Issues in Business Accounting - Essay Example

Issues in Business Accounting Name Institution Date Introduction Over time, management accounting has been perceived as being concerned with the generating, communicating as well as use of the financial and non-financial information in managerial decision-making and control activities. Such decision making activities range from operational to strategic. However, management accounting was criticized because the work done by accountants was simply internally focused, and thus limited to planning and control activities at an operational level. In this case, strategic management accounting has been seen as the most appropriate way to address the criticism. It is a form of management accounting which focuses on the factors external to the entity, non-financial information as well as internally-generated information (Chartered Institute of Management Accountants-CIMA, 2015). The role of strategic management accounting in an organisational setting According to the authors Tillman and Goddard (2008, p.80-81) it is worrisome that management accountants tend to be consciously and unconsciously involving in ‘sense-making activities by adopting the strategies of structuring and harmonising, bridging and contextualising as well as compromising and balancing. In addition, Tillman and Goddard examine that sense-making is visibly conducted in both external and internal contexts, in which they emphasize that underlying conditions that have great impact on this fundamental aspect of sense-making activities include valuable sets of information, professional know-how as well as having a feel for the game (Weick, 1995). In their view, therefore, accountants need to be providing different and extensive accounting information more appropriately. In so doing, accountants will effectively comprehend how accounting information is strategically used, and thus achieve the competence of developing more valuable accounting systems (Tillman & Goddard, 2008). In the contemporary competitive settings, it is noted that organizations are increasingly focusing on key factors that contribute value to customers. As a result of this customer-focus, organizations have been triggered to flatten their structures, a situation in which the term “horizontal accounting” has changed to mean practices adopted in companies that focus on the integration of activities across the value-chain purposely to enhance a heightened customer-focused type of strategy (Chenhall, 2008). It should be noted that in horizontal organizations, cross-functional management teams in particular, management accountants are in charge of decision making processes. Therefore, strategic management accountants have shifted from being seen as merely information providers to becoming active players within the strategic management process (Cadez, 2008). By considering the level at which accountants are able to become actively involved in utilizing the management accounting to improve their strategic management processes, three main factors have been considered influential in determining the degree to which this can be achieved. The three factors include; the practicalities involved in facilitating the accountants to perform their roles, those factors emanating from the organization and those related to attributes of the accountants. In particular, the organizational factors include; ability to add value, business knowledge, position in organization, culture, trust/credibility and relationship. The factors for practicalities are ability to add value, resource capacity, provision of information and information systems, while accountant led factors include; ability to add value, desire, and technical, skill set and interpersonal. In this these three main factors, the ability to add value dominates all of them, and thus seem as the main objective for involving in strategic management accounting (Chartered Institute of Management Accountants-CIMA, 2015, p.6). The important discussions studied by the authors in the prior literature The significant discussions studied by the authors in the prior literature shows that in recent years, strategic management accounting has received great interest particularly in the academic community. The major normative contributions made towards strategic management accounting often support the use of templates for achieving it through practices such as competitor accounting, competitive position monitoring, and strategic cost management and strategic investment appraisal as well as undertaking contemporary accounting developments by integrating strategic components of activity-based costing and the balanced scorecard. However, this normative approach to strategic management accounting is highly affected by drawback because it is perceived to be disconnected from the real happenings within organizations. A number of studies show that competitor accounting and strategic pricing have become the most widely adopted techniques and the meaning of the term strategic management accounting is still not adequately understood by managers (Tillmann & Goddard, 2008, p.81). In general, the authors argue that although normative research has received criticisms for not being up to reality, it has contributed much towards the development of strategic management accounting by creating various and specific techniques to achieve it. However, the authors support the idea that interpretive research is needed to enhance strategic management accounting (SMA) because it can potentially and extensively add value to the existing research to deepen the understanding of SMA of how it is applied and implemented within companies and received by organizational actors. From a number of literature reviews, it seems that very little evidence exists as to how organizational actors perceive the aspect of strategic management accounting. As a result, the authors strongly believe that grounded theory is an appropriate methodology towards undertaking an interpretive research to address the unclear and limited understanding of strategic management accounting. Whether the methodology adopted by the authors is adequate or not adequate for the study. Grounded theory is considered as one of the most popularly used research designs across the world. It is not only used for analysing thousands of literatures that report on studies undertaken by other scholars, but also involves understanding a collection of, for instance, seminal texts that researchers can use as guides to their studies as well as ensure the appropriateness of their work. Therefore, the idea of generating new theory from data is regarded more important than simply testing the existing theory (Cheffi & Beldi, 2012). The fundamental principles justifying the use of grounded theory as the ideal research design is the process undertaken of data collection and analysis, which is sometimes also known as “concurrent data generation.” This process involves the researcher to generate or collect some data which has a primarily purposive sample. The data is coded prior to generating or collecting more data, a concept that gives grounded theory methodology more advantages than other approaches to research design requires the researcher to initially collect and subsequently analyse the data or simple to develop a theoretical proposition prior to collecting data and testing their hypothesis (Hussein, Hirst & Osuji, 2014). Grounded theory was selected amongst other possible interpretive techniques for various reasons. Other than just paying more attention to describing the sense-making activities of accountants and their interactions, the authors assumed that grounded theory would help to incorporate the researchers’ views, and thus involve explanatory theoretical frameworks that can represent the structures and processes identified in an organizational setting. It is noted that grounded theorists shift their focus from simple responsibility of reporting data, to at least undertaking data interpretation. In addition, the grounded theory fosters the ability generate and use theory as well as to ground that particular theory in data. The practitioners of grounded theory argue that the methodology of grounded theory allows the actors’ own views and understanding of the concept of strategic management accounting. It is important to note that researches which are conducted beginning with pre-defined operational variables are established from the positivist assumptions. This excludes the objective of identifying new variables or categories of data, and thus does not involve applying a more meaningful way analysing relationships and patterns between the variables (Tillmann & Goddard, 2008, p.83). By considering the research context of strategic management account, it can be argued that this area of study involves complex human interactions within organizational settings that are still new. Therefore, it is necessary to use the grounded theory because it has the capacity for capturing the complex social phenomena. It is apparent that grounded theory strongly emphasizes the significance of developing various ideas and their linkages in the attempt to achieve strategic management accounting. Conclusion In conclusion, it is apparent the authors have adopted the role of grounded theory for their study. It is worthwhile to note that the author’s adoption of the importance of grounded theory has to a larger extent, influenced the direction and findings of their research which is achieving a clear view of strategic management accounting. It is notable that grounded theorists shift their focus from simple responsibility of reporting data, to at least undertaking data interpretation. In addition, the grounded theory fosters the ability generate and use theory as well as to ground that particular theory in data. The practitioners of grounded theory relevantly argue that the methodology of grounded theory allows the actors’ own views and understanding of the concept of strategic management accounting. Generally, the grounded theory methodology adopted by the authors is adequate for the study because it is an appropriate method of inquiry into understanding the main concept of their study which is strategic management account. It is a detailed approach which not only involves the common steps taken in other research frameworks such as initiating the research question, data selection, collection, analysis and conclusion but it also involves developing theories from the data which help the research to clearly understand the concept of strategic management accounting. References Cadez, S., (2008). Strategy and Strategic Management Accounting: An Investigation of Organizational Configurations. Manchester Business School Research Seminar-June18, 2008. University of Ljubljana. Chartered Institute of Management Accountants-CIMA (2015). Management Accounting in Support of the Strategic Management Process. CIMA Executive Summary Report, 11(1), 1-17. Nottingham Trent University. Cheffi, W & Beldi, A., (2012). An Analysis of Managers’ Use of Management Accounting. International Journal of Business, 17(2), 114-123. Chenhall, R.H., (2008). Accounting for the horizontal organization. Accounting, Organizations and Society, 33, 517-550. Hussein, E.M, Hirst, S & Osuji, J., (2014). Using Grounded Theory as a Method of Inquiry: Advantages and Disadvantages. The Qualitative Report 2014, 19(1), 1-15. Tillmann, K., & Goddard, A. (2008). Strategic management accounting and sense-making in a multinational company. Management Accounting Research, 19(1), 80-102.  Weick, K.E. (1995). Sense-making in Organizations. Sage. Read More