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HANOI UNIVERSITY FACULTY OF MANAGEMENT AND TOURISM -o0o - CAPSTONE PROJECT 2022 EXPENSE MANAGEMENT AT ALIBABA ENGLISH CENTRE Rationale report_Group 2AC Mentor: Mrs Do Van Anh Members: Nguyen Thi Hong Van 1704010124 Cao Thu Huyen 1804010043 Ngo Thi Huyen 1804010047 Dang Thi Khanh Linh 1804010056 _May 23rd, 2022_ Table of Contents Abstract 4 1.Introduction 5 2.Company introduction 5 a Brief history 5 b, Vision and Mission 6 c, Organisational structure 6 3 Problem Statement 7 4 Literature review 8 4.1 Expense management in small and medium-sized businesses 8 4.2 Expense management for English-teaching centres in Vietnam 9 4.3 Recording expenses under VAS standard 10 4.4 Administrative expenses 10 4.5 Salary expense management 10 4.6 Commission expense management 13 5 Method of inquiry 13 5.1 Interview question designs 13 5.2 Data collection 15 5.2.1 Lecturer and teaching assistant responses 15 5.2.2 Response of company’s management team 17 5.2.3 Response of CEO 17 6 Results of the projects 18 7 Action plans 22 7.1 Hiring an accountant 22 7.2 Building up Accounting Department 23 7.2.1 Mission and function 23 7.2.2 Plans for recruitment of Accounting Department 24 7.3 Administrative expenses 24 7.3.1 Photocopy expenses 24 7.3.2 Policy on expenses incurred in the course 25 7.4 Salary expenses 26 2 7.4.1 Fingerprint or card time attendance 26 7.4.2 MISA (ASO) 26 7.5 Commission expenses 29 8 Conclusion 31 REFERENCES 32 APPENDIXES 33 INTERVIEW QUESTIONS 38 3 Abstract Through 7 years of operation (2015-2022), Alibaba English Center has achieved remarkable and rapid growth in the number of students over 40,000 One of the top concerns of businesses is cost control Expense management is a critical factor since it also drives the company’s performance, particularly in SMEs and in periods of difficulty, specifically two years of Covid-19 Alibaba English Center is a medium-sized company, so the center also exposes to common problems of weak cost management For this reason, to support the company strengthen its brand, stay competitive in the market, and maintain strong performance, cost management is now a top priority for the center's management This project aims to improve the cost management system at one of the famous English Centers in Vietnam, which is Alibaba English Center Cost issues, the impact of costs on the organization's goals will be shown in the project This project aims to assist the company in solving cost-related issues, namely administrative costs, commission costs and salary costs Data are collected from the company to identify the problem existing in cost management system through interviews with managers and staff, direct observations of the process, and review relevant documentation Despite the difficulties of mutual trust between the team members and the CEO of Alibaba company, we expect to develop certain convenient tools and procedures to assist the management in controlling costs Thereby, we have come up with action plans such as using more MISA accounting software, using timekeepers, setting up an accounting department and having specific policies 4 1.Introduction General and administrative expenses are expenses incurred in the process of organizing business activities that such enterprises have to spend to operate their business Enterprise administration costs are related to all activities of the enterprise, not separate for each specific activity At the same time, depending on how the business operates, the administrative costs also vary Consequently, what most directors are keen on is the means by which to deal with this expense in the most sensible manner for their business Enterprise management is a job that requires administrators to understand the organizational structure and standardize the management process as well as optimize the cost of effective enterprise management to bring greater profits In order to maximize profits, each business must maximize revenue and minimize costs For many businesses, administrative expenses account for a small proportion One of the important keys to help businesses manage business costs effectively is to determine business management norms This is the basis to help businesses make operating estimates because in order to make a labour cost estimate, there must be a norm of man hours, and the cost of raw materials must have a norm of raw materials In addition, it also helps managers control business activities of the enterprise because normative costs are the standard, the basis for evaluation, and contribute to timely information for managers to make daily decisions such as pricing a product, accepting or rejecting an order, analyzing profitability More specifically, it attaches the responsibility of each employee to the economical use of resources Good corporate cost management will help businesses operate effectively, optimize unnecessary costs, and control the finances of the business Up to the present time, the company is facing difficulties in managing cost sources including: salary costs, administrative costs and bonus expenses Therefore, our solution for the company is to immediately hire an employee to record expenses incurred at the present time, in the next 1 month, set up complete accounting department The company should buy a printer to serve the necessary documents for the teaching process In addition, timekeepers should be installed at 4 locations In particular, the company must issue policies on commission costs, administrative costs and salary policies 2.Company introduction a Brief history Alibaba English - the company that we conduct research in is a limited liability company with its headquarter at 186 Giai Phong, Hanoi, founded by Mr Ngo Xuan Thang The company was established in August 2015 with a development path of nearly 7 years so far After 2 years of operation, up to 2017, Alibaba reached the top 100 typical young businesses in Vietnam Up to now, Alibaba has become the largest English centre in Hanoi with more than 40,000 students and it is also a language centre that has the cheapest tuition fee in Hanoi After 6 years of establishment, 5 the company has now expanded to 7 facilities with 4 facilities in Hanoi, 2 facilities in Nghe An and 1 facility in Saigon The focus that our team wants to study is on facilities in Hanoi The training system at the company includes pronunciation, grammar, communication and TOEIC In addition to training knowledge about industry transfer, the centre also integrates teaching students about critical thinking, creative thinking, presentation skills and teamwork, more specifically and also the brightest point Alibaba's is a dynamic environment that is different from other English centres b, Vision and Mission Since the company's establishment, the company has brought with it the desire of the founder of the company to bring English into the universal language for Vietnamese people in the current economic context of economic integration and globalisation, with the mission of helping one million students to speak English as their mother tongue Moreover, Alibaba also has a mission to build a strong English community and constantly strives to combine with leading partners in the field to create opportunities and a better future for Vietnamese people c, Organisational structure In order for the company to operate flexibly, the organizational structure plays a very important role Alibaba has a team of extremely young, dynamic and enthusiastic employees, the whole company up to now has about 150 employees Organizational structure of one member limited liability company Mr Ngo Xuan Thang is the owner and director of the company, who is responsible for the debts and related property obligations of the company within its charter capital The company has 4 main departments including marketing department, recruitment department, training department and sales department 6 3 Problem Statement Our team's target community will focus on the Alibaba English Center for all ages who want to learn with a focus on everyday communication as well as in-depth communication Alibaba English Center was established in 2015, after 7 years of operation, the center has 7 branches nationwide and more than 40,000 students With a system of training and teaching processes focusing on basic daily communication for all ages, Ablibaba has affirmed its position in helping students practice listening and speaking English in real life However, when we went into the company's management system, we found that there was a gap due to weak cost management In particular, in the management of administrative costs, salary expenses, commission expenses, there are many weaknesses and loopholes that can lead to many serious consequences in improving the development of the company later After surveying and working with the company, we learned that there is no specific accounting department who will be responsible for recording all kinds of expenses and related documents And when recording all kinds of expenses will be due to Mr NCH, holds the position of lecturer vs cost control, after everyone uploads the data to a drive file for comparison Regarding salary, there will be an Excel file on Google Drive to control teaching activities as well as expenses after a lesson Moreover, when there are costs incurred, each employee is responsible for uploading to Google Drive the invoice or photo for comparison and payment to Mr NCH The Excel file would automatically calculate the amount of payables to workers in the formula: Payables to Workers= Salary (based on their claims) + Expenses paid by them in advance Once Mr NCH alone takes care of all the work related to the costs incurred, it will lead to many loopholes Furthermore, because there is no accounting department in Alibaba, Ms LA, an employee of the sales department, is the trustful one to record the transactions in a journal based on Drive file & based on Mr NCH’s checking at the end of the month However, Ms LA violated Circular 200 cost accounting principles because Mrs LA does not actively record expenses at the time of arising, but only records all expenses at the end of the month Due to the lack of strict cost management has led to the following consequences The first issue, based on firsthand observation after working in this setting for a long time, is administrative expenses for which there is no dedicated person or cost /asset management department In fact, lecturers/employees buy materials, print articles, parties and bonuses completely freely and upload expenses to Excel file, but this file is not paid too much attention Without a dedicated cash flow manager, photocopying, document printing, party money, bonuses, and fines are just a few examples,and without a warehouse manager, it's impossible to keep track of vouchers, duplicate paperwork isn’t processed, and anyone can come and go from the warehouse This leads to shady, unsubstantiated expenses, which can lead to a lot of shady, fraudulent activity The second cost concern is that payroll costs are quite complex In fact, lecturers and staff will automatically report the working day on an Excel file We found that Mr NCH was both a 7 teacher and a salary checker through his practical experience working at the company and looking through Alibaba's financial documents when asked by this group Finally, according to company policies, you will be paid a commission if you recommend others to join the trial course About how to calculate the commission for each person, each employee has contributed to the company as cumulative points and the employee self-declares his contribution in the Excel file However, three incidents of employees generating bogus emails to register for a trial course were uncovered by December 2019, and those three employees were also in charge of reviewing enrolled students As a result, I was able to deceive the number of students that signed up for a trial lesson in order to collect a commission The CEO has not yet discovered a complete solution to the two challenges outlined above This project will provide a way to solve the problems of cost management in the most appropriate way from our team's point of view This is the foundation for assisting firms in making operating estimates, as a labor estimate requires a norm of man-hours, and a norm of raw materials necessitates a norm of raw materials Furthermore, because standard expenses are the basis for evaluation, it assists managers in controlling business activities of the organisation by providing timely information for managers to make daily decisions, such as pricing a product, accepting or rejecting orders, and reviewing profitability More specifically, it ties each employee's accountability to the efficient use of resources It will positively affect the aspect of the community in the long run A positive effect on the organisation is that it will help the company understand the costs of money coming in and out, easy to manage as well as reasonable allocation without wasting money Alibaba will be able to operate more efficiently, reduce superfluous expenses, and keep track of its finances with good corporate cost management 4 Literature review 4.1 Expense management in small and medium-sized businesses In traditional accounting for costs, it is assumed that fixed costs are independent in the level of activity and variable costs change proportionately according to the changes in the level of activity Costs should be divided into fixed and variable ones Most management accounting expects that the proportion between costs and activity refers that a 1% increase in activity results in a 1% increase in costs, and a 1% decrease in activity results in a 1% decrease in costs (Allen, 2007) Cost management is a comprehensive index to measure the level of enterprise management Generally, firms with limited access to capital have higher internal costs including salary and rental expenses There are two categories in processing costs which are rational decision-making and motivational The rational decision-making treats expense as a consequence of weighting costs and economic benefits The other is motivation and stimulations, providing incentives to work, for example perks and bonus In some companies, rewarding staff for firm performance improvement has now become a common practice However, because some of the expenses are variable, 8 decision-making processes by management are put in several difficulties, which requires critical information (Rougnaghi, 2017) Today, many firms manage their costs by utilising available resources such as hyman, machines and land When current operation results are not good as expected, it is the manager's critical decision whether to maintain those resources and keep the cost capacity in the short-term or immediately cut those Unfortunately, most information related to expenses that managers receive is mainly from financial statements while a business can have various expense behaviors It was long believed that administrative, general and selling costs vary according to activity level However, recent experimental studies have revealed evidence that the reduction in costs may lead to lower quality in sales processing in the future (Anderson et al, 2019) Thus, in some cases, an increase in costs can result positively in business activities To decide firm cost and whether to deduct expenses, it requires a long process of consideration and analysis before imposing those costs to firms 4.2 Expense management for English-teaching centres in Vietnam Truong Manh, a Vietnamese strategic manager, pointed out a common model for English- teaching centres in Vietnam In his opinion, English-teaching centres in Vietnam commonly has to to financial issues due to poor expense management The cashflow indeed reflect the optimization of business operations Expenses are divided in 3 categories: marketing & sales expenses, managing and controlling expenses and others However, in Vietnam, English-teaching centres mainly assign a specific person, usually known as an accountant to control both revenue and expense situations, which is considered as the great lack of expenses management Hence, there is a great risk of monetary frauds The founder is suggested to proceed with a short-term step which is to review all 9 the transactions in the latest 2 months and then highlight those that may have least effect on the business operation to judge and decide omitting those transactions in the future Moreover, expenses for human resources should be considered because efficiency and effectiveness require a thorough judgement, which comes to be the common weakness in most English-teaching centres Employees are overpaid than their potentials, leading to over- expenses (Truong Manh, 2021) 4.3 Recording expenses under VAS standard Circular 200 applies to small to medium-sized enterprises with the scope of bookkeeping, preparation and presentation of financial statements Article 82 of Circular No 200/2014/TT-BTC defines that expenses are the accounts that decrease economic benefits and are recorded at the time of occurring transactions or possibility of the future without already being paid or not (VAS,n.d) Moreover, the matching principle, which requires revenues and any related expenses should be recorded together at the same time, is also violated In addition, it is expected that the account should review evidence and reasonability for transactions by him or herself before recording, not just by relying on the others’ opinions and judgement Accountants should keep track of expenses such as wages, raw materials, depreciation of fixed assets, etc Moreover, expenses that are not considered calculated in taxes according to the provisions of the Tax Law but have sufficient invoices and vouchers and have been properly accounted for according to the current accounting policy shall not be recorded as a reduction in accounting expenses but adjusted in the tax finalisation to increase payable corporate tax All the expense accounts have no balance and at the end of the accounting period, all expense accounts incurred during the period must be transferred to determine business results (Vietnam Finance Law, 2014) 4.4 Administrative expenses Administrative expenses reflect directly on a company’s efficiency Research from the University of Texas shows that 82% of poor cash flow management leads to the failure of a small or medium-sized business The manager should review all office management tools to track the costs better (Akerks, 2016) Business is an organisation comprising many individuals Thus, there is a high risk of shortage in controlling administrative expenses, especially some variable costs like material printing, perks, and outside working expenses In an English centre, main costs come from studying material (Truong Manh, 2021) Some businesses have effective software and managing tools to control, but most neglect the importance of this matter, which leads to loss of the budget balance It is assumed that those expenses are the hardest to control, thus being the most-driven fraud (Styles et al, 2018) In Vietnam’s accounting system, administrative expenses (TK 642) are clearly classified into details including taxes, fixed assets’ depreciation, expenses incurred from conferences, research and training In Alibaba’s case, the cost spent for printing materials should be accounted for TK 6427 (Vietnamese Accounting System) 4.5 Salary expense management According to the internal auditing process for salary payables, Alibaba has now not fulfilled all auditing duties, especially the matter of lack of duty segregation There are 3 aspects that need to be reviewed periodically: incurring salaries expenses, calculating methods and 10