The Contribution of Management Accounting Innovations - Essay Example

? Management Accounting Introduction Management accounting is a profession that involves collaborating in decision-making, devising planning management, and management system performance, as well as providing expertise in financial reporting and control (Lucey, 2003). The major role of management accounting is that it assists management in the formation and implementation of an organisation’s strategy. Management accounting combines finance, accounting, and management with the progressive strategies that are needed to drive successful businesses (Emsley, 2005). On the other hand, management accounting innovation is the adoption of new ideas or modern forms of management accounting systems. Management accounting innovations are among the central themes driving modern organisations. These modern organisations manage to prosper and retain its success in the aggressive market environments through stable innovations towards organisational prosperity. This paper will outline the contribution of management accounting innovations towards organisational success. 1. Why Management Accounting Innovation is one of the core themes driving modern organisations Innovations are of many types, and research suggests that distinguishing the difference between them is very essential because innovations have different attributes (Schmeisser, 2010). More so, the adoption processes of innovations are not the same and factors affecting them differ. There are different types of innovation that mainly are technical innovation, administrative innovation, process innovation, product innovation, radical innovation and incremental innovation. To start with, technical innovation relates to the major work activities that are carried out in an organisation, while administrative innovation relates to the organisational structure and administrative processes inclusive of the management. Thirdly, process innovation contains an organisation’s process in new elements. Examples of this process innovation are input materials, task specification and many others. On a fourth note, product innovation relates to new services or products that are produced in order to meet the market requirement. Finally, radical innovations represent fundamental changes in an organisation’s activities as well as clear departures from existing practices. Innovations vary differently in different organisations due to the sise and activities of an organisation. However, in management accounting only two innovations are commonly used. These two innovations are administrative and radical innovations. 2. Management accounting is the core theme in driving innovation in modern organisations In the past decades, management accounting strategies included both decision-making and analysis (Emsley, 2005). These past management strategies are claimed to be the predecessor for the emerging innovation and the latest technologies. The modern accounting represents both the operational and the financial planning and control. Managerial accounting is a very essential tool in an organisation because it provides essential data with which the organisation operates. In other words, managerial accounting can be simply referred to as cost accounting. The management accountants have the role of preparing reports that focus on how well or bad managers and the business unit have performed (Lucey, 2003). The management accountants go ahead to measure these performance measures and the results are compared to plans and benchmarks. Most of these reports provide frequent updates on essential indicators and any arising problem is addressed. The main problems that arise in the reporting field are declining in profitability, global market crisis and other emerging problems. These problems are then solved strategically. Therefore, management accounting analyses the past, present and the future of an organisation’s performance through financial transactions. These summarised outputs are essential in planning the current and future stability of an organisation through innovation. 3. The role of management accountants in driving innovation The role of management accountants has not been effective in driving innovation in different organisations. Though they have tried, more needs to be done and that is why criticism of inability to innovate continues to persist even in the present. The lack of innovation was described as ‘accounting lag’ that needs to be diminished to keep management accounting relevant to the changing information needs of managers. However, these claims belonged to the past when proper management accounting research had not been carried out effectively. The reason that spurs the management accounting environment is the technology update demand. The management accountants are required to take the role of advising and leading business development (Brandley & Hussey, 2003). These developments portray changes in the roles of the management accountants who are evolving under modernisation. The main difference between traditional and modern management accounting practices is the invention of cost control techniques (Hansen & Guan, 2009). Therefore, the modern management accountants identify any inappropriate shortcomings in an organisation through data and reports. In this case, the management accountant will have no choice but to strategise methods of curbing the shortcomings. Since shortcomings are of different features, different innovations are implemented to tackle every problem. This is how innovation should be driven and management accountant should get up and more. Role Involvement and Suitability of Innovations Incentive I agree with the author that role involvement effects innovativeness (Emsley, 2005). Although many organisations have not vividly defined innovation processes, innovation remains a significant component of any organisation. Successful innovation process is portrayed by commitment of members. These members are supposed to work out their different tensions, outputs, and concerns that are associated with each stage. Implementation and management of innovation processes have proved difficult for most of the organisations and the success of a planned process will force the management to acquire attractive strategies in order to encourage members to participate fully. The management strategy could be incentives in the form of presents, goal achievements and other forms of employee motivation. These ideas will change the attitude of the employees and will convince them to participate in any kind of process activity. On the other hand, the unity between different members in different stages is important for easy running of activities. Availability of information from management accounting provides a base for managers to carry out a summary of the entire interior structure to facilitate the control functions of an organisation (Bendrey & Hussey, 2003). Additionally, management accounting is responsible for providing a scorecard by which an organisation’s total performance is rated by the public. The managers use this information to prepare organisation’s reports based on management and the organisation’s performance, reports on capacity utilisation, sales reports and many other different reports. Management accounting information is, therefore, essential and, if not handled properly, may lead to wrong decision making that will affect the organisation’s operations in general. Hence, accounting systems should be proposed in a way that will help them overcome complex environmental conditions (Chapman & Shields, 2007). 4. How management accountant can accelerate innovation within an organisation The management accountant plays a very significant role in acceleration of the innovation process. In modern organisations, the roles and actions of a management accountant are very sensitive (Coombs & Jenkins, 2005). This is the reason because they act as strategic partners and go on to provide decision based information. Additionally, management accountants have the responsibility of managing the business team as well as reporting relationships and responsibilities to the finance officer. Apart from these roles, the management accountant also forecasts, plans, analyses reviews, and monitors costs in the business. In this perspective, accountability becomes more significant to the business management team than to the finance department. This is the reason because management accountants become accountable to sales management score carding, development on new products and many other innovative developments (Hansen & Guan, 2009). Therefore, the flexibility in management accountants gains knowledge and experience from various fields within an organisation. Conclusion Management accounting is a complex task that needs careful handling because it is the key indicator of any organisation’s stability. The management accountants are doing a great job of scaling and weighing organisations’ stands in the competitive market framework (Chapman & Shields, 2007). However, more is needed from them and all acceleration measures should be implemented to promote innovation because it is through innovation that most organisations will rise and beat the changing market environment. References Bendrey, M., Hussey, R., & West, C. (2003). Essentials of management accounting in business. London: Continuum. Chapman, C. S., Hopwood, A. G., & Shields, M. D. (2007). Handbook of management accounting research (vol. 2). Amsterdam: Elsevier. Coombs, H. M., Hobbs, D., & Jenkins, E. (2005). Management accounting: Principles and applications. London [u.a.]: SAGE. Emsley, D. (2005). Restructuring the management accounting function: A note on the effect of role involvement on innovativeness. Management Accounting Research, 16 (2), 157-177, Retrieved from http://www.sciencedirect.com. Hansen, D. R., Mowen, M. M., & Guan, L. (2009). Cost management: Accounting and control. Mason, Ohio: South-Western. Lucey, T. (2003). Management accounting. London: Continuum. Cengage Learning EME Schmeisser, W. (2010). Innovation performance accounting: Financing decisions and risk assessment of innovation processes. Heidelberg, Germany: Springer. Read More