Changing role of management accountant
Discuss about the Management Account Is Account Of Segment Of Accounting.
Management accounting is taken into account as a segment of accounting and it is involved in providing information to the managers that could be utilised in controlling and planning operations. The management accountants are responsible for operational scorekeeping, in which accounting information is utilised for meeting the reporting obligation of the organisation (Chenhall and Moers 2015). The role of the management accountants to facilitate the management in efficient process of decision-making is agreed highly from the perspective of the complex business environment. This is because there is increase in demand and needs for the managers to undertake decisions. Hence, the responsibilities of the management accountants have increased over time in contrast to the past and their role would be active in the decision-making process of the management.
In the words of Cooper, Ezzamel and Qu (2017), the management accountants were traditionally responsible to provide operating and financial information to the management. However, the changing organisational shape and business environment have increased the expectations from the management accountants and they are considered as the essential part in order to assure the success of the organisation. In addition, it is necessary for the management accountants to keep them aware of the competitors and customers due the changing conditions n business environment in terms of time, flexibility and continual development.
As the field of technology has made rapid advancements, management accountants could be redefined as the analysts, in which they are needed to take part in strategy formulation decision within the firm. The intention is to attain the likely competitive advantage (Fullerton, Kennedy and Widener 2014). The change in the role of the management accountants takes into account the decision pertaining to resource allocation like technology, finance, people, products and processes for accomplishing the determined strategies. The redefined role of the management accountant has direct effect on the business operations, since the accountants are probable in contributing towards change management in an environment of uncertainty, speed and complexity. This signifies that the management accountants provide information to the management so that the latter could have an effective insight of the complicated business environment. This, in turn, enables them to undertake better decisions (Hiebl et al. 2015).
However, Makrygiannakis and Jack (2016) are of the view that the management accountants have a different role to play, since the newer information system like Enterprise Resource Planning (ERP) has offered adequate time to evaluate information, instead of obtaining the base financial figures. Due to this, the position of the managers has improved in terms of undertaking suitable decisions. This is carried out after conducting a critical assessment of data and thus, there could be attainment of enhanced business performance. It is possible for the management accountants to have direct impact on the business, since they could identify the primary drivers of spending and greater control could be carried out to accomplish better operational efficacy.
Factors influencing changing role of management accountant
Hence, based on the above analysis, it could be cite that there is increase in role of the management accountants with the passage of time in the current complex business environment in contrast to conventional role of providing the figures only to the higher-level management. They are involved even in developing strategies for assuring the organisational effectiveness and thus, better organisational growth could be accomplished. However, the varying role of the management accountants in the current era is due to certain factors. These factors take into account shift towards the service economy, applying advanced system of information like enterprise resource planning, enterprise risk management, international competition and just-in-time management. Thus, there is significant increase in the responsibilities and roles of the management accountants and hence, the impact would be positive on the decision-making process of the organisation.
The various factors that have direct impact on the varying role of the management accountants include the following:
The organisations have made huge investments in new technologies of manufacturing. These include “computer aided design”, “computer aided manufacturing” and transparent manufacturing systems. These technologies have direct effect on conventional management accounting systems and thus, there needs to be changes in management accounting with the change in manufacturing systems. In relation to overhead costs and product costing, it is not possible to track different individual products. Conventionally, in order to apportion overhead, the base is considered in the form of labour hours (Messner 2016). The suitability is minimal since the charge of automated products would be made via an inadequate overhead rate.
The effect of global competition on organisations and deviation from cost-led pricing to price-led costing along with globalisation are few major factors affecting the rising expense on research and development and new product development which majority of the organisations incur.
In the conventional era, many nations tend to function in protective environments. The cross-border organisations were restricted to function in the local market with communication barriers, protected markets and geographical distance. However, the manufacturing organisations were open in severing competitive pressure from the cross-border firms offering greater quality products at cheaper prices. In order to assure success against these organisations, they need to progress along with adoption to change and finding a competitive strategy to cope up with the leading manufacturing firms. Due to the increasingly competitive market, expectations of the customers and changes in their preferences and tastes, the organisations need to have the pliability of coping up with customer demand for higher improvements and variety and reduced lifecycles (Walker 2016).
The growth of information technologies related to management accounting, especially the ERP system, has been a significant change in IT and conventional techniques related to management accounting have to cope up with the increasing advancements. As stated by Odar, Kav?i? and Jerman (2015), the association with management accounting seems significant, since one class of advantages from integrated system is expected to transfer from rapid and easy access to the data pertaining to operations. Thus, the need for management accounting arises in this situation in order to transfer data in a managerial usable and pertinent form.
Since ERP is a fully integrated system of information, all data from manufacturing department are merged with the division of sales and the flow of integrated data is immediate in the system. Due to such integration, the accountants need to work with the new system and the business needs to be viewed as a process instead of divisions, which would result in greater teamwork and higher cross-functional communication and cooperation.
The changes in globalisation, production technology and increasing rivalry have resulted in modifications in the organisational structure. The organisations need to concentrate on outsourcing support services and downsizing (Otley 2016). The growth of technologies in robotics of flexible manufacturing has helped in automating production, planning and computerised engineering. This has direct influence on the market enhancing the product and service quality while minimising and eradicating stock levels.
In the current competitive landscape, the cost classification is extremely important for the management accountants for certain number of reasons, which are elucidated briefly as follows:
The cost classification is carried out to determine the cost related to a project or process of production. For manufacturing organisation, the process of production for a group of products is carried out in combination and due to this; the cost spent for a specific product is identified. As a result, cost classification based on resource consumption could be traced for determining the cost spent on a specific product (Ramli, Sulaiman and Zainuddin 2015).
With the help of cost classification, cost could be controlled effectively, since the cost for each specific area could be identified and the specific activity having greater cost could be traced. As a result, the management could undertake certain steps in order to control greater cost (Sunarni 2015).
Since effective function of cost classification helps in identifying cost of a specific product, the management could set the prices of its products effectively.
The ascertainment of income could be achieved with the help of cost classification, since the variations in selling price of a product and amount spent in producing the same could be utilised as a base to ascertain the appropriate income level (Uyar and Kuzey 2016).
The managers could make different types of significant decisions with the help of cost categorisation. The product prices could be fixed effectively, which provide an opportunity to make effective business decisions.
Such increasing need of cost classification has significant effect on the varying role that the management accountants need to play in the current era.
Conclusion:
From the above evaluation, it has been found out that the changing organisational shape and business environment have increased the expectations from the management accountants and they are considered as the essential part in order to assure the success of the organisation. The growth of information technologies related to management accounting, especially the ERP system, has been a significant change in IT and conventional techniques of management accounting need to be in line with the increasing advancements. Finally, the increasing need of cost classification has significant effect on the varying role that the management accountants need to play in the current era.
References:
Chenhall, R.H. and Moers, F., 2015. The role of innovation in the evolution of management accounting and its integration into management control. Accounting, Organizations and Society, 47, pp.1-13.
Cooper, D.J., Ezzamel, M. and Qu, S.Q., 2017. Popularizing a management accounting idea: The case of the balanced scorecard. Contemporary Accounting Research, 34(2), pp.991-1025.
Fullerton, R.R., Kennedy, F.A. and Widener, S.K., 2014. Lean manufacturing and firm performance: The incremental contribution of lean management accounting practices. Journal of Operations Management, 32(7-8), pp.414-428.
Hiebl, M.R., Duller, C., Feldbauer-Durstmüller, B. and Ulrich, P., 2015. Family Influence and Management Accounting Usage. Schmalenbach Business Review, 67(3), pp.368-404.
Makrygiannakis, G. and Jack, L., 2016. Understanding management accounting change using strong structuration frameworks. Accounting, Auditing & Accountability Journal, 29(7), pp.1234-1258.
Messner, M., 2016. Does industry matter? How industry context shapes management accounting practice. Management Accounting Research, 31, pp.103-111.
Odar, M., Kav?i?, S. and Jerman, M., 2015. The role of a management accounting system in the decision-making process: evidence from a post-transition economy. Engineering Economics, 26(1), pp.84-92.
Otley, D., 2016. The contingency theory of management accounting and control: 1980–2014. Management accounting research, 31, pp.45-62.
Ramli, A., Sulaiman, S. and Zainuddin, Z.N., 2015. Factors driving change in management accounting practices: Malaysian survey evidence. In Proceedings of the Colloquium on Administrative Science and Technology (pp. 479-490). Springer, Singapore.
Sunarni, C.W., 2015. Management Accounting Practices at Hospitality Business in Yogyakarta, Indonesia. Review of Integrative Business and Economics Research, 4(1), p.380.
Uyar, A. and Kuzey, C., 2016. Does management accounting mediate the relationship between cost system design and performance?. Advances in Accounting, 35, pp.170-176.
Walker, S.P., 2016. Revisiting the roles of accounting in society. Accounting, Organizations and Society, 49, pp.41-50.
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