Looking At Management Accounting From a Strategic Perspective
Strategic management accounting is described as a form of management accounting that emphasizes on information related to external factors of a firm. Moreover, it underscores the importance of internally generated and non-financial information. The field helps in providing and analyzing management accounting data associated with business strategy, especially the trends and comparative levels of prices, market share, volumes, actual costs, demands and cash flow over the total resources of a firm.
The conventional aspect of management accounting is considered to be inadequate due to a number of reasons. Firstly, it focuses on manufacture and overlooks the costly post-conversion activities. Moreover, it also ignores the effect of other activities. Besides this, traditional management accounting fails to evaluate the relative cost position of the competitors.
In contrast, strategic management accounting emphasizes the relative cost positions and the techniques for securing sustainable cost advantages. It also enables cost differentiation. Thus the addition of strategic aspect to the conventional management accounting has helped in extending the role of accounting in two different directions. Firstly, it enables the integration of cost into strategy using strategic cost analysis. This also helps in alignment of costs with the corresponding strategies. Secondly, it facilitates in ascertaining the cost structure of competitors and monitoring the related changes.
The incorporation of strategic aspect in accounting has enabled management accounting to play the role of a strategic partner for an organization. While management accounting remains an integral aspect of management process, the management accountants are strategic partners for the management team of a company.
The management team attempts to create value for an enterprise through management of resources and activities. Moreover, it helps in achieving the goals of an organization in an effective manner. Primarily, the work of management team focuses on four activities: planning, controlling, and decision-making and operational activities. In the present scenario, management accountants have taken a proactive role in both routine and strategic decisions of an organization. Despite the fact that majority of information provided by strategic management accounting is financial, a strong inclination is there towards presentation of considerable non-financial data also. Therefore, management accountants provide different types of information to management. Moreover, they work as strategic planners to support the management in organizational and decision-making activities.
Strategic information is useful at the strategic level of an organization. Hence, it is useful for the management or senior executives. This information is extremely precise or abstract, based on external as well as internal sources and is both quantitative and qualitative. Moreover, the information focuses on a long term aspect and encompasses the organization as a whole.