A Study on the Challenges of Accounting in Bangladesh's Garment Sector

This report provides a comprehensive overview of the accounting challenges faced by the garment sector in Bangladesh. The study begins with an introduction to the importance of accounting, followed by an examination of the garment sector's impact on the Bangladeshi economy and the accounting methodologies employed. It delves into the challenges encountered, including lack of skilled professionals, compliance issues, and the adoption of advanced technologies. The report draws on various research papers and studies to support its analysis. The research identifies issues related to the implementation of accounting information systems, lack of training, and challenges in responsibility accounting. The report concludes by emphasizing the need for solutions to address these challenges and improve accounting practices within the garment sector. The report is a valuable resource for students and professionals seeking to understand the complexities of accounting in the context of Bangladesh's garment industry.

Business Research

Table of Contents
Introduction......................................................................................................................................1
Project Objective..............................................................................................................................1
Project Scope...................................................................................................................................1
Literature Review.............................................................................................................................1
Overview of Garment Sector in Bangladesh...............................................................................1
Accounting methodology and systems used by garment sector in Bangladesh..........................2
Challenges of accounting faced by garment sector in Bangladesh.............................................4
Recommending solutions to reduce the challenges....................................................................7
Conclusion.......................................................................................................................................8
REFERENCES................................................................................................................................9

Introduction
Accounting is critical and complex procedure and organisations requires team of
specialists who can manage the book keeping effectively and efficiently. In this context, the
focus of researcher will be on the challenges faced by global organisation especially garment
sectors in Bangladesh by comparing and contrasting on the researches done by senior researchers
and authors. The business research study will comprises project objectives, project scope and
literature review. Literature review is search and evaluation of the available literature in the
given subject or chosen topic. The motive of literature review is to construct theoretical
framework in the study. Here, aim of researcher will be searching relevant sources and materials
so that a robust critique of articles can be done.
Project Objective
The aim of the project is to “To analyse the challenges of accounting faced by global
organisation; a study on garments sectors in Bangladesh.
The objectives of the project is listed below:
 To identify the impact of garment sector on Bangladesh national economy.
 To analyse the accounting systems or methodology used in Bangladesh garment industry.
 To examine the challenges of accounting faced by garment sector of Bangladesh.
Project Scope
After completing the research, researcher will be able to comprehend challenges of
accounting faced by Bangladeshi garment industry. Moreover, researcher will provide some of
the best recommendations which can be implemented by the organisations in order to manage the
accounting procedures and practices more effectively and efficiently.
Literature Review
Overview of Garment Sector in Bangladesh
According to Heath and Mobarak, (2015) Readymade Garment Industry (RMG) in
Bangladesh is considered as one of the fastest growing sectors in the country by making
enormous contribution in the national economy. From 2002 to 2012, the readymade garment
industry growth rate in Bangladeshi economy was 55 per cent. Garment sector in the country has
been thriving due to ample of resources available in the country which is required for
manufacturing clothes and other garments. elucidated that readymade garment industry
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represented 81.13 per cent of Bangladeshi's total exports in 2014. Many multinational
organisations establishing their businesses in the country due to availability of resources, cheap
labour agile laws and taxation policies. According to Mahmud, Sawada and Yamada, (2018)
with 7.11 per cent of gross domestic product (GDP) in 2016, Bangladesh becomes the second
fastest growing major economy in the world. Contribution of industries to GDP was 28.1 per
cent where readymade garment sector contribution was the biggest. Barnett, (2016) said that
Bangladesh’s textile and clothing sector secured a growth in achieving Foreign Direct
Investment (FDI) in the financial year 2015-2016 (Hasan, and et.al., 2016). The Bangladesh
Bank statistics, in this sector FDI successfully stood up at $396 million which is 11 percent
higher than previous fiscal year when it was $351.62 million. Belal, (2016) argued that out of all
sectors operating in Bangladesh, readymade garment sector contributes majorly towards the
national economy of the country.
Currently there are more than 4000 readymade garment firms in Bangladesh which
provides job opportunities to millions of Bangladeshi workers. Majority of the workforce
includes women from nearby villages. The sector further contributes towards growth and
development of indigenous communities, localities and rural areas of Bangladesh as a part of
their corporate social responsibility (Anisul Huq, Stevenson and Zorzini, 2014). Almost 95 per
cent of the firms are locally owned with the exception of few foreign firms located in export
processing zone. Hossain, (2015) argued that due that many of garment sectors incorporating in
Bangladesh does not follow appropriate legislations. It was identified that less than 2 per cent
factories were risky to safety while the global safety risk is about 4 per cent.
Accounting methodology and systems used by garment sector in Bangladesh
According to Islam, (2015) finance is considered as heart of an organisation. Finance
department is responsible for managing accounts and budgets of an organisation in an effective
and efficient manner so that the business always posses liquidity in order to cope up with
uncertainties and risks. From managing wages and salaries of employees to maintaining profits
and revenue, financial department of organisations plays crucial and complex role. Hopper,
Lassou and Soobaroyen, (2017) elaborated that Bangladeshi readymade garment sector has to
compliance with International Accounting Standards (IAS) and also Bangladesh Accounting
Standards (BAS). The financial statement of organisations associated with garment industry
should be prepared under the historical cost convention using accrual basis of accounting.
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Bangladesh have adopted International Financial Reporting Standards (IFRS) and International
Accounting Standards Management in order to do accounting.
Nurunnabi, (2015) said that with enhancement in technologies, the book keeping and
accounting of financial transactions in most of the Bangladeshi textile organisations has been
recorded in precisely designed computerised accounting system. The computerised accounting
system helps in managing and feeding data effectively reducing the overall efforts, time and cost
of both accountant and organisation. According to Sulong, Sulaiman and Norhayati, (2015) in
the era defines by innovation and enhancement of technologies, every organisations in the world
upgraded digital technologies within their business framework. These technologies provide
ample of benefits to domestic as well as global industries by reducing their efforts and enlarging
their revenues. From managing human resource to managing financial positions, numerous
technologies and software have been developed by engineers and scientists which can be utilised
by the organisations to eliminate minor to major issues.
Groff, White and Bultz, (2018) said that in many multinational or global textile
companies incorporating in Bangladesh, the management already implemented the accounting
information systems (AIS) within their respective organisation. Accounting information system
is the digital and efficient way of recording accounts and financial transactions of the
organisation. Through this the management with one single click can generate all the required
information adequately. Accounting information systems reduces the mental strain of
accountants and helps them to enhance their capabilities and skills through which they can easily
able to comprehend tough to tougher calculations. Das, Dixon and Michael, (2015) said that
readymade garment industries plays prominent role in Bangladesh economy. They contribute
major portion in Gross Domestic Product, dominates on total exports and provides job
opportunities to millions of Bangladeshi people. It is important for the management of these
organisations to manage their accounts and financial transactions in an appropriate way so that
they can handle future risks and uncertainties efficiently.
Chhabra and Pattanayak, (2014) elaborated that financial management and accounting is
often confused as similar things. In pragmatic manner, both have significant difference. Financial
management is the management of assets and budget allocation in the organisation and
accounting management refers to the process of book keeping and recoding financial transactions
made by the company in a financial year. Thus, an organisation required two experience wings to
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manage its financial activities. Macchiavello and et.al., (2015) elaborated that garment industries
incorporated in Bangladesh contributes majorly towards growth and development of national
economy. It is important for them to use precise and prescribed accounting methodology and
standards. These accounting standards must be in accordance with International accounting
standards and Bangladesh Accounting Standards.
Challenges of accounting faced by garment sector in Bangladesh
Stanwick and Stanwick, (2015) elucidated that in order to sustain in the competitive
environment, business organisations faces ample of issues and difficulties. Global organisations
incorporating in different countries also faced numerous issues which lowers their progress and
affects their profitability and productivity. There are various challenges which are associated
with the present accounting methods and systems used by Bangladesh readymade garment
sectors. These challenges affects on the overall growth and development of garment sector
incorporated in Bangladesh. Alam, Azim and Alias, (2017) said that managing accounts and
financial position of organisations is critical task and it requires enormous experience and
knowledge to manage the accounting and financial transactions of the company. In this context,
it was identified that lack of specialists and professionals in Bangladesh affects the accounting
procedures and practices in the organisations.
As most of the garment companies owned by locals it becomes difficult for them to find
and hire accounting professionals. Alamgir and Banerjee, (2018) argued that another challenge
faced by readymade garment sector in accounting is related with the compliance. In the research
study authors identified that many of garment companies failed to work as per compliance.
Timely VAT payment, submission of income tax returns, updating Registrar for Joint Stock
Companies (RJSC) are some of the compliance issues identified by the researchers. According to
Weber, Hoque and Ayub Islam, (2015)it is essential for them to follow international accounting
standards and prepare financial statements as per International Financial Reporting Standards. In
order to sustain in the global competitive environment it is rudimentary for the organisations to
work as per the compliance, rules and regulations.
Finance is considered as heart of every organisation and thus accountants have a huge
responsibility to manage the critical element of corporate body in effective and efficient manner
so that it can run in long run. Habib, (2016) said that it becomes difficult for garment sectors to
meet the regulatory body's requirement without submitting relevant documents. If the
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management of organisations does not have a financial expert who can collect necessary
information and meet the regulatory requirements in time, the organisation faced difficulties in
the future. Jacobs and Singhal, (2017) elucidated that many of the garment sector organisations
in Bangladesh has been facing issues with advance technologies and software like accounting
information systems. These are advance sophisticated software which helps the management to
reduce their manual efforts and assists them in saving their time and cost. Lack of training and
lack of availability of skilled employees who can easily able to utile these technologies is the
challenge faced by the management of garment sectors incorporating in Bangladesh.
James and et.al., (2017) said that challenges and issues affects the productivity and
profitability of the organisations, but it also helps the companies in continuous improvements.
Every organisation faces one or many challenges during their course of work (Jacobs and
Singhal, 2017). Challenges should be considered as a benchmark on the basis of which the
management can make necessary changes and transformations in order to eliminate the issue. In
same context, it is important for the management of garment sector organisations to focus on the
issues and generate possible solutions which can helps them to obliterate issue effectively.
Chakravorti, Macmillan and Siesfeld, (2016) said that there are numerous challenges faced by
the readymade garment sectors of Bangladesh. One such challenge of responsible accounting
was identified by the authors.
Responsibility accounting refers to multi divisional firms installing different types of
responsibility centres to promote alignment between individual and corporate goals depending
on the decision rights delegated to the subunit managers. This issue has been found in accounting
practices of Bangladeshi garments firms where the management was not able to delegate the
roles and responsibility to the subunit managers effectively (Habib, 2016) Management of
garments sector organisation couldn't able to implement appropriate responsibility centres and
thus facing challenges in accounting systems and practices. Carlson and Bitsch, (2018) argued
that Bangladeshi garments firms bother about profits and revenue and focus less on devising
strategies which can minimise their problems and issues. Training and development of
employees is another challenge faced by Bangladeshi readymade garments firms.
From the research study conducted by Islam and Bari Chowdhuri, (2016) identified that
the attrition rate in the organisation has been tremendously increases. Many skilled and
professionals accountants in search more better opportunities left the organisations. Thus, it
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became difficult for the management to hire and retain accountants. From further analysis,
researcher identified that due to lack of training and development of employees, the motivation
and morale of workforce has been diminishing. Management reluctance in fulfilling employees
needs and expectations leads to increase in attrition rate. Sultana, (2017) said that in order to
increase attraction and retention of employees it is important for the management of readymade
garment organisations of Bangladesh to incorporate effective strategies and provides them
training periodically so that their skills and knowledge level can be increase and they become
more loyal and motivated towards work (Weber, Hoque and Ayub Islam, 2015). Advance
technological systems and accounting information software becomes a challenge for the
accountants working in garments sector firms in Bangladesh (Fink, 2014). Management faced
difficulties in finding efficient and skilled people who can manage these advance systems
effectively and efficiently.
Barnett, (2016) said that handling these software and systems is not everybody's cup of
tea. It requires enormous training, command on codes and language and skills in order to utilise
these technologies and systems efficiently. Thus, the challenge revolves around Bangladeshi's
majority of firms working under readymade garments sectors. Belal, (2016) elaborated that
accountants and finance team is supposed to provide constructive and effective support to the
management of organisation regarding the numerous challenges faced by the companies. RMG
sector plays significant role in developing the national economy of Bangladesh. It contributed
12.36 per cent of total contribution towards gross domestic product of Bangladesh in 2017
(Alamgir and Banerjee, 2018). In order to sustain in the competitive environment it is essential
and important for the management to hire and recruit skilled and competent employees which
can provide initial support to the corporation in accomplishing their desired goals and objectives
(Alam, Azim and Alias, 2017). Bangladesh readymade garments sectors strives for skilled and
competent accountants who can easily manage and feed database in effective manner so that
organisation can fulfil all the regulatory and statutory requirements.
As per Islam, (2015) the challenge of developing robust accounting infrastructure and
team within the corporations exasperating management and managers. The accounting
infrastructure helps the management in enhancing the financial management systems of the
company and helps accountants to improve their capabilities. This requires enormous amount of
budget which becomes core issue for the management. Hopper, Lassou and Soobaroyen, (2017)
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said that in order to continue business activities and operations it is rudimentary for the
management to comply with laws and regulations. It was identified that management of
readymade garments firms was unable to cope up with essential regulatory norms such as filling
income tax returns on time, Timely VAT payments etc. It is important and crucial for the
management to enhance their accounting practices by hiring skill and competent staff so that the
challenge of compliance can be eradicated effectively. According to Nurunnabi, (2015)
accounting is critical and complex procedure and organisations requires team of specialists who
can manage the book keeping effectively and efficiently. In this context, authors contends that
technological challenges drastically affects the accountants working in RGM ecotours of
Bangladesh.
Recommending solutions to reduce the challenges
Challenges and issues indeed affects the profitability of the organisations, but they also
act as a catalyst for continuous improvements. In this context Sulong, Sulaiman and Norhayati,
(2015) suggests that in order to enhance the current accounting methodologies and systems, it is
important for the management of organisations working under readymade garments sector to
incorporate latest technologies and implement advance accounting information systems within
the organisations. These systems are capable of conducting complex to complex calculations and
transactions in an effective and efficient manner. Groff, White and Bultz, (2018) argued that
organisations that have implemented advance accounting informations systems have faced issues
in identifying skilled and competent people in Bangladesh. They have to hire from outside of
country which affects the overall budget of the organisation. In this context, authors recommend
the management to hire a specialist or an expert for providing training to existing accountants
working in the organisation. This will eventually enhance their abilities in managing and using
the software appropriately and precisely. Das, Dixon and Michael, (2015) elucidated that to
obliterate the issue of non compliance, the management needs to train the accountants and
financial team regarding the Bangladesh Accounting Standards and tax policies. They have to
ensure that the accountants they hire must have adequate knowledge regarding accounting
standards and accounting codes. This can benefits the organisations in two ways. First it will
reduce the attrition rates of employees and second the organisations will be able to work as per
compliance. Chhabra and Pattanayak, (2014) recommends the organisations working in garment
sectors of Bangladesh to focus on the abilities on accountants and delegates them responsibility
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accordingly. In order to boost up the morale and motivation of employees it is essential for the
management and corporations to allocate duties and responsibilities on the basis of skills and
competencies posses by the employee. Macchiavello and et.al., (2015) elaborated that as
readymade garment sector in Bangladesh contributes major portion towards gross domestic
products in order to boost up the national economy of the country, it is important and essential
for the management to improve their accounting systems so that they can enhance their
productivity and reduces the errors in finance. Due to global presence in increase in foreign
direct investment in the country, new ventures are establishing in the country which gives rise to
competition (Stanwick and Stanwick, 2015). Thus, it is being advised to the readymade garment
sectors to make necessary actions and changes to upgrade the accounting systems in the
organisations and eliminate the challenges effectively.
Conclusion
From the above research study, it can be understood that Readymade Garment Industry
(RMG) in Bangladesh is considered as one of the fastest growing sectors in the country by
making enormous contribution in the national economy. Currently there are more than 4000
readymade garment firms in Bangladesh which provides job opportunities to millions of
Bangladeshi workers. Majority of the workforce includes women from nearby villages.
Accounting is critical and complex procedure and organisations requires team of specialists who
can manage the book keeping effectively and efficiently. It was further identified in the study
that many of the garment sector organisations in Bangladesh has been facing issues with advance
technologies and software like accounting information systems. Thus, the research study able to
describe the accounting methods used by garment industry of Bangladesh and challenges they
faced. Eventually, recommendations has been provided in order to reduce the challenges.
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