Throughput Accounting: The Analysis of Managerial Implications on the Tourism Services Market

Introduction

In 1990, Goldratt introduces for the first time throughput accounting concept in accordance with theory of constraints (TOC), developing new applications and techniques, in order to improve company profit (Goldratt, 1990; Watson et al., 2007).

In order to improve the enterprise profitability managers found a way that simplified accounting approach known as Throughput Accounting (TA). Relatively new in management accounting, throughput accounting was created by Eliyahu Moshe Goldratt (1984). TA detects elements that boundaries a company from attaining its goal, and then concentrates on measures to enhance company profitability and returns (Rahman, 1998).

Throughput accounting represents an alternative to traditional cost accounting, focuses on generating more throughput. Today cost accounting is all about long term yield management and efficiency, and considers companies in connection with the economic and social environment (Jasinski et al., 2015). Throughput Accounting represents the solely management techniques that regards constraints as elements limiting the company’s profitability (Hilmola & Weidong, 2016).

In our days everywhere you look we are confronted with threats and menaces, and from multiple sources. First, organizations must have in their foreground the suppliers and second the demand, both elements of uncertainty. The transparency represents a key element in achieving goals inside a company (Topor et al., 2017). Costs and revenues are difficult to estimate in the light of incertitude (Şimşit et al., 2014; Duff, 2017; Picard, 2016). For this, the profit is put under the magnifying glass of insecurity (Hilmola &Gupta, 2015). Căpușneanu et al. (2015) claims that senior director’s pay and acquire computer and accounting systems able to indicate what short-term decisions to take with long-term positive effects.

The management strategy and throughput accounting represents domains of theory of constraints that needs software’s systems technology, and software’s checking outgrowth (similar to yield management informatics tools); (see: Tsou, 2013), and project management (Mabin & Balderstone, 2003).

‘Throughput’ is defined as sales revenue less materials and services purchased outside the company which relate to products sold. ‘Operational expense’ covers the cost of conversion including all employee time. The Goldratt Institute now defines ‘throughput’ as revenue less totally variable costs (Noreen et al., 1995). Throughput accounting relates what actually occurs in business areas like distribution, operations and marketing, and one of the most important aspects of Throughput Accounting is the relevance of the information it produces (Souren et al., 2007; Linhares, 2009; Okutmuş et al., 2015; Picard, 2016; Huber et al., 2018).

On the tourism services market it is crucial to know how to optimize the capacity of production in order to gain profit. Assaf and Tsionas (2018) in their paper untitled The estimation and decomposition of tourism productivity measured the performance of international tourism destinations and provided both short-term and long-term productivity measures.

Figure 1.

Analogy conventional cost accounting and throughput accounting

Source: Adaptation after Dugdale and Jones (1998).