Management Accounting Issues and Solutions: Woolworths Group

This report examines the management accounting issues faced by the Woolworths Group, specifically focusing on the significant wage underpayment scandal affecting thousands of employees. The report highlights the role of ineffective management accounting techniques in contributing to the problem, emphasizing the importance of proper cost allocation, budgeting, and employee satisfaction. The analysis delves into the consequences of these issues, including reputational damage and potential impacts on productivity. The report then proposes solutions based on improved managerial accounting techniques, such as manual percentage assignments and closer monitoring of labor department needs, to ensure fair wage distribution and overall financial health. The report emphasizes the crucial role of management in addressing these issues to maintain the company's reputation and ensure employee satisfaction.

Running Head: MEMORANDUM
MEMORANDUM
Name of the student
Name of the University
Author’s Note

1MEMORANDUM
TO: The Board of Directors
FROM: The Consultant
DATE: 14th January 2020
SUBJECT: Management accounting issues faced by the group
This memorandum portrays the issues faced by the Woolworths Group, an Australian
chain of supermarkets, regarding the management accounting issues faced by the company.
Management accounting is a significant tool that helps in tracking all kinds of internal costs
for making effective decisions for the company. Usually, manufacturing and wholesale
companies use management accounting tools to ensure effective operation and smooth
working of the company. It mainly concerns with the allocation of production costs to the
goods produced and services provided by the company.
Woolworths is one of the largest group in Australia specifies in grocery products,
stationaries, DVDs, health products and many more. Woolworths supermarket also known as
Woolies owned by the Woolworths group is a large-scale supply chain industry that serves a
substantial number of Australian supermarkets. In a recent report, it was stated that “the
organization operates across 1024 stores in Australia and relies on more than 115,000 team
members who support different business operations in distribution centres, support offices,
and stores. In 2019, the organization had 43 metro convince stores and 981 supermarkets in
different Australia regions.” The organisation has gain a large fraction of the market space
over the years that adheres to all necessary policies by the directors and ensures effective
management.
Recently in a well-recognised article, an issue regarding the employee’s satisfaction
was published. It stated that thousands of employees working in the Woolworths Group,
specifically the Woolworths supermarket were underpaid by an amount up to $300 million.
The Fair Work Ombudsman is entrusted to investigate a $300 million wage underpayment
issue faced by the employees of Woolworths. Woolworths announced as of October that it
had identified as many as 5700 employees who have been underpaid. However, this number
went on increasing day by day due to the presence of short-changed former employees
identified through survey of payment records. Sandra Parker, The Fair Work Ombudsman,
shared her concern on finding Woolworths joining the list of companies guilty of
underpayment. The list already included number of large companies, namely,

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Commonwealth Bank, Qantas, Wesfarmers, Michael Hill Jewellers and Super Retail Group.
She then adds that the group will be accounted for in compliance with workplace laws. Tony
Brouke, a labour employment’s spokesperson urged for a parliamentary level enquiry on the
underpayment issue in the company. This demand of Tony Brouke was a result of the
statement presented by Woolworths relating to the underpayment of wages to their
employees. An employment lawyer in Maurice Blackburn Mr Giri Sivraman, exclaimed that
the issue was the biggest underpayment issue he has seen till date. He added the amount has
doubled from $160 million in the previous record to $300 million this time. The group
accepted the fault was from their part and this happened due to ineffective management
accounting techniques followed by the managers of the group. Brad Banducci, a chief
executive of the group states, “As a business we pride ourselves on putting our team first, and
in this case we have let them down” he then adds, “We unreservedly apologise.”
Management accounting is a significant tool that helps the managers in effective
decision making by analysing a company’s financial figures and resources available. Proper
cost allocation is the most essential factor that the managerial accounting goals at. Significant
factors that ensure a company’s success is its pricing strategy, an appropriate allocation of
costs or budgeting techniques, controlling the organisation’s operations and processes,
identifying the problem areas and then strategically manage it. Management accounting is the
primary tool that makes sure the company is serving well in these aspects. The above issue
that arises in the Woolworths Group was a result of ineffective and improper managerial
accounting techniques in the group. If the managers of the group would have monitored the
managerial techniques effectively the issue would not have arisen. This underpayment issue
is a vast issue that the company cannot afford to face or continue. This can hamper the years
of reputation and goodwill that the company has in the market. It should be the primary
concern for the managers and the directors of the group and the matter should be looked into.
Management accounting techniques help an organisation in allocating funds to
different departments as per the need and requirement of the same. The underpayment in the
wages was a result of ignorance by the supervisors and lack of funds to pay the workers.
Woolworths should look into this immense issue. Managerial accounting techniques provides
different strategies that ensures evenly distribution the costs in various department. The
identified issue can be tackled by using these techniques. Manually assigned percentage can
be one of the effective methods that can be used to resolve the issue. This technique ensures
that all the departments in the organisation is manually supervised and then the distribution is

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done depending on the needs of the different departments. As in this case, if the Woolworths
management should have kept an eye on the labour department and their requirement it
would have known that where the problem lies. After identifying the problem the
management can go ahead with identifying why is the problem arising, in this case it is
because of the uneven distribution of resources. This unequal distribution leads to less funds
in this department, which lead to underpayment in the wages of the employees. The
management needs to pay attention on the budgeting and spending of the organisation and
makes sure that the employees are satisfied enough, as this would ensure the company with
more profits and a good market reputation. For any company or group, its employees are its
most valuable assets and satisfying them should be the primary motive of any group. Issues
such as underpayment would harm the company’s years of hard work. Hence, it would be
appreciated if the directors of the group take some actions in resolving the issue with the help
of efficient managerial accounting techniques. As this is not only spoiling the organisation’s
reputation but also affecting the productivity of the group.

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Reference:
Butler, B. (2020). Woolworths underpaid thousands of workers by up to $300m. [online] the
Guardian. Available at: https://www.theguardian.com/business/2019/oct/30/woolworths-
underpaid-thousands-of-staff-by-up-to-300m [Accessed 13 Jan. 2020].