Management Performance & Financial Management - Essay Example

Management Performance & Financial Management Lecturer Table of Contents Table of Contents 1 Role of the Management Accountant 2 Reflective Statement 9 References 11 Role of the Management Accountant Change in management accounting is frequently used to convey paradigmatic shift in expectations and roles of management accountants (Otley, 2008). In the last two decades, there has been substantial degree of interest and research on the relevance and the future of the role of management accountant in an organization. This indicates that the role of management accountant has lost some relevance. There have been researches done suggesting changes to the role of management accountants as well as the management accounting techniques, systems and practices. Researchers suggest and recommend “solutions” to the relevance of the management accountant role. These are information frameworks and innovative costing like economic value adding. The researches have focused on the drivers and triggers of change in management accounting profession as well as changes in the roles and skills needed by management accountants. The today’s world of global competition and computer aided manufacturing indicate that modern organisations and corporations must work and design new systems of management accounting that will assist and help managers in a more integrated way in the long term planning. As such, change is needed in the approach, methods and functions of the role of management accountant if they are to be useful and relevant in these increasingly challenging modern times (OMahony & Doran, 2008). The management accountant’s focus needs to change and move from cost to creating value. Their performance and planning management must start with the customer needs. The role of management accountants needs to change from collector and presenter of financial information to change agent and team member. This is increasingly becoming important for companies because of the modernization and use of advanced technology in manufacturing and therefore making the role of management accountants to change. In addition, management accounting systems should as well change from being reconciliation engines and transaction heavy inspection to being vital and lean providers of business insights. The fundamental role of management accountant to an organization is to support value creation for customers. Traditionally, management accounting emphasized on control of organization by way of tracking of costs, planning, good utilization of resources and integration of management and financial accounts. Management accounting also was concerned with valuation of inventory and cost absorption, efficiency optimization by, comparing actual and predetermined costs (Burns & Baldvinsdottir, 2007). The change-taking place on the role of management accountant is emphasis on creation of value for customers. Creation of value starts with the customers and therefore every production or manufacturing of any product must be focused on customer wants, needs and desires for the product, services and other value added company offerings. Many customers understand the value created but they are not aware of their future needs and desires. This means that management accountants must change their roles to anticipation, creation and innovation of new value through innovative services, processes and products (Lord, 2007). Importantly, it is very important for management accountant to understand the value they provide to their customers both currently as well as in future. Organisations and companies will prosper if they provide increasingly high levels of value to their customers and to the marketplace. The essential purposes of management accountant roles are to engender relentless and continuous improvement. The management accounting systems must provide analysis, measurements, classifications and insights in to challenges of cost problems, processes, quality problems, inventory problems, satisfaction problems, time problems, waste problems and customer service (Emsley, 2005). They must not only identify these issues but as well provide guidance on their importance as well as their root cause. The measurements and reports must actively support empowerment of continuous improvement teams in an organization. This is only possible by delivering and making available the right and necessary information at the right time as well as in a format that is useful and accessible to the organization. As Otley (2008) underpins, to achieve transformation from the traditional management accountant to the new focus of value creation, it requires changes to some aspects of the role of management accountant in an organization. Regular accounting methods need changes in order to eliminate some transactions, replace the traditional controls with operational controls and most important to free the management accountant for a more proactive role. The old management accounting methods such as performance measurement, budgeting, variance analysis and financial planning needs to be changed. The wider business control becomes focused on value creation that is customer driven by using methods such as target costing. It understands the value created for customers and it drives their implications to the entire value stream (OMahony & Doran, 2008). The ever-increasing competition is making businesses to respond by way of emphasizing quality improvement of services and products and increasing productivity. To achieve these priorities many organisations have adopted re-engineering concept. The first department to be reengineered being the finance depart. The common result of the reengineering concept has been downsizing. As such, management accountants are required to have an in depth knowledge of an organisations production, strategy and service delivery systems (Burns & Baldvinsdottir, 2007). They are also required to be specialists in order to be in best position to collect information and develop management accounting practices based on the current trends and way from the traditional management accounting. Notably, management accountants are challenged to have the following portfolio of skills; Expertise in systems design Expertise in change management and be change agents Ability of relating strategy to cost management Increased expertise in functional areas For the upcoming individuals who want and desire to be management accountants, they must develop a lot of competence in computer technology and systems analyst; develop facilitation skills like communication and persuasion skills. They must acquire broad knowledge in operations, strategy, finance and economics. Moreover, they must learn the future and posses analytical skills. They must develop willingness to accept and embrace change as well as assume risk. Above all the above, they must master accounting, as it is the backbone of management accounting. By this, they will have prepared for the exciting and rapidly evolving management accounting. The field calls for professionals who are able to balance between breadth of knowledge and technical skills. Numerous terms are often used to describe the new role that management accountants should be aspiring. Nevertheless, the main themes, as suggested by Hopper et al., (2007), that enable characterization of the new roles are; Less weight is placed on traditional skills and technical knowledge, albeit they are still recognized as important in the new role. As such, the new role relies on skills and supplementary knowledge notably in reflection of non-financial information in the work of an accountant. Critically, accountant is closely involved in providing evidence and decision support throughout the organization on both operational and strategic matters. They are supposed to apply specialist technical skills and knowledge to the wider business context while applying more of forward looking orientation. Leadership and management (change, people and risks) are of greater significance in the activities of an accountant. It is envisaged that the working methods of an accountant change while in pursuit of the above new kind of roles mainly with an increased emphasis on collaboration outside function of finance and working in cross functional groups. The high rate of developments of the market economy is making management accounting to be very important. In order to keep up with the rate of high development and increase in market economy, companies and organisations must adopt and implement new tools and techniques of management accounting. This is imperative for them due to the ever-changing market conditions and evolving market economy. The management accounting practices that any organization or a firm adopts and implements also plays a very big role in the way the management accounting will help the organization. these practices must be updated and be up to date with the current developments in the market economy, market conditions and use the current conditions in manufacturing and production. One of the best-recommended techniques and tools of management accounting are the total quality management and just in time techniques. These tools and techniques are very efficient and provide organisations with exactly what they need in management accounting. As such, management accountants should align them and apply these techniques and tools that of important and useful to their organisations. It is also very important to apply rules and regulations in management accounting. Management accountants have the responsibility of ensuring that their organisations follow rules and regulations pertaining the tools and techniques in management accounting. These are not necessarily compliance issues but concerns of following the right procedures and process in the organization. One of the significant aspects of the financial accounting is that they are highly standardized. On the other hand, management accounting lacks standardization. There are no equivalents of generally accepted accounting principles in management accounting. The lack of standard procedures in management accounting may make the management accountants to device their own metrics and systems to assess the position of the organization in terms of decision making using management accounting information. The biggest concern in this is that the methods, systems or metrics used by the management accountants vary from organization to organization and within the organization itself. As such, inconsistencies in measuring financial benchmarks as well as evaluations arise. Interpretation of the systems and metrics is different among the management accountants in the organization. This underpins the reason for great concern on the relevance of the role of management accountants in companies. Subjectivity in management accounting is another concern in the current organisations. Management accounting allows a great deal of subjectivity when coming up with methods and metrics for performance measuring. This allows management accountants biasness and personal beliefs to set in and have an impact in measuring of performance. For instance, management accountants may focus exclusively on the employee output and not consider the employee input that have big effect overall organisational productivity. Consequently, this affects the employee and the whole organization. This is because; the information that the management accounting is using is not appropriate and right in evaluating the employees. The employees feel that the assessment is not fair to them. The high rate of subjectivity in management accounting allows for a great deal of biasness and pursuance of personal interests by the management. It therefore allows high rate of manipulation by the management in order to suit their interest. This is a very big concern to all stakeholders of the organisations as it sets fraud. As such, the relevance of the role of management accountant in the organization is highly debatable in the present advanced technological world where better methods and ways of using the management accounting tools, techniques, systems and metrics are available. It is very important and crucial for management accountants to be market and future oriented. Management accountants are responsible on internal processes of an organization and focus their attention on the organisations production, requisition of materials, processes and other internal production and manufacturing functions. As such, they do not have much information on the market trends and the latest developments in the market. This is detrimental for organisations because organisations are directly and indirectly affected by the conditions and changes in the market. Management accountants should be forward looking to make the organization to progress. The accuracy of management accounting information is dependent on cost accounting and therefore there are concerns on the usability of the data. Management accountants require learning more and having the knowledge that is related to the future of the organization. Management accountants use past and historical information of the organization and they are not future concerned. For the organization to remain afloat in the market, it needs to make investments and appraise ways of improving its performance. As such, management accountant’s role should as well include the future of the organization so that the relevance of their roles may improve. Essentially, the relevance of the contemporary and future role of the management accountant becomes very much integrated with the functions of value creating. The functions of control, accounting and performance measurement information are designed to enhance and support continuous improvement process. As such, management accountant becomes a change agent within an organization. Reflective Statement This reflective statement provides me with an opportunity to present what I have learned through the whole unit. As a matter of important, this is very important as it helps me to outline what I have learned over the period of the coursework. To start with, I learned a lot from producing this coursework. I learnt many research techniques that I had not known before. In addition, I know how to apply them in searching for information. The coursework has motivated me by having more desire to learn more about management performance and financial management. May planning and time management skills have developed very well and this will help me in future. Importantly, I learned much about myself, I developed critical thinking approach and competence. I will apply what I learnt from this subject in organisations and in my future personal life to plan and management myself appropriately. I encountered some problems in the course of this coursework and in completing the assignment. Although there were enough resources, I did not have enough guidance on how to use the resources. This is a challenge that I encountered. Moreover, the teaching strategies adopted in this coursework were not as effective. As such, I did not grasp one hundred percent of what I was supposed to grasp indicating that the teaching strategies were not as effective. Though I did not attain the level required, I was very close to attaining the required level. The facilitator of the coursework congratulated me on results but informed me there is still much to be done. One of the things that I would do differently in my work is better application of the research techniques. Although I was taught on the research techniques, I was not able to apply them as required in searching for information. Next time I will improve on this. Better application of research techniques would have enabled me to do a better job. When completing the assignments, the learning outcome that I found easiest was evaluating the financial and behavioural aspects of management techniques for planning, budgeting and organisational control. This is knowledge and comprehension. I found these easier because I had a better understanding in the fundamentals. My major is financial management, I like it very much, and I have great understanding in this area. On the other hand, distinguishing between management and financial accounting provided me with some difficulties and it was the difficult part of the assignment. This is because, these two areas are very closely related, and they are confusing. Luckily, through the course facilitator, I was able to come to terms with both of them, and I can now distinguish them. I honestly believe that I am a better person and I have performed to the best of my ability. I know that with additional learning and training, I can be able to do more. In my coursework, the facilitator has always told me that I have a lot to learn, and I am prepared to explore the heights in this subject. References Burns, J., & Baldvinsdottir, G. 2007. The changing role of management accountants. Issues in Management Accounting, 3, pp.117-132. 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A review of activity-based costing: technique, implementation, and consequences. Handbooks of Management Accounting Research, 2, 641-671. Hopper, T., Northcott, D., & Scapens, R. W. (Eds.). 2007. Issues in management accounting. London: Pearson Education. Johnson, H. T. 2008. Relevance Regained. NY: Simon and Schuster Pub. Lord, B. R. 2007. Strategic management accounting. Issues in Management Accounting. Harlow: Prentice-Hall. OMahony, A., & Doran, J. 2008. The changing role of management accountants; evidence from the implementation of ERP systems in large organisations. International Journal of Business and Management, 3(8) pp. 109. Otley, D. 2008. Did Kaplan and Johnson get it right?. Accounting, Auditing & Accountability Journal, 21(2) pp. 229-239. Posner, P., Ryu, S. K., & Tkachenko, A. 2009. Public-private partnerships: The relevance of budgeting. OECD Journal on Budgeting, 9(1) pp.11. Schick, A. 2002. Does Budgeting have a future?. OECD Journal on Budgeting,2 (2) pp.7-48. Schick, A. 2007. Performance budgeting and accrual budgeting: decision rules or analytic tools? OECD Journal on Budgeting, 7(2) pp.109. Read More