Business Planning and Control: Integrating Accounting - Literature review Example

Institution : xxxxxxxxxxx Title : xxxxxxxxxxx Tutor : xxxxxxxxxxx Course : xxxxxxxxxxx @2014 Introduction Management accounting, while quite distinct from the commonly known public accounting, is undoubtedly very important in driving the business performance. It is majorly concerned with providing managers with accounting information within the organization. This information is quite useful in making proper choices leading to informed decisions, as highlighted by Seal (2011). Such information equips the organization members better with regards to functions of management and controlling. The Planning part of management accounting is in fact quite crucial as it is concerned with coming up with ways that will direct the organizations future operations. With planning, organizations point out the future resources needed by the organization, whether financial or non financial resources. This paper therefore critically evaluates the social implication of planning as an element of management accounting. According to Bowhill (2008), the planning element of management accounting is without a doubt quite fundamental to the whole organization especially in view of the fact that it is the most important element that determines the future direction of an organization’s operation. While often viewed as a necessary part of any business operation, planning indeed entails both Long term and short term plans. As opposed to short term plans, long term strategic plans drafted by the organization are those lasting for longer periods, about three to five years. Despite this, both plans put strong emphasis on the organizations operations in light of its budget. As such, the planning element of management accounting, the manner in which it is developed and how it is conducted are very important factors that have significant social implications. In fact, as highlighted by Seal (2011), the information provided within the plan affect the organizations decisions and activities, which is directly linked to the social life of the organization. The managers actually use the planning information to deliberate on the best products to be manufactured, know where the effort of the organization is to be channeled in the future/coming years, and develop future strategies and specific future goals ACCA (2008). However, when such information provided within the plan contains some bias then there will be the inevitable animosity between employees and among the various departments. Similarly, when the information within the plan has flaws, it might lead to misunderstandings within the organization. Planning is highly associated with the ability to align an organization’s objectives with the available resources, to which budgeting becomes a major part and impacts socially. While preparation of budgets is a basic activity, budgets actually express an organization’s planned action based on quantitative figures (Wickramasinghe & Alawattage, 2007). Allowing the managers to appropriately allocate resources according to the financial need of the departments and eliminating ineffective programs and departments, budgeting may have significant social implications when the plans are wrong. Since plans regarding budgets and costs often include the amount of resource provided and how the resources operate or are shared, any uncalculated move in such plans significantly affect employee performance, departmental output and customer satisfaction. The accounting staffs are thus compelled to put into considerations factors such as the behavior of the staff when plans associated with budgeting and costs are being developed and implemented. Planning brings right people together. For the plans made to be executed the management ensures that the right people are involved in the implementation of the plan. This people are the ones with knowledge on the business, influential participants, those that are challenging, stimulating, honest, and open to discussions and those that think of the difficult issues that concern the organization. This helps in creating a better understanding of the organization and the issues that affect it, as highlighted by Ansari & Jan (1991, pp. 19). The approach helps build a better understanding of the company and the issues that affect it. However there is a likely hood that the honesty and the vigor in the dialogue might be constrained and place the executives at the discussion focus on the defense (Seal, 2011). A lot of companies, however, focus on the data gathered and elements of plans gathered and neglect components that are crucial and interactive to the company. Planning often affects the firm’s consumers in that a proper planning brings about customer satisfaction by enabling the customers to find goods of their tastes and preference. The management team and the employees know exactly what their clients want. Likewise, there are future priorities of the company concerning their employees, where the managers consider the organizations priority alongside that of the employees while the appropriate targets are focused on as a strategy of approaching customers (Seal, 2011). Whenever planning is done in the wrong way, the management and the customers are likely to fail to understand and appreciate the value of the organization. To employees, this could be a sure indication that there are no fit projects invented and implemented to solve the problems of the business or improve the organizations revenue. It is a critical factor since this impacts on how an organization is perceived both internally and externally by employees and customers. Questions regarding the chances of the planned move affecting the staff number or minimizing the satisfaction of the customers are similarly fundamental. Considering the likelihood of such affecting the amount of information provided on the report and how often this information is given to the staff or how much information is shared is quite significant. When the plan is poorly developed it may have significant consequences for the staff in terms of information overload, a fact which is likely to distract employees from the major point and a view supported in the works of Drucker & Maciariello (2008). Failure to address the questions appropriately and adequately during the planning process is likely to results in negative consequences for the staff and the customers. The morale and performance of employees significantly improves in organizations with better plans of performance. Such Employees are often psyched up, work willingly and put more efforts. Failure to do planning properly often demoralizes the employees and kills their morale whereby employees always give a low performance in the end. Without an effective plan in place, the staff is likely to fail to achieve the goals and aspirations of the organization. The organizations management may believe that the organizations’ projects are going to be successfully realized but with lack of proper planning, the resources are likely to be constrained and implementation done without any time considerations. This is due to the fact that plans often include requirements of the business, scope, and deliverables, success factors, timelines, roles and other important items (Vollmer, 2009, pp.141-150). Regarding poor planning, workers are often aware of their disorganized environment therefore suffering from stress and frustrations due to difficulties associated with the tasks and resources that have been allocated. The staff turnover rate is often high leading to a reduction in the employee number, productivity, and the profits. The fact that an organization is understaffed leads to other employees having a notion that they are overworked. This worsens the downward fall of the organization. The planning process, which involves fulfilling the organizations mission and goal, often helps the managers to realize the goals that have been set out given the fact that they have a properly defined plan. Mission and strategies are significant factors that affect the behavior of the employees. Strategies may of differentiation or low costs, prospecting or defending and harvesting or else divesting. The focus of the firm remains towards standardized product lines, costs that are lower, economies of scale and efficiency in operation through quality, cost and leadership in service. This necessitates employees with an aim of maximizing efficiency while stressing on cost reduction and the achievement of the motivational planning system. Those firms that are visionary and prospective, with strategies that differentiate and competitive missions, often tend to be inclined towards participative assessment making procedure (Parker, 2012, pp. 54-70). According to Bowhill (2008,p 115), the employees get a chance to be involved in the important issues of the organization as they are involved in the plan to make decisions in the organization. They are thus forced to study issues trending socially, surveying the needs of learners, being aware of the technological changes and the future research directions that are long term (Ansari & Jan 1991, p. 18). There are rewards on the employees and managers based on the parameters of appraisal like financial variables. These variables include achievements on budget as well as non financial variables such as growth, product innovation and market development. The planning systems of such organizations are normally sophisticated, with greater devolutions and participative workforce. Contributions from various parties may be valued. While this sounds good and has been indeed good most of the time, there are often some contentions whereby some inputs generate problems among the affected. Stakeholders and the company’s employees may get job satisfaction when it comes to matters dealing with the objectives of finance, ethical and moral considerations in the process of planning. This is because planning gives these levels of the organization a chance to come up with both long and short term decisions that are essential in policy making and the process of recommendations. This policies and recommendations direct the organization towards the stated goals, mission, vision and the objectives of the shareholders and the employees (Bryson, 2011). However, it is also good to note that there may be a planning fallacy by a part of the team and that may ultimately affect the outcomes of plans and the way employees will carry out their operations. Another factor is also associated with the manner in which it affects performance and evaluation of staff. Apart from long term strategies of the company, managers are compelled to come up with short term strategies including yearly growth of revenues and improvement in margins. This helps in gauging both the employees and managers performance. The managers here are hence made responsible for the strategies’ success. Poor planning is indisputably regarded as among the main factors that make the management team fail to control the organization’s cash flow effectively, given the fact that cash flow needs tracking and analysis. Without proper plans on how to maintain the cash flow of the organization, there are minimal chances for improvements (Wickramasinghe & Alawattage, 2007). The credit worthiness of the customers, their records on payments and other details may thus become part of the challenges faced. Planning also significantly affects what beneficiaries of an organization get. Actually, every organization often singles out what the beneficiaries are to get according to the plans. Figures are determined by what the organization is doing for the beneficiaries. The benefits offered are thus defined and often homogenous, targeted, verified empirically and quantified. The benefits are often vital to the beneficiaries where the shareholders benefits from enhanced prospects from capital gain mix and dividends from a tolerable risk profile. The information from the planning activities can also be regarded as significantly affecting those who prepare financial reports; reports that often serve as indicators of a company’s progress from which the stakeholders are able to gauge the progress of the business. The stakeholders pay close attention to the provided information since it is this information that dictates the survival of the organization. From the provided information, they are able to deliberate on ways that will assist in improving the firm. The information is similarly important to the accountants in the organization since from the collection of this information they are able to make certain decisions on behalf of the organization. They are able to manage their finance, record the transaction that has taken place, information concerning finance and operations of the business are also communicated among other essential things to the business (onaolapo & Oladejo, 2013). Conclusion From the above analysis, a conclusion can be drawn that the planning element of management has significant social implications especially given that the information within the plan affects an organizations operations which may negatively or positively affect employees. Plans may motivate employees to work towards the goal of the organization while at the same time provide an organization with the proper direction towards the success of the business. On the other hand, poor planning may lead to low employee morale, failure to realize the goals, vision and mission of the company and hence failure of projects. Managers are thus affected in the sense that they are challenged to employ measures that will ensure successful realization of the business goals through effective plans. Bibliography Association of Chartered Certified Accountants, 2008, Management accounting, Berkshire: Kaplan Publishers. Ansari, S & Jan, B., 1991, “Symbolism, Collectivism and Rationality in Organizational Control", Accounting, Auditing & Accountability Journal, vol. 4, no. 2, pp. 4-27. Bryson, J., 2011, Managing information services a sustainable approach, Farnham: Ashgate Publishers. Bowhill, B., 2008, Business Planning and Control: Integrating Accounting, Strategy, and People, John Wiley & Sons Drucker, P. & Maciariello, 2008, Management, New York: HarperCollins. Onaolapo, A. & Oladejo, K., 2013, “Evaluation of management accounting techniques as tool for planning and control decision-making in selected manufacturing companies in Ibadan, Nigeria”, Journal of Emerging Trends in Economics and Management Sciences. Vol 4, Pp 274-280. Parker, L., 2012, “Qualitative management accounting research: Assessing deliverables”, Critical Perspectives on Accounting, vol. 23, pp. 54-70. Seal, W., 2011, Management accounting for business decisions, McGraw-Hill. Vollmer, H., 2009, “Management Accounting as Normal Social Science”, Accounting, Organizations and Society, Vol. 34, pp. 141-150. Wickramasinghe, D. & Alawattage, C., 2007, Management Accounting Change: Approaches and Perspectives, New York: Routledge Top of Form Read More