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Faculty of Accounting and Informatics

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    Cost control and operational performance at eThekwini human settlement unit
    (2024) Jwara, Msawenkosi Cedric; Marimuthu, Ferina; Nzuza, Zwelihle Wiseman
    Government municipalities have encountered notable challenges due to their inability to undergo necessary revitalisation and keep pace with the ongoing modernisation of the contemporary business environment. Within South African municipalities, prevailing cost accounting methods exhibit a lack of alignment with contemporary advancements in cost management. This misalignment has resulted in delays in delivering vital community services due to an insufficient grasp of strategic resource cost control. Consequently, there arises a distinct imperative to undertake an inquiry into the practical cost control techniques employed, the determinative factors influencing cost controls and the resultant effectiveness of such controls in improving operational performance of the eThekwini Human Settlement Unit (HSU). This study aims to identify the role of cost controls in improving the eThekwini HSU's operational performance. Specific objectives include investigating cost control techniques, factors influencing cost controls, and their effectiveness. Employing a quantitative approach, this study used a questionnaire instrument with closed-ended questions to gather data from 44 purposefully selected HSU employees. Data analysis involved descriptive and inferential statistics using SPSS (version 27®), ensuring reliability and validity. Ethical considerations were observed throughout the research process. The investigation revealed that the eThekwini HSU implements an array of strategies encompassing budgetary frameworks, audit techniques, cost estimation and cost analysis tools in its pursuit of cost containment. Conversely, negative factors of cost control were identified, prominently including challenges rooted in deficient communication, a lack of administrative accountability and socio-political influences. In the context of perceptions, a notable agreement emerged amongst the surveyed personnel, showing the effectiveness of established cost control mechanisms. Based on the findings derived from this study, it is recommended that the eThekwini HSU take proactive measures to address the identified challenges in cost control. This research contributes to the adoption of modern cost control techniques in the eThekwini HSU and, by extension, other municipalities. Improved cost management processes enhance service delivery and benefit citizens by ensuring efficient resource allocation.
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    Investigating the contemporary management accounting practices used by small enterprises in Ntuzuma Township, Durban
    (2024) Zulu, Londiwe Thandazi; Nzuza, Zwelihle Wiseman
    Despite the implementation of various managerial strategies, Small Enterprises (SEs) in South Africa continue to confront challenges in effectively managing their business, with cost management remaining a persistent struggle. The sustainability of SEs in a growing economy like South Africa is critical because of their significant contribution to the country’s economic growth and job creation. Nevertheless, the high failure rate of SEs in the country has become the primarily concern for government. The adoption of management accounting practices (MAPs) presents potential solutions by providing techniques for efficient cost control and informed decision-making. Therefore, the current study seeks to identify the CMAPs used by SEs; examine their knowledge about these practices, investigate the perceived usefulness of CMAPs in Ntuzuma Township, and analyse the correlation between biographic data and CMAPs. To fulfil these objectives, a quantitative cross-sectional design was employed. The data used in the study was collected utilising a questionnaire instrument and involving 180 respondents. The research framework was guided by contingency theory, and data analysis was conducted using regression, tables, and standard deviation, which are derived from the SPSS software version 25. Despite the majority of respondents indicating limited extensive use of CMAPs, a significant portion recognised the benefits of CMAPs in making well-informed decisions relating to the management of costs. Notably, the sales budget and cash budget emerged as the most commonly employed budgeting practices. The study also brought to light that managers possessed varying levels of knowledge regarding CMAPs, with most of this knowledge acquired through previous work experiences. Biographical factors exhibited a detrimental influence on costing and budgeting practices, as evidenced by weak correlations and the absence of statistical significance. The study's recommendations emphasise the necessity for SEs staff training, CMAPs applications of tools programmes, knowledge sharing and further research and evaluation.
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    The adoption of target costing as a contemporary management accounting technique in a public higher education institution : a case study of Durban University of Technology
    (2022-05-14) Thango, Thobelani Sabelo; Marimuthu, Ferina; Nzuza, Zwelihle Wiseman
    There is a growing need for public higher education institutions (HEIs) to opt for all cost management tools following the government’s shortfalls in the budget allocation for public HEIs. The focus should be on the suitable pricing methods that will consider the students’ perception of the value of education and give fees that are reasonable and accepted by students, while ensuring that the institution meets target returns. The biggest concern is that fees are based on the cost-based pricing model. Cost-based pricing always results in higher prices, where the accurate costs are unknown, despite the strategy used to implement it. Furthermore, fees are based on historic cost models, not on a continuously reworked costing model. Following cuts in the budget allocation to HEIs, the institutions have increased fees rapidly to remain sustainable. A fee calculated on uncertain historic costs while government support falls results in a rapid increase in fees. Target costing can assist in cutting down on unnecessary costs and ensure acceptable fees for students. Target costing is a known cost management tool that assists in ensuring costs management and keeping fees low. Despite the cuts in government spending on HEIs, adoption of target costing will result in reasonable costs to keep the fees low. Considering the limited empirical studies conducted on the adoption of target costing in South African public HEIs, study's main aim is to investigate the factors that influence the adoption of target costing in public HEIs, using the Durban University of Technology (DUT) as the case study. Therefore, this study will massively contribute to research pool on the adoption of target costing in HEIs. The study used the quantitative research method with a sample of 52 Heads of Departments and 15 finance staff. The research instrument employed was a questionnaire, which was dominated by close-ended questions. The study was guided by the positivist philosophy where data analysis was done using the Statistical Package for Social Science (SPSS version 27 ®), in which descriptive and inferential statistical analysis were undertaken. The results have shown that DUT is using the full cost-plus method to account for fees. The costs are allocated using the traditional absorption method. The results showed that target costing had not been fully used but exists in selected areas of the university. Findings further reveal that costs to fees are subject to historic judgement, implying that costs to fees are not reworked annually. While the fees increase, many respondents perceive the current pricing methods to be the best for the university and that the cost-plus pricing method is most appropriate to ensure it’s the university’s sustainability. Findings revealed that the variables which influenced the adoption of target costing at the DUT included: size of DUT, management style and staff inclusion, information system and technological advancement, vertical differentiation and centralisation, formal support to accounting for adoption of target costing, resource adequacy, intensity of competition, and government regulations. The respondents have disagreed that sufficiency in the expertise of target costing has an influence in the partial adoption of target costing at the DUT. The students’ perception on the value of education is also not the reason that the concept of target costing exists in some parts of the DUT. Overall, the results help to understand the current pricing method used at DUT. It has further brought a clear indication of the factors that influence the adoption of target costing and whether the elements of target costing exist at the university.
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    Financial preparedness of heads of departments in the Faculty of health Sciences at the Durban University of Technology KwaZulu-Natal, South Africa
    (2021-12-31) Allison, Wendy; Olarewaju, Odunayo Magret
    This study investigated the financial knowledge and skill levels of the Heads of Departments in the Faculty of Health Sciences (FoHS) at the Durban University of Technology (DUT). These department heads in the FoHS receive no formal training in financial management, yet are required to manage budgets and ensure that their department is financially viable. The study established the financial management proficiency of the Heads of Departments with a view to offering ways in which the financial management of the department heads could be improved. The data generated used a combination of open-ended and closed-ended questions, comprising of both qualitative and quantitative methodology, which followed a pragmatist paradigm. A total of 22 participants, all of whom served as the Heads of Departments between 2013 and 2020 were included in the sample. The researcher used SPSS Version 26® to analyse the quantitative data, and NVIVO to analyse the qualitative data. The identities of all the Heads of Departments in this study are withheld to maintain anonymity. The findings indicated that the financial management skills of these department heads are severely lacking, resulting in departments with compromised financial management. Added to this, universities can no longer rely on 1st or 2nd stream income alone, but departments need to create and manage 3rd stream income. None of this, especially the management of 3rd stream income, is possible without the relevant financial management training. These Heads of Departments require training in the creation of their budgets, as well as in the implementation and control thereof. The department heads agreed that they do not have these skills, and expressed a desire for financial management training.
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    Factors influencing the adoption of management accounting practices (MAPs) by small and medium enterprises (SMEs) in the manufacturing sector in Durban
    (2020-10) Msomi, Mbali Portia; Nyide, Celani John; Ngibe, Musawenkosi
    Most countries recognise small and medium enterprises (SMEs) as a key element in strengthening the economy and in reducing the high unemployment rate that is currently prevailing globally and especially in South Africa. Although these enterprises contribute significantly towards the economy, they often fail to survive beyond their start-up phase due to a number of challenges affecting their business life-cycle. These challenges stem from both internal and external factors and, if not curbed during the initial phase of the enterprise, they may cause the business to fail prematurely. Common causes of failure include, but are not limited to, difficulties encountered in gaining access to start-up capital; a lack of entrepreneurship or business management skills; a lack of appropriate business education along with a lack of any culture of innovation or of networking skills amongst their owner/managers. Finally, there is frequently a failure to adopt management accounting practices (MAPs). It is with this last issue that this research is concerned. MAPs are techniques used to provide management with financial and non-financial information to facilitate the planning, controlling and decision making process of an organisation. These techniques are recognised to improve business performance and sustainability substantially, and the application of these techniques is often seen as determining the success or failure of an enterprise. However, there has been some concern around the adoption of MAPs amongst manufacturing SMEs, especially in the South African context. Hence, the aim of this study was to explore the critical factors influencing the adoption of MAPs by SMEs in the manufacturing sector in South Africa using a case study of businesses located in and around Durban. The aim was also to provide informative guidelines to promote the facilitation of MAP practices. A quantitative research approach was adopted involving non-probability, purposive sampling to ensure that the relevant participants were chosen. A sample consisting of 202 participants was considered appropriate for a population with over 1050 manufacturing SMEs registered in Durban (Department of Trade and Industry report 2016/17). A questionnaire was used to collect data from the participants in the study. A pilot test was conducted to ensure that the research instrument was adequately prepared. The data collected were analysed using the Statistical Package for the Social Sciences (SPSS) version 26.0, and the results were presented using graphs, tables and charts. The results of the study showed that both traditional and contemporary MAPs are regarded as relevant in this changing business environment. Manufacturing SMEs still see the significance of using traditional MAPs, although with the new industrial revolution taking over globally, more sophisticated new MAPs have been implemented by several manufacturing SMEs, and this has proved more effective in their gaining a competitive edge and demonstrating innovation and thus in achieving market success. The findings of this study are therefore in a position to contribute towards promoting the adoption of appropriate up-to-date MAPs that are more technically advanced to meet current management needs. The findings also revealed that the key internal factors identified by the respondents in this adoption process were: the owner’s business experience and skills, the firm’s structure, its size, and changes in the firm’s size. Amongst the external factors, the results of the study showed that competition, technology, market innovation, market success, and networking with other businesses, were regarded as the predominant factors influencing the adoption of MAPs by manufacturing SMEs in the Durban area. Although the study was able to identify these critical factors influencing the adoption of MAPs, the results were limited to those views expressed by the responding stakeholders from manufacturing SMEs located in the Durban area, and therefore can only be generalised with caution. The study recommends that both traditional and contemporary MAPs should be adopted upon the inception of a business, and that the relevant stakeholders should invest in educating themselves so that they can have a better understanding of the available MAPs, and their adoption and implementation within their business processes. The study further recommends that manufacturing SMEs identify and adopt the most appropriate MAPs to promote cost effective measures, optimise business performance and ensure sustainable growth. The effective adoption of MAPs would also be aided if stakeholders were to make more use of government supporting agencies allowing them to benefit from further financial assistance, mentorship and training of staff.
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    The role of management accounting practices in the success of small and medium-sized enterprises in Durban
    (2020-10) Cele, Sicelo; Stainbank, Lesley June; Nyide, Celani John
    The sustainability of small and medium-sized enterprises (SMEs) in South Africa is important, mainly because of their contribution to the Gross Domestic Product (GDP) of the country as a whole. Nonetheless, the high rate of SME failure in South Africa is largely attributable to lack of management skills by owners and managers of these SMEs. This study investigated the role of management accounting practices in the success of SMEs in Durban. The objectives were to identify the types of management accounting practices used in SMEs, to examine factors that affect the use of management accounting practices by SMEs, to examine the extent to which management accounting practices are used by SMEs and to examine the impact of management accounting practices in SMEs’ success. A quantitative approach was adopted in a form of self-administered questionnaires which were mailed to respondents. Data were analyzed using descriptive statistics to summarise the opinions of the respondents from the data collected. The findings were analysed using the Statistical Package for Social Sciences (SPSS) version 25. The findings of the study indicate that although the management accounting practices were not often used, the most used costing system was traditional costing as well as process costing. In terms of the decision support and investment appraisal tools, the most used tool was the accounting rate of return followed by the payback method and relevant cost and revenues. Planning and control techniques such as the sales budget and production costing were also used by SMEs in Durban. Factors that affect the use of management accounting practices are the lack of management accounting knowledge, lack of education and skills and the cost to employ management accountants. Management accounting practices were found to have a positive relationship with planning and performance. Challenges faced by SMEs are financial challenges, human resource challenges as well as technological challenges. The study recommended that SMEs’ owners and managers should attend management accounting training, employ management accountants or outsource the management accounting function. Implementing management accounting practices by SMEs may improve their business management in terms of cost controls and decision-making
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    Implementation of Kaizen costing towards improving cost management at the water and sanitation and electricity departments of the Ethekwini Municipality, KwaZulu-Natal
    (2017) Khuzwayo, Siyanda Percy; Stainbank, Lesley June
    Little is known about kaizen costing opportunities and challenges in service organizations since little research has been conducted about its implementation in this sector (Singh and Singh 2009: 63). Kaizen costing is a management accounting technique that is mainly focused on improving the cost management of the organisation. Since the cost management performance of South African municipalities is very poor, the purpose of this study is to evaluate whether implementing kaizen costing will improve cost management at the water and electricity departments in eThekwini municipality. Studies have shown that there are a lot of unexploited benefits which can be gained by South African municipalities as well as other organisations by implementing kaizen costing. This is a quantitative descriptive case study of the Water and Sanitation and Electricity Departments in the eThekwini Municipality where data was collected from the target respondents using questionnaires. The 320 questionnaires, which consisted of predominantly closed-ended questions, were self-administered to the target respondents. The results were analysed using the IBM Statistical Package for Social Sciences (SPSS) version 22.0. The findings of this study revealed that the adoption of kaizen costing may be successful in improving the cost management inefficiencies faced by the South African municipalities. Based on the findings, the majority of the respondents indicated that they would embrace and support the application of a kaizen costing at the Water and Sanitation and Electricity Departments in the eThekwini Municipality. The study recommends that the Water and Sanitation and Electricity Departments in the eThekwini Municipality should consider implementing kaizen costing to improve its cost management.