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The management accounting - Essay Example

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Introduction: With the advent of information technology, customers have found a way to aggressively bargain with a product or a service provider. Information technology has allowed consumers to go on the internet, and extract all pertinent information regarding their desired product or service…
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Download file to see previous pages This shift in orientation has brought with it the requirement to induct new practices and upgrade exiting practices. In this endeavour, a change in the orientation of management accounting is required. Rather than just supporting internal processes and providing information for decision making by top management, management accounting has taken a more strategic outlook (Baines and Langfield-Smith, 2003). Management accountant, from just being focused on operational issues have added new responsibilities in their job description. These responsibilities are more strategic and have to do with knowledge regarding customers, financials, human resources, and processes. Thus, management accountants have become strategic accountants in this new and evolved business environment (Dixon, 1998). In reaction to a more pronounced competition, companies have started doing competitor appraisals, changing from its previous practice of internal assessment. A framework for strategic management accounting, based on contingency theory has been adopted by companies. This framework allows companies to better adapt their internal business processes to fit the underlying variables in the external business environment (Langfield-Smith, 2008). The internal business processes should correspond with factors like the firm’s size, business strategy, and market orientation etch. In order to design business processes in this way, the urge is to use management accounting techniques which have strategic applications, and use the insight of management accountants in strategic decision making. The second point requires giving management accountants a more active role in the strategic management processes (Cinquini and Andrea, 2007). These changes, although very dramatic, are essential to maintain a sustainable business. Businesses from being mechanical have become more organic, making them sensitive to the slightest of change. But in order to maintain a competitive business operation changes in the way things are done is required. The development of commercial management expertise, including marketing, general management and financial management, has become essential (Atkinson, Banker, Kaplan, and Young, 2011). This has given rise to the concept of looking at the business holistically. This concept of looking at the business from a 360-degree viewpoint has given precedence to the build-up of cross-functional teams, team-based structure and horizontal integrations. This new approach has blurred the line between boundaries and has lead to a culture build around information sharing and collective decision making. Firms who believe in this have merged their activities across their supply chain to become more customer and competitor focused (Bisbe, Batista-Foguet, and Chenhall, 2007). As mentioned earlier, management accounting has taken a more strategic outlook, with a focus on strategy, long term future oriented time frame, and an external focus, whereas previously, this focus was more towards internal processes and a short-term time frame. Thus this change is more of a strategic nature rather than of any other reason (Potter, 2005). Consequences of the changes: As highlighted earlier, businesses in order to face the hostile business environment effectively and efficiently have become more nimble and strategic in orientation. Traditional functional departments have been dissolved to form cross functional teams. Functional areas are working keeping in ...Download file to see next pagesRead More
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