STRATEGIC MANAGEMENT ACCOUNTING

Strategic Management Accounting



Strategic Management Accounting

Introduction

Managerial Accounting

1. Financial accounting allows department heads to record and report transactions. It provides benefits such as improved operations and better visibility in the marketplace. Managerial accounting sweetens the pot. Besides performance-data reporting, it helps segment chiefs make sense of factors affecting productivity, sales, administrative charges and manufacturing output. Managerial accounting is also known as cost accounting or management accounting.



Importance

2. Managerial accounting helps top leadership hear valuable feedback from those who have their ears to the ground: department heads, manufacturing supervisors, business-unit chiefs and rank-and-file personnel. Senior executives want to know not only what these personnel hear, but what they see with respect to market trends and the competitive landscape. Businesses use cost accounting to spot and correct budget gaps, monitor and rein in wasteful manufacturing expenses, and set spending limits through budgets.



Strategic Planning

3. Strategic planning enables businesses to adapt to various economic settings, including volatile and fast-changing market trends. It involves looking at corporate operations, studying rivals' moves and engineering plans to improve profitability and gain market share. Strategic planning draws on strategy formulation and business planning. An organization devises one or more strategies to reach its operating goals. The business plans to make sure it has adequate resources to achieve these objectives.



Relevance

4. Planning is integral to a firm's long-term success. All organizations engage in planning initiatives to take a closer look at corporate operations and come up with improvement measures. The topic of strategic planning is not just important for businesses; it is also dear to charities and government agencies, which need to plan to avoid budget deficits.



Relationship

5. Running a business often boils down to finding the right mix of strategic vision and tactical acumen to expand corporate operations. In the global marketplace, strategic planning and managerial accounting remain interrelated concepts, although both work streams are distinct. Corporate planners need accountants' input when charting a company's operating course. Management accountants seek planners' feedback to make sure financial reports are consistent with the firm's long-term goals. Companies often use similar tools to coordinate both activities - some of which are enterprise resource planning software, financial analysis applications, and accounting and reporting programs.

Managerial Decision Making

A key function of management is to make decisions which are necessary because of the implicit roles of setting the organizational strategic direction and operationalising enterprise-based internal coordination and control. Traditionally management was viewed narrowly as a process involving planning, organizing, commanding, controlling and coordinating. Executive management as a result tends to have a medium and longer term focus in the strategic context of organizational decision-making. This supports the selection of strategic planning and resource allocation that is budgeting, as two of the key areas of management decision-making that were chosen as major components of this thesis. Shaw refers to these executive tasks as the making of 'Big Decisions' that operationally the strategic direction decisions taken by the governing body and executive ...