Factors Contributing To The Development Of Management Accounting Practice And Usefulness Of Balanced Scorecard

Factors Contributing to the Development of Management Accounting Practice

Modern management accounting practices are playing a significant role in business decision process within highly volatile market trends. In the current market trends, management accounting is not only focused on traditional accounting based on compliance and control but also strategic and competitive factors which assist top managers in collection of wide range of information such as market demand, market share of competitors, growth trends, costing of new goods and services and product lifecycle (Mårtensson et al.2016). All these elements have a great involvement in strategic business accounting as well as a decision-making process.

Factors contributed to the development of management accounting practice

            As a result of a change in business trends, companies in different industries are applying organizational changes in which management is mainly focusing on innovative approaches within management accounting practices. In traditional accounting practices, companies have mainly focused for control and compliance practices through several tools like cost control, budgeting, cost-benefit analysis and investment appraisal (Nuhu, Baird & Appuhami, 2016).

Apart from that application of a customer-centric approach in the strategic planning process has influenced management for the adoption of new trends in business accounting practices that provide significant support to a business entity in highly competitive market trends. In this context, some important elements of management accounting practices are discussed below that provide competitive support to top authorities in a huge competition.

Cost leadership: It is one of the key factors of organizational success within in highly completive market. According to this approach, companies make an effort in order to produce its products at the lowest cost with reference to the price of its competitors. This approach influences companies for application modern accounting practices in business operations such as business process re-engineering for changing the structure production process, determination of product lifecycle costing for assessment of cost of products in whole life and consideration of Zero-base budgeting through which organization can manage its expenditure as per business priorities (Hald & Thrane, 2016).

All these tactics help the firm in offering its products and services at lower prices as compared to other organization. It also provides significant assistance to management for ensuring competitive edge over other companies. For example; Walmart has adopted the cost leadership model through company offers thousands of products at the lowest prices based competitor’s prices of similar products that have played an important role to outcompete its rival companies for many years.

Differentiation: In the current management accounting practices, top managers within an organization considers differentiation strategy in its product or service range. According to this approach, business entity makes efforts in the development of such kinds of products or services which are unique and superior in quality and speciation with reference competitor’s goods and services (Nuhu, Baird & Bala Appuhamilage, 2017). Therefore, differentiation plays an important role in obtaining a competitive advantage over other companies. In this context, modern management accounting has found very effective in rectification of modern organizational management issues and increase effectiveness traditional management accounting operations for financial decision non-financial.

Cost Leadership Strategy

This is because different kinds of information are acquired in contemporary accounting operations such as nature of activities, size of the market, external business environment and market conditions, the profile of target consumer, human resource related issues, structural business issues, etc. (Schaltegger & Burritt, 2017). In this context of differentiation approach, total quality management can be considered as an important and most effective system through the organization is able to improve the quality and specification of goods/services. For example, Tesla, a US-based company, has differentiated itself through its high luxury electric sports cars.

Strategic risk management: In the present era, business entities face a wide range of business risks in the form of cost of investment, change in needs of customers, alteration in market demand and other international as well as domestic factors. In this regards, management accounting operations support manager in the assessment of risk or potential hazards factors that could lead negative impact on overall business performance, and markets share of organization (Epstein, Verbeeten & Widener, 2018). In this context, balance scorecard has found very effective tools for assessment of risk because it covers all areas of business management such as growth, internal business environment, customer trends, financial perspective, etc. through which manager can handle different aspects of business trends.

Evaluating the usefulness of balanced scorecard

The balanced scorecard is a termed as most effective management system organizations of modern management accounting practices that enables management to get clarify about vision and strategy of business entity and convert it into the day to day business actions. This system provides feedback to management about both the internal business operations as well as external outcomes that play an important role in managing continuous improvement in strategic performance. In addition to that, the balanced scorecard has found very effective for transforming strategic planning from a management desk to real-time business practices (Nuhu, Baird & Bala Appuhamilage, 2017). It covers four elements which are mentioned below:

• Learning & Growth Perspective: Advancement in skills of employees and the application of new business practices.
• Internal Business Practices: Assessment of current business operations.
• Customer Perspective: Evaluation of present trends in customer, products and market demand,
• Financial Perspective: Investment appraisal, assessment of financial performance and cost-benefit analysis.

Apart from that, some other uses of the balanced scorecard are mentioned below:

• Better Strategic Planning: The Balanced Scorecard provides a powerful and most effective framework for building and communicating business strategy so as top managers are able to consider the cause-and-effect relationships among various business operations.
• Improved Strategy Communication & Execution: In the process of management accounting practices, this approach facilities one-page picture of organizational goals and strategy which can communicate strategy internal and external stakeholder (Nuhu, Baird & Appuhami, 2016).
• Better Alignment of Projects and Initiatives: It assists managers in order to map company’s projects as well as initiatives towards a wide range of strategic objectives so as a business entity could generate optimum results.
• Better Management Information: The Balanced Scorecard has found very effective in designing of key performance indicators with reference to primary strategic objectives. Therefore, the performance of the organization and its employees can be evaluated easily on the basis of predetermined standards (Hald & Thrane, 2016).

Conclusion

On the basis of the above study, it has been concluded that contemporary management accounting practices have found more effective for business operations in comparison to traditional accounting operations. This investigation has found that companies are giving more attention to competitive management accounting operations rather than traditional practices related to control and compliance.

Question 2

Critical success factors

Non-stop flights: Company aims to provide the nonstop flying towards the destination routes covered in their network. Such facility provided by the airlines helps to reduce its travel time to reach an exacting destination.

Continuous promotions & in-flight services: Qantas construct the best airlines in contrast to other airlines as they provide promotional services in airlines sectors refers to aiming the loyal consumers and concentrating on high revenue clientele. Additional flight facilities are provided such as the selection of seats, effortlessly booking the tickets & categorisation of the class of services (QANTAS ANNUAL REPORT 2017, 2017).  Moreover, Qantas has also been known for its exercise of cardiac defibrillators in their flights. Proper guidance is given to the workers so that they can use the physician kit and cardiac defibrillators in a situation of any crisis on board.

Low price strategy: Further airline companies aims to reduce their cost of operations to uplift their profits without compromising with quality. For this aspects, Qantas implements training and development programs to enhance the skills of their workforces (Annual reports of Qantas Airways, 2016). Further, for operational efficiency, the company implements updated technologies by considering environment sustainability.

Quality services: Company aims to provide regular and punctual services to enhance customer satisfaction. Further, they improvise operational strategies by considering customer feedbacks and complaints.

Key performance indicators

• Optimum capital structure
• Increase in EBIT
• Increase in shareholder’s wealth through an increase in EPS

Strategic Map

The balance scorecard links the spots among the big picture element strategy for example, vision (what the organizations desire for), fields of strategic attention (aims, themes and conclusion), mission (the intention of the organization), measures (KPI or key performance indicators that track the strategic performance), core values (in which the organization believe), initiatives (those assignments that are helped to accomplish the targets), operational elements like as objectives ( constant improvements activities), and targets (the level of performance that is wished for) (Kenny and Bourne, 2015).  As per the cited description balance scorecard of Qantas airlines is formed below:

References

Annual reports of Qantas Airways, 2016. [Pdf]. 

Epstein, M. J., Verbeeten, F. H., and Widener, S. K. (Eds.). 2018. Performance Measurement and Management Control: The Relevance of Performance Measurement and Management Control Research. Emerald Publishing Limited.

Hald, K. S., and Thrane, S. 2016. Management Accounting and Supply Chain Strategy. In 1st International Competitiveness Management Conference. Sage.

Kenny, G., and Bourne, M. 2015. Performance Measurement. Wiley Encyclopedia of Management, 1-3.

Mårtensson, M., Höglund, L., Holmgren Caicedo, M., and Svärdsten, F. 2016. Management accounting of control practices: a matter of and for strategy. In the 9TH INTERNATIONAL EIASM PUBLIC SECTOR CONFERENCE, held in LISBON, PORTUGAL, SEPTEMBER 6-8, 2016.

Nuhu, N. A., Baird, K., and Appuhami, R. 2016. The association between the use of management accounting practices with organizational change and organizational performance. In Advances in Management Accounting (pp. 67-98). Emerald Group Publishing Limited.

Nuhu, N. A., Baird, K., and Bala Appuhamilage, A. 2017. The adoption and success of contemporary management accounting practices in the public sector. Asian Review of Accounting, 25(1), 106-126.

QANTAS ANNUAL REPORT 2017, 2017. [Pdf].

Schaltegger, S., and Burritt, R. 2017. Contemporary environmental accounting: issues, concepts and practice. Routledge.

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