STRATEGIC MANAGEMENT ACCOUNTING

Rada plc



Rada plc

Introduction

It has been observed that even though the products for Rada plc are very strong in the market place but still there are certain major problem exists within the company. They are:

There are no accurate budgets to guide the company's managers nor there effective system of communicating such information.

There appears to be a few management control systems & little performance management in the company.

The transfer pricing system in the company is poor and does not encourage efficient decision making.

Therefore the paper revolves around these problems and provides appropriate strategic concerns on this behalf.

Discussion

Budgeting is being drawn up to serve two main purposes in most of the business. The first objective is financial planning, which involves the adapted plan for the whole organization to achieve its goals. The co-ordination plan for each department is one important characteristic of the planning. For example if the top management decide to increase conference room booking in a period of time. Such function of budgeting is "to co-ordinate the various activities of an organization in order to achieve company rather than divisional or departmental objectives." (Glautier and Underdown, 2008). The second objective of Budgeting is the financial and management control. The budget represents the control which is exercised through the budget makes events fit in with it. Control involves in comparing actual performances with plan and determining whether the plan should be revised in view of the comparison.

According to Berry and Jarvis (2009), "planning involves the determination of objectives and expressing how they are to be attained. The control process is the means of ensuring that the plans will be achieved." The planning and control process have been identified as several stages: determine the business objectives; make strategic and operating decisions; monitor and revise plans. Although planning and control are two distinct concepts, they should not be examined in isolation because a good budgeting system must provide for both planning and control. Good planning without effective control is time wasted and only when planning is laid down is it possible to implement control. (Garrison, 2007)

Establish responsibility

First of all, a budget committee should be formed to supervise and take responsibility for the budget-setting process. (McLaney and Atrill, 2007). The management accountant, the general manager & the marketing manager and other senior manager of functional department of Rada plc such as logistic, public relations should be comprised in the committee. Qualified accountants should be hired to be budget officers to take responsibility for carrying out the proper procedures in budgeting.

Communicate budget guidelines to relevant managers

In order to draft out budgets, the budget committee should make sure every managers have a clear understanding of their planning. There should not be any discordant objective between each department. At the same time, each manager needs to pay attention to the change of the external environment in which they will operate.

Identify the key and limiting factor

'What is the Rada plc able to earn in the budget period?' Such question outlines the limits to the ...