ACC305 Report: Management Accounting Issues in Woolworths (2019-2020)

This report analyzes the management accounting issues experienced by Woolworths Supermarkets, focusing on the critical problem of employee dissatisfaction stemming from widespread underpayment of wages. The report details the issue, which involved significant underpayment and subsequent investigations by the Fair Work Ombudsman, highlighting failures in management oversight and adherence to labor laws. It explores the potential threats to the organization, including reduced employee motivation, decreased customer service, and high labor turnover. The analysis incorporates management accounting techniques, such as financial and cost accounting, to identify and propose solutions. Recommendations include strengthening payroll audits, reviewing wage payment policies, and implementing cost accounting methods to manage expenses effectively and restore Woolworths' reputation. The report references relevant academic sources and provides a comprehensive overview of the situation and potential remedies.

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MEMORANDUM
TO: The Board of Directors
FROM: The Consulting Firm
DATE: 22 January 2020
SUBJECT: Management accounting issues relating to Woolworths Supermarkets
The aim of this memorandum is to elucidate the key Management accounting issues
experienced by the leader of Australia’s retail business, Woolworths Supermarkets.
Management accounting can be referred to as the interpretation of the accounting data and
information by the managers and administration of company to help themselves in taking
more prudent decision. This memorandum brings such a key managerial accounting issue
before the eye of the Board and suggest some remedial measures by using managerial
accounting tools and techniques.
One such key managerial accounting issue that can be highlighted concerning
Woolworths Supermarkets is "employee dissatisfaction”. The main identified management
accounting issue “employee dissatisfaction” was caused when thousands of workers were
underpaid and the amount of this underpayment was roughly around $300 million. A fair
work Ombudsman was appointed by the government to inspect this massive issue. This case
of under payment of wage was brought before the stock exchange where the main
management lag can be portrayed as a breach in the management accounting as they did not
inspect their labor department as long as 9 years which concerned around 5700 staff.
However the number of the unpaid workers would be increasing in future as the investigation
further rolls out. Woolworth will find further lag in its payment process as it further initiates
its internal investigation of scrutinizing its payment records to determine the additional

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number of former staffs who may also be underpaid and were not detected on account of
transfer or change previously.
According to the appointed Ombudsman, Sandra Parker, it was a surprise to her when
she found out that a prestigious retail chain like Woolworth was classified with the group of
big firms who have this wage under payment allegation against their names like
Commonwealth Bank, Wesfarmers, Qantas Airways Limited and many more. The fair work
Ombudsman is entrusted with the responsibility of bringing into notice all issues relating to
Woolworth that breached the “Workplace laws”. This management accounting issue of
“employee dissatisfaction” out of underpayment of wage, attracted comments from eminent
personalities like Tony Bourke, the Labor’s employment spokesman who demanded for a
parliamentary level investigation.
Critical analysis of last two years data, could not find any significant events relating
to this underpayment of wages so, this case of employee dissatisfaction holds its roots way
back in 2010 and the retail market leader did not communicate this matter of to the “Fair
Works Ombudsman” till proper disclosure was made before the ASX. “Enterprise bargaining
agreement” is the principal law that started this investigation, so the main affected parties to
this under payment of wages were mainly the workers or staff who worked in the different
departments of Woolworth’s Supermarkets. This management accounting issue can be
termed as an absolute failure in the management of Woolworth as it was identified on
account of a complaint made from a staff and not out of the efficient management and this
caused wide spread resentment among the staff and at times reported high labor turnover for
Woolworth.
The main threats to the organization on account of such a massive management
accounting issue could be lack of motivation among the employees which will directly affect

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their production and will hit the production of the organization. If employees are not satisfied
especially relating to workers working in a retail chain, they will not approach the customers
proactively and as a result the sales will come to a halt or reduce significantly. This lack of
motivation may reduce the proper communication of the staff with the customers and if the
customers do not get the proper intimation or information about the products they want to
buy or get recommendation about the best product available then in this highly competitive
market Woolworth may lose its valuable customers or potential customers. Another potential
threat could be lack of loyalty towards the organization, where the employees will not restrict
any loss caused to the company and may often be involved in cases relating to illegal
activities like black marketing of the organizational products or be involved in thievery. The
last but not the least threat could be loss of highly skilled and productive labor or staff
causing high labor turnover. The organization spends a lot of money in training the staff and
this turnover of labor causes huge loss for the organization and also increases the productive
strength of its competitors set backing its market standing.
There are two types of information that is required for the managers for a sound
strategic decision- financial and non-financial. Thus management accounting is the thorough
analysis and scrutiny of these financial and non-financial information for an effective
decision making to achieve the long term goals of the firm. Management accounting involves
certain tools and technique which are essential in both identifying the key managerial
accounting issues as well as supports the management with ample amount of information and
remedial measures to solve such management accounting issues. The major Management
accounting techniques and tools used in identifying as well as suggesting remedial tools to
management accounting issues includes:
 Financial Accounting – The main tools includes Ratio Analysis, Cash Flow Analysis,
which are directed towards the maximization of profits of the organization.

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 Cost Accounting – The main tools Marginal Costing, Variance analysis, which are
directed towards reducing the cost in different levels of the organization.
 Mathematics – Operations Research, Linear Programming.
 Future information – Budgeting, Appraisal and evaluation to compare the result with
the expected outcomes.
The identified key managerial accounting issue relating to Woolworths
Supermarkets is “Employee dissatisfaction” occurred as a result of deficiency in
managerial decision making caused due to under payment of wages. This issue can be
effectively eradicated by devoting proper attention to the management accounting
techniques by the top level management. This issue has hampered the reputation of the
retail market leader of Australia, Woolworth. The main management accounting
techniques that could be used to stop this ongoing issue was a proper appraisal of the
supervisors responsible for the preparation of pay-roll and payment of wages by the
management. The top-level management can arrange for proper appraisal process of the
lower level management so that it applies a proper check on the payment procedure which
are dealt by the lower level management relating to preparation of pay-rolls and actual
payment of wages. Proper audit of the pay-rolls from time to time would ensure that all
the payment procedures starting from determining the wage rate till actual payment are
right on track.
The management should arrange for proper scrutiny of the labor laws applicable
to determine and structure the wage payment policy and should audit the departments
from time to time to properly understand and solve this issue. On the other hand, different
methods of cost accounting techniques can also be applied for proper management of cost
and reducing the cost on all unnecessary items and on heavy outflow departments to save
money and bring out profit to pay off the underpaid staff. Manually Assigned Percentage,

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Even Spread are those cost accounting techniques for allocation of cost into various
departments based on the percentages or values provided to them so that proper allocation
of cost could be done in all the departments so that this issue can be easily tackled and the
top management can easily appraise each department and its respective supervisors. The
application of the above mentioned techniques can be effectively used by the top level
management to tackle such a massive management accounting issue and restore the
previous fame and reputation of Woolworth.

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