This article throws light upon the five major difficulties faced during the installation of a costing system. The difficulties are: 1. Lack of Support from Top Management 2. Resistance from the Existing Staff 3. Non-Co-operation at Other Levels 4. Shortage of Trained Staff 5. Heavy Costs.
Difficulties in Installation of a Costing System:
- Lack of Support from Top Management
- Resistance from the Existing Staff
- Non-Co-operation at Other Levels
- Shortage of Trained Staff
- Heavy Costs
Difficulty # 1. Lack of Support from Top Management:
It may so happen that the managing Director may introduce costing system without consulting departmental managers or without taking them into confidence prior to its introduction. This results in the opposition of the system. Departmental heads take it as device to check their activities.
This difficulty can be overcome by taking into confidence top managers before introducing the system. They can be told of the need and utility of the costing system.
Difficulty # 2. Resistance from the Existing Staff:
ADVERTISEMENTS:
The resistance from the existing financial accounting Staff is natural because they are unsure of their role and position in the organisation after the introduction of the costing system.
The existing staff can be assured of their present positions and that a new system is meant to strengthen the existing system.
Difficulty # 3. Non-Co-operation at Other Levels:
There may be an opposition to the costing system from other levels of the organisation. The foremen, supervisors and other staff may resent the additional burden of supplying information to the costing department.
To secure the active co-operation of these employees, the necessity and utility of the system should be explained to them. A need for their co-operation in making the system successful should be emphasised.
Difficulty # 4. Shortage of Trained Staff:
ADVERTISEMENTS:
There may be a shortage of trained personnel to handle the work of cost analysis, cost control and cost reduction. The work of the costing department can be handled only by the competent persons.
This difficulty can be overcome by giving expertise training to the existing staff and by recruiting trained staff from outside, if needed.
Difficulty # 5. Heavy Costs:
The costing system will involve heavy costs if it is not designed according to the requirements of specific cases. The costing department should be used as a service department so that it provides information to every department. It will make it more useful and will reduce its cost burden.