Role of Strategic Management Accounting - Essay Example

Strategic management accounting (SMA) has been introduced as a field of study in the accounting profession. The core purpose of introducing SMA is to advance on the usual management accounting by giving it a wider scope. The introduction of SMA was due to numerous requests on the improvement of MA. SMA centers on the internal financial information of the business as well as the external facet of the business operation. Compared to management accounting, SMA focuses more on comparing the business with the competitors, which helps the managers to be more vigilant based on how the competitor is conducting business (Shah, Muhammad & Malik 2011, p.1)The management learns business techniques from competitors and makes appropriate decision.

The ability of SMA to include non-financial features of business in decision making is a major breakthrough in accounting. In a nutshell SMA plays vital roles in business management such as collecting information that is related to the competing business. It is also used in helping the accountant and the management make a strategic decision that relates to the business. Also, SMA help in cost cutting measures based on strategic decisions by the management, and finally, Strategic business management, is resourceful in helping the business gain competitive advantage over the rival businesses.

In performing the above roles, authors of strategic business management have been encouraging accountants to use analytical tools developed and used in the area of strategy. and marketing which are now essential in the field of SMA. The first tools of SMA as presented by scholars is the Competitor cost assessment, this involves making a keen analysis of the cost that the business competitor incurs. Such cost, which includes labor, raw materials and production cost, is accessible mainly with the increasing development of accessing information.

Analyzing and understanding this cost will help the management to cut and manage the business cost. The second tool is attributing costing which is costing system that emphasizes on the products attributes. Such attributes will include the features of the product, purchase agreements and after- sale services. The information analyzed in costing system should have relevance with either the current or future employer (Shah, Muhammad & Malik 2011, and p.3).Another tool is SMA is the application of the balanced scorecard (BSC) which was proposed by Norton and Kaplan in 1992.

In BSC financial and non-financial measures are amalgamated for strategic performance management purposes. The intention is to create a balance by linking vision and strategy of the business with multi-dimensional points of view of the customer. Competitor Appraisal Based on Financial Assessment is another crucial tool of SMA. This model is effective as it allows comparison and yard sticking. The process is also fairly cheap in comparison to others. Strategic costing is also an