Management Accounting and Budgeting - Essay Example

Management Accounting By Location Introduction Management control systems include all the techniques, tools and mechanisms used by organization that influence behaviors to be able to achieve organization objectives. MCS are integrated systems and for them to work and influence employee behavior they require to have an impact in the internal environment while also being sensitive to the external environment. Information technology has a very vital role in managing controls (Langfield-Smith, 2007). Management controls can be subdivided into two main sections. The first one involves the output control while the second one involves behaviors, personal controls and social controls. The two sections are not independent of each other and they are intertwined so as to work properly in achieving the specific goals they have been designed to. Budgeting In the fast changing world and the high cost of business managers have to set up budgets for what to invest and understand the priorities to focus on. A budget is the plan set by the organization for the forthcoming period and it is designed at different level of the organization. The top management focuses on the master budget which is more detailed and requires integration and coordination of every part of the organization. The primary role of budgeting is systematic planning (Taylor III, 2013). The challenge of setting up a good master budget focuses more on the people hired to do and how they ensure they also are concerned with the macro while also being detailed to the micro management priorities of the business. Contrary to organization budgeting is not forecasting but is more of a leadership role of accompany than a financial one (Mettanen, 2005). Transaction cost economics this is the most complicating accounting calculation top managers’ face. It needs a lot of time and is more complex and it is widely used to decentralize multinational organization it involves understanding the tax related issue within the geographical area as well as ensuring that the cost incurred for raw materials is up to the required and that reducing operating cost (Laitinen, 2002The objective of this transfer cost is more of ensuring proper resource of allocation as well as minimizing cost and also having a competitive advantage over the rest of its competitors. Preparing of benchmarking involves a lot of consideration and managers in this have to understand the qualities required for the benchmarking and how to rate and rank the staff. The challenge when embracing this can lead to employees who think they are sacked. This requires involving of everyone in the said organization so as to work as a team and not like autocratic leaders (Chavan, 2009). MCS are a positive requirement in organization and for the controls to be implemented in a fast changing world technology is becoming a very important issue and this require a lot of capital to buy and set up such enterprise resource planning. This requires consultants and experts so as to train the staff on the possible ways to run and manage the put up systems (Spraakman, 2007). Globalization With new opportunities, countries are looking for other markets as the countries are trading more and more across the continents and with this opportunity, the company is facing threat from different sources. Recently, the world was facing a threat of EBOLA this affected countries in West Africa and such threats affected the companies and also the airline industry as they had to look for new ways to ensure that they do not halt flights, while also not endangering the lives of its passengers. Another example for this occurred this year, when an Malaysian airline was brought down in Ukraine by rebels claiming it had passed their territory such accidents occur when an organization is trying to find new markets and it is up to the Top managers to ensure they are able to ensure the staff while also ensuring the increase their market share. Uncertainty The top managers face a lot different priorities in the world today in a macro level organization can face the threat of terror. Terrorism is a global war and it affects all organization regardless of where they are. In as much as the role for security involves the government also the organization has to ensure that its staff are well protected and are well handled so as to ensure that there is no cause for alarm. Oil drilling companies like the BP has oil drills in countries like Nigeria where insecurity is rampant it is for this fact and others that they have to incur extra charges like security surveillance. Human capital The world is becoming a global village and the need for qualified employees is becoming a task and it is with this reason that that employers have to ensure better pay to help in the event of competing with the rest. It is with this reason that the more expertise an employee is the more the pay and this brings out the cost of employment being high. (Brennan, 2011) Ethics The integrity of the management accountants is important to review and analyze as this brings out the quality of handling the employee this is regarding to the transactions carried out it is important to have qualified staff that are able to be honest and ethical. A case of Enron managers in 2000 where the managers worked in cahoots to swindle money from the organization .This goes to the extent of reflecting how difficult it is to manage people with ulterior motives. There is also a case of Tesco management where there is a profit miscalculation and the crime fraud department had to come in and investigate. This cause’s serious reputation for the organization as shareholders will tend to avoid the organization which will be of great damage to the company’s reputation. (James, 2008) Complexity As the business world continues to change, complexity sets in. This brings about more complication and comes with other technicalities; for example, the top managers have to analyze more sophisticated ways of doing things. In regard to the cancer treatment, it is important to understand the equipment and ensure there is no negative effect caused by the equipment, such as the CT scan. It is such reasons that organization needs to understand that though technology should be embraced, checks and balances should not be ignored at any cost. (jorgeson, 2012) There are also opportunities that this top manager’s face and it is also important to identify such. One example is large market share due to the increase in population. It is important for top managers to expand to different countries with large population. Videophones ensure a spirited campaign to ensure that it gets a share of the India mobile market that they finally got the chance of buying off a company in India. It is such an example that top managers requires skilled employees in helping them find new markets for the goods and services. (JunghoBaek, 2008) Technology is also an important role and it has enabled a lot to be done at a click of a button this helps in reducing the cost of hiring employees and also the time to take when conducting an operation for example time taken to search or explore for oil has taken a short time compared to the last fifty years this will enable the top managers to save a lot of time and this will result to reduction in cost. Other opportunities for top managers are minimizing the cost by utilizing more of it by using well its resources. With the opportunity of going green organizations can turn the waste into income generating projects such as production of energy this can help and also help the company to use its energy. Sweden has utilized waste so efficiently that now it imports from Netherlands. These are just but opportunities waiting to be tapped and utilized. (Russell & Taylor, 2011) Information Overload Information technology is also a challenge as with the technology. The ability of organizations to make decisions (JunghoBaek, 2008)on with this kind of knowledge is a very big challenge. This is because the rate of new innovation is trickling very fast and how to regulate what to use and what not to use is a tough call and all this needs to be decided in a short time. (Traettino, 2010) Conclusion The threats faced by organization are many and occur from the macro and micro areas of a business and it is important for top leadership to ensure that it is flexible to meet the fluctuating needs of the world and it is significant to note that change is the only constant and being open to it requires an organization to be able to manage and evaluate its risk properly. It is for this reason that embracing change should be encouraged but with caution. BIBLIOGRAPHY Laitinen, E.K (2002), A dynamic performance management system: evidence from small Finnish technology companies,Scand. J. Mgmt.,vol. 18, pp. 65-99 Brennan, L. (2011). Operations management. San Franscico: Mcgraw hill. James, E. (2008). Environment and its aftermath. carbon bootprinting, 84. jorgeson, K. (2012). Globalisation in the 21st century. The cost of technology, 86. JunghoBaek. (2008). The environment causes of globalisation. American Agricultural Economics, 29. Russell, & Taylor. (2011). Operations management. New york: Thomson Dickson. Taylor III, B. w. (2013). Introduction to Management science. Newyork: Prentice hall. Traettino, R. M. (2010). Automating Input Data to Improve On-. Time Deliveries An iSix Sigma Case, Langfield-Smith K(2007)Management control and systems and strategy:A critical review of system.vol22 Mettanen P (2005)Design and implementation of a performance measurement system for an organisation Production ,planning &Control Vol 16. 11)Chavan M (2009) The balanced scorecard anew challenge for management accounting vol.28pg35-38 12)Spraakman G(2007)Transaction Cost Economics a theory for internal audit Magerial auditing journal vol12/7 No2pg18-21 Read More