From Traditional Transaction-Based Financial Information to Technologically Based Non-Financial Information - Essay Example

Task Moving Away From Traditional Transaction-Based Financial Information to Technologically Based Non-Financial Information According to CIMA, The Chartered Institutes Of Management Accounts, the field of management accounting has been defined as involving the processes of identifying, measuring, accumulating, analyzing, preparing, evaluating and controlling a business entity for the purpose of ensuring that resources are appropriately and accountably used (Cooper, 2009). The discipline also includes the processes of preparing financial reports for the groups within the business who do not participate in the management of the business entity (Zhou, 2012). This includes groups such as the shareholders of a company, creditors along with the regulation and taxing authorities (O’Sullivan, 2010). Many businesses have in the recent times shifted their focus from using the traditional transaction-based financial information towards using technologically based non-financial information (Agresti, 2002). This has been largely due to the fact that the traditional approaches usually limit themselves through the definition of their cost behaviors in the terms of their production along with sales level (Burns and Baldvinsdottir, 2007). The traditional methods were mostly utilized for the purposes of giving reports when the valuations of the items in their income statements and balance sheets (Zhou, 2012). The method also had so many restrictions as the statements prepared were supposed to comply with the GAAP principles. As a result of being outdated in their practices the governing body of the management discipline brought more technological advances that would have helped in resolving the issue (Cooper, 2009). Additionally, in the recent past there has been a great shift by the managements of businesses across the globe towards the use of technologically based non-financial pieces of information (Burns and Baldvinsdottir, 2007). This has been brought about by the use of newer tools along with techniques along with changes in the roles of the management accountants (Agresti, 2002). The management accountant’s role has basically shifted from being a provider of information within organizations to being an advisor within the management of an organization. These two types of change within the management field are evident simultaneously across many businesses along with organizations (Burns and Baldvinsdottir, 2007). Reports indicate that such an occurrence might occur because both of these changes may be subjected to the same types of normative pressures though they are basically mutually independent (Agresti, 2002). The management accounting profession has in the modern world changed their views on various aspects that affect their operations. For instance, less emphasis has recently been placed on the acquisition of technical knowledge along with the traditional skills of doing business (Burns and Baldvinsdottir, 2007). The new work of the management accountant thus relies on his ability of interpreting non-financial information for the benefit of a business entity or organization (O’Sullivan, 2010). This has made the management accountants new work to be described as involving the offering of consultancy services to the internal operations of a business. Change within the management profession has also been driven by the fact that the accountants are currently being involved in the support of decisions and offering of professional advice to the organization (Agresti, 2002). The advice provided is on the strategic along with operational issues of an organization and the application of special technical skills for the benefit of the organization (Cooper, 2009). The issue of leadership is directly related to the management profession and this implies that the methods applied by the professionals in the field have to change. The change should therefore be aimed at providing an increase in the collaborations beyond the financing option and working in teams that have multiple purposes in a business (Agresti, 2002). Despite the changes being witnessed across the management field, reports still indicate that the traditional methods utilize a lot of an accountants time. Recent reports indicate that a lot of an accountant’s time is usually spent on processing transactions (Burns and Baldvinsdottir, 2007). This was estimated to amount to over 60% of their time whereas only about 11% of their time was utilized in the decision making processes within an organization (Cooper, 2009). The changes in the field have mostly been attributed to issues such the globalization of the markets and the advances occurring in the information along with production technologies being utilized (Burns and Baldvinsdottir, 2007). The changes have in turn reduced the time spent on the processing of the information from a business or organization thus enabling other members of staff to undertake the duties that were previously performed by the management accountants (O’Sullivan, 2010). The growing trends in managing and operating a business that point towards the management of relations with their associates and customers, outsourcing and the adoption of leaner process along organizational structures have also facilitated the changes being witnessed within the profession (Agresti, 2002). The processes of globalization along with increased competition have provided newer incentives for the competencies of the management accountant to be deployed in a better fashion while offering their direct support to a business (Burns and Baldvinsdottir, 2007). They have also provided newer incentives for in the long term trend that has seen the development of cost effective communication along with information technologies. These applications have recently been utilized for reducing the costs a business incurs in its operations while at the same time increasing their levels of profitability (Cooper, 2009). The invention of the technologies has in turn reduced the traditional roles of the management accountants in their activities of transactions processing and the preparation of financial reports. This is because the new technologies being put help in generating the required information thereby reducing the bulk of work for the management accountants (Agresti, 2002). The adoption of the new technologies has further facilitated the option of outsourcing of business operations to other firms. The demands on the management accountants have further been reduced by their reliance on non-financial information in the processes of decision making (Cooper, 2009). They have enabled the organizations to delegate these functions to other members of staff who are now charged with the responsibility of monitoring their financial performance. This is largely because there are new software’s that have been adopted which help in performing the duties the accountants performed within the traditional setting (O’Sullivan, 2010). The reduction of the accountants’ duties through the adoption of the newer technologies for offering non-financial information has in turn enabled organizations to cut down on their staffs thereby reducing their costs. A big advantage of this technological advancement in businesses and organizations is that they are now able to deploy their management accountants into other roles that add value to their activities along with organizations (Agresti, 2002). However, the adoption of the newer technologies resulting in the above benefits depends on an organizations ability to invest their funds in these activities. An organization that adopts the use of non-financial information in decision making will inevitably have to adopt the new technology that is being availed (Burns and Baldvinsdottir, 2007). Additional costs of retraining their personnel on using the new technology and reorganizing an organization to efficiently take advantage of the situation will be utilized (Cooper, 2009). The availability of resources for investing in these resources could be a representation of an organizations financial strength although its size will most likely determine whether it should invest in the technology (Zhou, 2012). Previous reports indicate that larger institutions usually have more idle resources for uses such changing the functions of their finance departments (Burns and Baldvinsdottir, 2007). The smaller businesses have reportedly lesser capacities of investing in the technologies that will instigate such a magnitude of change within them. The large businesses are more likely to be exposed to the process of globalization than small businesses and this will urgently require their management accountants to participate in more decision making roles (Zhou, 2012). In performing these roles, the accountants will require ample time to consider all aspects the aspects affecting an organization along with making consultations with other senior members of an organization. This further implies that their previous roles will be performed through the new technologies involved so as to indulge their full concentrations in the formulation of strategies to assist the business. In the modern world the role of management accounting and the management accountants in regards to the modern world wide enterprises has greatly changed. The management accountant is currently viewed as a strategic partner in business activities in various organizations (Zhou, 2012). They are usually involved in the tasks of offering financial information for the purposes of aiding in the decision making processes. They offer operational and financial information and the management of their business teams (Agresti, 2002). This is performed while simultaneously reporting the relationships along with responsibilities to the organization’s finance departments. The management accountants within the profession have been charged with the duty of forecasting, planning, performing analyses on the variances being witnessed in an organization (Cooper, 2009). These duties are done in addition to the tasks of carrying out reviews along with monitoring operations while reporting their findings to the financial departments. Through the use of the more advanced technologies the management accountants are currently able to easily compile financial reports and reconcile financial information to the original sources (Burns and Baldvinsdottir, 2007). They are also currently able to generate reports for the purposes of regulating risks from the many sectors that an organization could be having (Agresti, 2002). This greatly enables an organization to detect and avoid risks which might affect its operations in the future. Management accounting as a field within an organization is usually charged with working closely with departments such as the department Information Technology (Zhou, 2012). This is done to ensure that transparency during the costing of the systems they use is achieved. Many large organizations that have adopted the use of these systems usually incur very large costs in attaining and maintain them (Burns and Baldvinsdottir, 2007). They should therefore employ the services of the management accountants in ensuring that the costing of these facilities is accurate so as to prevent their incurrence of unnecessary costs (Agresti, 2002). The adoption of non-financial information by management accountants in global business enterprises has had a significant effect on the strategic management practices that an organization adopts. This has been done with respect to the business’s relationship to its customers, competition, markets for capital along with labor and their suppliers (Cooper, 2009). The center competencies of an organization usually describe how its products or services are more superior to their competitors along with their relationships to their suppliers and their accessibility to the labor and capital markets (Agresti, 2002). The practices in the field of management accounting are relevant to strategic management depending on their extent which they support an organization in evaluating the most appropriate strategies to use (O’Sullivan, 2010). The management accountants in this situation will be responsible for using the non-financial information in preparing their production, marketing and product managers who will be charged with adopting their preferred strategies (Zhou, 2012). The management accountants will then responsible for advising an organization on the implications of various costs due to their choice of strategy while calculating the revenue they have attained (Burns and Baldvinsdottir, 2007). The adoption of the non-financial information by the management accountants additionally enables them to easily categorize the information on costs and revenue within an organization. The accountants are easily able to categorize this information by product, market segments, sales mixes along with other groupings (Zhou, 2012). In response to the measuring the costs involved in implementing certain strategic measures, the management accountant may utilize the non-financial information in calculating the costs that an organization will incur in implementing a strategy (Agresti, 2002). Traditionally, management accounting has been blamed for only considering information from the financial departments while ignoring what the decision making authorities would have liked to know (Zhou, 2012). The traditional methods of providing management information were tedious and did not facilitate the participation of the management accountants in an organizations decision making tasks (Cooper, 2009). In summary, the new roles of the management accountant in managing global business enterprises can be said to be dependent on the abilities along with experiences that a professional has. They vary from performing a cost analysis, rate along with volume analysis, forecasting sales, finances, budgeting, allocating costs, strategic planning, capital budgeting and ensuring transparency in the costs an organization incurs in acquiring their IT systems (Burns and Baldvinsdottir, 2007). There are other roles that depend on the scope of an organization’s activities such as the modeling of prices and determining of product profitability’s among other tasks (Kwan & Theodorou, 2009). References Agresti, A., 2002, Categorical Data Analysis. John Wiley & Sons, Inc., Hoboken, New Jersey. Burns, J. and Baldvinsdottir, G., 2007, The Changing Role Of Management Accountants, In Issues In Management Accounting. Pearson Harlow, London. Cooper, P, 2009, Change in the Management Accountant’s Role: Drivers And Diversity, University of Bath, London. Kwan, A. W, Theodorou, P, 2009, Strategic Information Technology And Portfolio Management, Idea Group, New York. O’Sullivan, K, 2010, Strategic Intellectual Capital Management In Multinational Organizations: Sustainability And Successful Implication, Idea Group, New York. Zhou, Q, 2012, Advances In Applied Economics, Springer, New York. Read More