
The services production model advocates that the production process of banking institutes cannot be properly analyzed on basis of assets and liabilities of the company but according to this model it takes into account both the financial intermediation and the provision of other banking services generated transformation cost which entails the use of real resources both human and technological.
Review of Management accounting
According to the Chartered Institute of Management Accountants (CIMA), Management Accounting is "the process of identification, measurement, accumulation, analysis, preparation, interpretation and communication of information used by management to plan, evaluate and control within an entity and to assure appropriate use of and accountability for its resources. Management accounting also comprises the preparation of financial reports for non management groups such as shareholders, creditors, regulatory agencies and tax authorities". As further management accounting to the areas of strategic management ,performance management and risk management which helps the management accounting personnel act as a strategic partner as to develop practices strategies for the decision making and managing performance of the firm with contribution to frameworks and practices for identifying , measuring ,managing and reporting risks to the achievement of the objectives.
Management accounting main and objectives are
These helps to formulate strategies for the company
Management accounting helps to plan the future business activity
It facilitates decision making
It provides management to use resources for the best results
It assists the financial report and conservation of assets
Different Techniques used for Management Accounting
Cost accounting is the major method for management accounting it is primarily done by two different techniques these are
Innovative Management accounting
In modern era new concepts are evolving for management accounting as throughput accounting, lean accounting and transfer pricing.
Best for the Banking sector:-
As cost accounting is the major method for management accounting the cost incurred by the banking sector can be classified into two groups that are transformation costs and overhead cost. Transformation cost, are cost incurred by profit centers during providing services for the customers. Overhead cost, are cost generated by the organisational centers for supporting all the company functions.
As innovative management accounting is the best method can be used for the management accounting in the banks because after deregulation there is a entry of new competitors and hence prices are regulated through the markets so there is a requirement for the better understanding of the markets, customers and competitors .now the present scenario of extreme competition requires the search for new competitive advantage at a constant rate. Among different techniques in Innovative management accounting the suitable technique will be activity based costing system.
Always on Time
Marked to Standard
From the beginning of nineties North American and British banking companies began adopting the innovative management accounting practice of activity based costing which helped them to understand the factors which influence the behaviour of the costs and helps them to allocation of costs to cost objects. According to Obadia and Faubert (2000) said that activity based costing helps to draw a logical sequence of the cost formation and to reconcile the degree of profitability of different products ,customers and distribution channels .This technique helps banks to reduce the number of costs that are considered as indirect cost in relation to the cost objects so the larger portion of indirect costs can be allocated to the customer centers as they are directly responsible for the consumption of the resources. At the implementation part Activity based costing can be applied homogenously across the manufacturing and as well as services sector so it can be easily implemented in the banking sector. Activity based costing system is best suited for multi product sectors with a high degree of indirect cost which is just similar to the retail banks and saving banks fall into that category.
Why not traditional costing methods:-
In traditional costing method there are two types of technique partial cost system and full cost system but both the techniques have there own shortcomings. In partial cost technique only attribute costs are considered as the direct costs which keeps large proportion of cost as indirect cost .In full cost model faced by a large limitation. As full cost model allocates certain indirect costs under business volumes can be accepted in the industries with homogeneous output and relatively small amount of indirect costs but it is not at all suited for the multiproduct industries with high indirect costs.
Ernst and young (1990) argued that traditional costing assumes indirect costs from production only but not take into consideration the effects of the complexity of the operations on indirect cost. Due to high competitive environment so meet these requirements indirect cost of the company increases due to market research, atomization, new technologies etc .As the count for the cost drivers used for the indirect cost is very small so there will be the difference between the use of the resources for attaining diverse service production process by the banking services this makes the management totally ineffective in decision making as it is literally impossible to trace the costs incurred by the banks.
Example to understand the difference in decision making:-
Product portfolio management involves estimating the profit and loss of different products and services with certain degree of reliability. To analyze these management decision makers have two options as to deduct the direct cost of the products from the financial margin generated or to take both direct cost and a part of the transformation cost and allocate that to the product. As per the certainty part in traditional method the indirect cost are so high so it is literally impossible to calculate the cost correctly so management will be under dark and taking the decisions. In activity based costing the indirect cost are transferred to direct cost which can be easily calculated and allocation of resources well also be easy to the management decision maker. So this example shows how management can take decision on based of certain and clear data as compared to the traditional costing method in activity based costing method.
Strength and Weakness:-
As the report, takes into consideration the indirect and direct costs along with the implication of these costs on different management decision making scenarios. This report tries to have simplified decision making and planning strategies by more certain and quantifiable data. The classification is based on the property of the banks as the multiproduct and high indirect cost further helps the banking sector to introduce the best management accounting methods in the organisation.
As the report is based on the costs only so the information regarding the cost related to the intangible aspects like cost of idle time, cycle time for the process to be completed, bottle neck points details etc these details would have helped tom analyze the cost incurred by the companies on the most important asset time. These details would helped to analyze the newer method of management accounting as lean accounting, throughput accounting, or life time cost accounting which are implemented in manufacturing firms but not on service sectors.
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Another limitation was the availability of all the processes and the systems used and implied for the completion of the cycle and customer relationship aspects of the bank which would bwe helpful for analyzing the customer lifetime value.