South Asian Federation of Accountants (SAFA)  

South Asian Federation of Accountants (SAFA), an IFAC Network Partner, comprises eleven professional accountancy bodies from the South-Asian Region, namely: India, Pakistan, Bangladesh, Sri Lanka, Nepal, Maldives, and Afghanistan. Bhutan, where no accountancy body exists, is an observer. SAFA has undertaken the leadership role in providing a new direction to the accountancy profession within the region and SAFA has over 475,000 members affiliated with its member bodies. The Institute of Chartered Accountants of India (ICAI) hosts SAFA’s Permanent Secretariat at New Delhi. More information on SAFA can be found by visiting the SAFA website.   

Cost and Management Accounting  

This topic-focused series partners IFAC with the four Cost and Management Accounting-related IFAC members from the South Asia region—Institute of Cost Accountants of India (ICMAI), Institute of Cost and Management Accountants of Bangladesh (ICMAB), Institute of Cost and Management Accountants of Pakistan (ICMAP), and the Institute of Certified Management Accountants Sri Lanka (CMA Sri Lanka)—to produce a series of monthly articles to highlight the importance and impact of these PAOs not only in their jurisdictions but the region they serve. The South Asia region is expanding fast in terms of economic growth and the respective professional bodies have existed for decades to serve the needs of their constituents and growth.    

Starting July 2024 until October 2024, each of the professional accounting organizations (PAOs) will prepare an article sharing best practices of their experiences.  

The second article below is produced by ICMAP Pakistan 

ICMA Pakistan was established in 1951 and was granted statutory status under the Cost and Management Accountants Act of 1966 to regulate Cost and Management Accountancy in Pakistan. ICMA Pakistan is a professional body for Cost and Management Accountants in Pakistan, and its responsibilities include administering the Cost and Management program, establishing initial professional development and continuing professional development requirements for its members, setting ethical requirements, and establishing a QA and I&D system to monitor its members. ICMA Pakistan awards the Associate Cost and Management Accountant and Fellow Cost and Management Accountant membership designations, and it also bestows qualification titles such as Chartered Management Accountant, Chartered Cost Accountant, and Affiliate Financial Accountant. Under the Companies Act, 2017, Cost and Management Accountants (CMAs) are eligible to conduct cost audits alongside Chartered Accountants. CMAs have the same powers, duties, and liabilities as company auditors when performing cost audits, as directed by the Commission. In addition to being a member of IFAC, ICMA Pakistan is a member of the Confederation of Asian and Pacific Accountants, the South Asian Federation of Accountants, and the IFRS Foundation. Besides this, ICMA Pakistan is the first Professional Accountancy Organization (PAO) in Pakistan to join the esteemed ranks of the International Corporate Governance Network (ICGN) and is a signatory to the United Nations Women's Empowerment Principles (WEPs). 

Spearheading the Future – The Importance of Cost and Management Accounting 

In the current global business environment, the role of cost and management accounting has become increasingly important, especially for developing economies like Pakistan’s. With a growing industrial sector and economic challenges, Pakistan is leveraging modern techniques in cost and management accounting to navigate the changing business landscape and enhance economic progress and competitiveness in the global market. Pakistan's economic diversity, spanning agriculture, textiles, and emerging technology sectors, presents unique financial management challenges. Traditional bookkeeping methods have proven inadequate in the face of international supply chains, market fluctuations, and fierce competition. Applied cost and management accounting has emerged as an essential tool for business success and economic advancement in Pakistan. 

One of the keyways modern cost and management accounting techniques have revolutionized business practices in Pakistan is through improved decision-making processes. These techniques provide managers with detailed insights into product or service cost structures, enabling informed decisions on pricing, product mix, and resource allocation. For example, activity-based costing systems have significantly benefited the textile industry, a vital sector in Pakistan's economy, by accurately attributing costs to specific activities throughout the production process, leading to improved product costing and profitability. A notable case study in Pakistan's textile industry demonstrated the impact of implementing an activity-based costing system, resulting in a 12% increase in overall profitability within the first year. By identifying previously hidden costs in complex production processes, the company was able to adopt more effective pricing strategies and enhance resource utilization, as supported by studies conducted in 2022. 

Furthermore, target costing has gained momentum in Pakistan's manufacturing sector, enabling firms to determine selling prices based on desired profit margins and design products to meet those prices, ensuring competitiveness in price-sensitive markets. Research done in 2022 revealed that firms in the automotive parts industry in Pakistan employing target costing achieved a 15% increase in profit margins compared to those using traditional costing methods. A leading tractor manufacturer in Pakistan implemented target costing in 2021, resulting in a 20% cost reduction while maintaining product quality and capturing a larger market share in the competitive agricultural machinery sector. 

The service sector in Pakistan, particularly focused on IT and telecommunications, has embraced modern management accounting approaches like the Balanced Scorecard to align financial objectives with customer satisfaction, internal processes, and learning and growth perspectives. This holistic performance measurement approach has been instrumental in driving sustainable growth and innovation in knowledge-intensive industries. A major IT services provider in Pakistan implemented the Balanced Scorecard in 2019, leading to a 25% increase in customer satisfaction scores, a 30% improvement in employee retention rates, and an 18% revenue growth within two years. By linking strategic objectives with operational metrics, the company established a clear roadmap for growth and performance enhancement. 

Strategic cost management has become crucial for Pakistani businesses facing economic challenges such as energy shortages and inflation. Value chain analysis and strategic positioning have enabled organizations to identify cost-saving opportunities without compromising competitive advantages. Large-scale manufacturers in Pakistan have successfully reduced costs and enhanced operational efficiency through value chain analysis. A leading conglomerate in Pakistan utilized value chain analysis to optimize manufacturing and distribution processes for fertilizers, resulting in a 22% cost reduction and a 35% improvement in delivery times. This strategic approach not only increased the firm's profitability but also boosted agricultural productivity by efficiently distributing fertilizers to farmers. 

The integration of technology, particularly Enterprise Resource Planning (ERP) systems, has transformed cost and management accounting practices in Pakistan. ERP systems have enabled real-time data processing and reporting, empowering businesses with valuable insights for decision-making. A survey by ICMA Pakistan in 2023 revealed that 67% of major enterprises in Pakistan had implemented ERP systems, leading to enhanced decision-making capabilities. In 2020, a prominent cement manufacturer in Pakistan implemented an SAP ERP system, resulting in a 15% reduction in inventory holdings, a 20% increase in production planning accuracy, and a 10% improvement in operational efficiency. The ERP system facilitated better decision-making in production scheduling, resource allocation, and pricing strategies by providing real-time data insights. 

  • A survey by ICMA Pakistan in 2023 revealed that 67% of major enterprises in Pakistan had implemented ERP systems, leading to enhanced decision-making capabilities.
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    • The digitization of accounting practices in Pakistan has further accelerated business transformation. Cloud-based accounting solutions have democratized access to advanced financial management tools, enabling SMEs to compete more effectively with larger corporations, particularly in rural areas. Blockchain technology, although in its early stages, holds promise for enhancing cost and management accounting processes, especially in supply chain management and auditing. The Central Bank of Pakistan has embraced blockchain technology for cross-border remittances to reduce transaction costs and enhance transparency. This initiative is expected to revolutionize cost accounting in the banking industry and streamline international transactions for businesses. 

    Robotic Process Automation (RPA) has emerged as a game-change in accounting practices, automating routine tasks and freeing up human accountants for strategic activities. While RPA adoption in Pakistan has been slower due to lower labor costs, financial services firms have started implementing RPA in accounting processes, leading to significant time and cost savings. A major Pakistani bank introduced RPA in its reconciliation department in 2022, resulting in a 50% reduction in processing time, a 30% decrease in operating costs, and a 35% improvement in reconciliation accuracy. The successful implementation of RPA has paved the way for extending automation to other accounting and finance functions within the bank. 

  • A major Pakistani bank introduced RPA in its reconciliation department in 2022, resulting in a 50% reduction in processing time, a 30% decrease in operating costs, and a 35% improvement in reconciliation accuracy.
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    • Despite the challenges of cultural resistance, skills shortages, and implementation costs, Pakistan is making strides in adopting advanced accounting practices. Initiatives by ICMA Pakistan, such as revising accounting curricula, specialist training programs, and capacity building initiatives for SMEs, have contributed to a 30% increase in chartered cost and management accountants in Pakistan over the past five years. The future of cost and management accounting in Pakistan is poised to drive economic development by leveraging emerging technologies and advanced practices. Chartered management accountants are expected to play strategic roles in decision-making processes, supported by artificial intelligence and machine learning tools that offer predictive insights and enhanced capabilities. 

    A leading university in Pakistan has established a Center for Artificial Intelligence in Accounting and Finance, focusing on AI applications in management accounting. Initial research projects have shown promising results, with AI models predicting cost fluctuations in manufacturing processes with 85% accuracy, revolutionizing budgeting and forecasting practices in Pakistani industries. The integration of modern cost and management accounting techniques with emerging technologies in Pakistan underscores their critical role in enhancing business efficiency and economic growth. As Pakistani companies continue to adopt these practices, they will strengthen the country's competitive advantage on the global stage. The future of business in Pakistan lies in the hands of those who harness the power of advanced cost and management accounting integrated with cutting-edge technologies to navigate the challenges of the modern economic landscape. 

    Other Articles in this Series

    A man sitting with ahnds clasped wearing a suit and a turquoise tie
    Zia ul Mustafa Awan, FCMA

    President, House of Professionals Inc.

    Zia Ul Mustafa is a renowned management professional and corporate leader with over 25 years of experience across diverse industries. His expertise encompasses organizational development, strategy, operations, project management, financial stewardship, risk management, and corporate governance. He holds several prestigious qualifications, including being a Chartered Management Accountant (ICMA Pakistan), a Certified Management Accountant (IMA USA), a Fellow Financial Accountant (IFA UK), a Fellow Public Accountant (IPA Australia), and a Chartered Management Professional (ICMP USA).

    Zia has held key leadership positions in regulatory bodies and the corporate sector, including serving multiple terms as President of ICMA Pakistan and leading the South Asian Federation of Accountants (SAFA) as its President. He has occupied C-level positions at notable organizations such as Rustam Group of Industries, Descon Engineering Limited, Pakistan Expo Centres, and House of Professionals Inc. Additionally, he has made significant contributions as a Director at the Agricultural Development Bank of Pakistan, the Pakistan Institute of Corporate Governance, the Ignite National Technology Fund, and the Pakistan Institute of Public Finance Accountants.

    Currently, he serves as the President of the House of Professionals, a management consulting and professional training organization, and holds several leadership positions, including Chairman of the Strategic Board of ICMA Pakistan, Director of the Pakistan Institute of Public Finance Accountants, Member of BOG of the Institute of Taxation Pakistan, Chairman of the SAFA Committee on Governmental & PSEs Accounting, Member of the CAPA Public Sector Advisory Group, Member of the Program Innovation of IMA Leadership Academy USA, Member of the PAIB Advisory Group of the International Federation of Accountants (IFAC), and Member of the Global Advisory Board of ICMP USA.

    Zia’s extensive international exposure, combined with his strategic insight and leadership acumen, has positioned him as a prominent figure in both the corporate and public sectors. He is also a prolific corporate trainer, public speaker, and author of various articles. His attributes of courage, motivation, and a strong ability to lead with passion and integrity have been key to his success in driving organizational growth and transformation.

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    Aamir Ijaz Khan, FCMA

    Executive Director, ICMA Pakistan

    Aamir Ijaz Khan is a distinguished Chartered Management Accountant with over two decades of extensive experience. As a Fellow member of ICMA Pakistan and the current Executive Director of the institute, Mr. Khan has established himself as a prominent figure in the accounting profession. His expertise spans across various domains, including client servicing, project implementation, business repositioning, financial management and compliance.

    Throughout his illustrious career, Mr. Khan has held several pivotal positions highlighting his leadership and expertise. He currently serves as a Director on the Board of Foundation of the South Asian Federation of Accountants (SAFA) and as a Technical Advisor on the Professional Accountants in Business (PAIB) Advisory Group of the International Federation of Accountants (IFAC). His past roles include serving on the Board of Governors of the Pakistan Institute of Public Finance Accountants (PIPFA). At ICMA Pakistan, his tenure has been marked by notable achievements, including his role as Chairman of the Lahore Branch Council from 2011 to 2013 and his foundational involvement in the Quality Assurance Board of ICMA Pakistan.

    Mr. Khan's professional journey includes significant contributions to major projects and organizations. He worked as an Audit MIS Expert (Punjab) in the World Bank-funded Project to Improve Financial Reporting & Auditing (PIFRA) and as an Executive Financial Accountant at Sui Northern Gas Pipelines Limited (SNGPL). He also gained valuable experience as the Head of Quality Assurance at M/s. Innovative Pvt. Ltd., further broadening his expertise in financial management and quality control.

    In addition to his professional accomplishments, Mr. Khan is recognized for his leadership in various organizations. He served as the Founder President of the ICMA Lahore Toastmasters Club and is currently a member of the Management Committee of MENSA International - Pakistan Chapter. His expertise extends beyond his primary roles, as he is also an SAP FI/CO Certified Consultant and a Certified Director.

    As a professional trainer and motivational speaker, Mr. Khan has conducted numerous training sessions and workshops. He has contributed valuable insights through various papers presented at national and international forums, focusing on topics such as the growth dynamics of the Pakistani services sector and economy, economic sectors' strategic dynamics, and budgetary measures. His continued involvement in these areas demonstrates his commitment to shaping discussions in financial reporting, auditing and economic policy.

    Mr. Khan's multifaceted experience and his current role as Executive Director and Secretary of the AML Supervisory Board at ICMA Pakistan position him as a respected authority in the field of management accounting. His career exemplifies a dedication to professional excellence and a commitment to advancing the accounting profession both nationally and internationally.