Impact of Digitalization on Management Accounting
Digitalization can be termed as the use of different digital technologies within the business model which allow a business to have different types of value producing opportunities within the firm. Further, with the help of digitalization, the domain of management accounting has seen significant amount of change with which it has been able to improve to significant extent. Further, it is evident that the business models within an organization can be also affected by the digitalization and with the help of digitalization, management accounting within a business environment can be improved significantly (Brennen and Kreiss 2016). The finance function as well as the management accounting function can be greatly improved with the help of robotization and automation. Management accounting process can be denoted as the branch of accounting that delivers information as well as assists in understanding business transactions. With the help of management accounting function, the internal as well as external users of the company can understand the current business situation as well as improve decision making within the organization. It is essential for managers to execute different financial activities related to organization (Gray and Rumpe 2015). Without help of management accounting, it is not possible for a business to improve significantly. Despite of different researches on the management accounting and digitalization, there is a lack of analysis on the transformation of managerial accounting trends in the era of digitalization. Hence, the following section of the paper will evaluate the topic and understand how digitalization has improved the overall management accounting process within a business environment.
In the modernized business environment, researchers have found that digitalization can allow in improving different business functions and can improve the competitive position of the business. It is evident that the management accounting with digitalized software can allow more efficiency in recording the conventional financial entries as well as can support the decision-making activities within the competitive business environment. While it is still not clear how management accounting process can reduce its limitations in response to the adherence to digitalization, it is evident that digitalization can significantly improve the efficiency of transactions as well as can play a supplementary role in the external reporting framework of the organization (Evstafyeva, Kislaya and Kruchanova 2019). Within the external reporting framework of an organization, the management accounting can play a pivotal role and can allow in understanding of inward look function within the business environment.
Digitalization can further allow a firm to overcome the limitations related to the traditional management accounting functions. In recent times, the increase in the business competition and globalization has created opportunities as well as threats to business environment. Without analyzing the business transaction’s digitally, a business can overcome the difficulties created by the traditional management accounting methods. The unit and functional level play an important role in the success and failure of a business (Bredmar 2017). Digitalization and the use of automation software can allow a business to analyze different variables as well as can also allow it to analyze the profound effects of business functions with the business. Strategic management accounting has responded to the business’s strategic move in at least three ways: first, it demonstrates a clear link between organizational strategies and managerial functions; second, it employs innovative managerial accounting method to enable strategic cost estimates that inevitably aids in competitiveness; and third, it takes into account a competitive business environment characterized by increased use of data. Although top business schools, experts, and academic works have championed this strategic trend of management accounting, it will fail if it overlooks networks and the complicated corporate environment.
Traditional Management Accounting Functions
In recent times, accounting industry officials were predicting the end of an age for traditional accounting, fearing that evolving technology, particularly automation, will bring about the end of bookkeeping as we recognize it. Indeed in 2019, accountants asked by Robert Half about the impact of technology on their job expressed concerns about being replaced, having less opportunities for creative problem-solving, including being unduly reliant on technology to execute commercial activities (Bhimani 2020). There’s no denying that the digital revolution has drastically changed the game. In order to become more competitive, big data has matured into a vital asset that must be leveraged. This transition, on the other hand, digitalization is not a threat, for companies who will leverage from it.
As per the recent research, it is evident that most of the companies are already introduced to the automated forecasting techniques as well as data analytics which will allow it to combine time series techniques as well as assist in the machine learning. With the help of management accounting, a business can ensure proper identification and control of the existing business challenges related to the management accounting. Without having access to proper data and having secure database, it is not possible for a business to prosper and improve the existing data storage (Wadan etal 2019). Without data storage, it will not be possible for the management accountant to evaluate different data sources and make proper decision based on the data research. Hence it is evident how digitalization in management accounting practices can allow in accounting process automation and better decision making process within the organization.
Further, it is still remains unclear that how can be digitalization be applied to the business model and improve the system implementation and control. In this field, there are several factors that comes into consideration. In order to prosper, a business will require relevant as well as reliable data which will allow them in better financial decision making process. It is core responsibility of the management to ensure that the increasing challenges of management accounting are reduced (Baidybekova etal 2021). Companies which do not adhere to the process of digitalization are found to be affected by poor data quality and the same has been found to impact the internal control function of an organization. Self-service reporting with the help of digitalization can lead to better self-service based reporting as well as better automation process in the business process. However, critiques have noted that digitalization can creation new information routines which many create more decentralized situation within the existing business framework and can create confusions across the users of automation. With that being said, there will be various challenges of digitalization in regards to the implementation of management accounting functions however the business must ensure that the finance function with the help of digitalization are sound and is under governance. Employees needs to be trained and further analytics may be needed which may further need analytical thinking.
With the help of increased globalization across the world and globalization, it has been evident that the financial function of the business may get changed. Most of the finance function in large firms will not require further function based approach however it is essential to emote that the small and medium sized organization may require its employees to learn about the changes associated with the digitalization in order to prosper further. Further, business will need to develop expertise in the field of big data and analytics which will allow it to aid in the transformation. The higher management of businesses will have to understand the ways in which it can bring changes in the corporate functions and business units in the light of digitalization. CEO’s of a firm always tend to focus on the value creation and always tend to prioritize in the finance function of a business. The enterprise function of a business is found to have profound impact on the production as well as analysis of big data in the part of its control system. Therefore, it will be required for the managers to understand how the increase in accounting research will create value for the firm. Without the implementation of big data automation, artificial intelligence and critical thinking, businesses will have hard time in generating depth and sound knowledge based on the field of management accounting. In recent times, the era of digitalization that have been connected with the context of big data. There are various factors that add value to the use of management accounting in business which includes the internet of things (IOT), digitalized supply chains as well as cloud computing. With the help of digitalization, different financial data within the business will improve significantly thereby adding value to the existing process and finance functions. Digitalization within firms have allowed in creation of different quantities of information which are anticipated to grow at a rapid pace. Due to the evolving nature of the big data, it is possible within the business to understand and investigate different possibilities in relation to the current accounting atmosphere. Organizations, with the help of big data can understand the structured as well as unstructured financial information which is essential to comprehend for improvement in business function. Further it has been also evident that information systems can display important message and information which is required for firms to execute its strategic operations.
Management Accounting Automation
Organizational arrangements, corporate strategy creation as well as structuring of the information system can make it massive difference in the big data analytics and insights. Digitalization can improve better transformation of the information outputs within the business environment which can allow in further improvement of the accounting prospects within the work environment of an atmosphere. Despite of the fact that security issue remains one of the key implication affecting the framework of digitalization and it should be the key responsibility for an organization to understand the key issues related to the implementation and therefore most improve the existing business framework which will allow them better decision making within the management accounting functions (Rikhardsson and Yigitbasioglu 2018). As the organizational risks and interconnections have increased, there has been increase in the implementation of new applications within the accounting framework. Parameters related to accounting framework needs to be evaluated and maintained in order to ensure transparency within the management accounting process. Digitalized data can ensure that the process is streamlined with the business operations and further the data can be traced however it cannot always ensure the efficiency within the framework in which management accounting process is adhered. Researches can gain significant amount of opportunities with the help of the digitalization process. It is evident as per the recent research that digitalization can greatly improve the speed and efficiency of the existing business transactions as well as has allowed firms to process maximum number of transactions at a time. The derivation of the analysis and prediction from the technological data and can be also interpret with the use of the digitalization trends. In line with the digital transformation, it has been evident that the management accounting system can allow a system to process more efficient decision making system. For managing multi-platform based networks and transactions, the use of AI and automation is required. Without digitalization, it is not possible for a business to process such transactions.
However, the implementation of the digitalization process can be only possible if the digitalized environment is transformed and the rapid pace can be only achieved with deeper understanding of the digitalization and associated factors. If accountant fails to acknowledge and understand the traditional technical skills, the implementation of digitalization within the organizational environment might get delayed. The process of the digitalization can also ensure improvement in customer service as well as will ensure increase in revenue for the business. With deeper understanding of the business functions and processes, firms can be able to make sure that the business has significant amount of advantages within the new digitalization framework. If can get problematic for business to store different systems and access to them gets difficult with the increase of business size and area. Digitalization within the management accounting framework can remove the need of manual accounting processes and thereby allow the business to streamline the business transactions. Digitalization will also ensure proper storage of accounting information and therefore provide the business owners access to the real time information. In current business framework, it is very easy to gain insights from the financial data as well as understand how the business is performing within the industry. Once implemented, the digitalization process is very easy to use which will allow business to provide users of accounting information with access to the data related to the financial function of the business (Cagle, Y?lmaz and Do?ru 2020).
Conclusion
On a concluding note, it is evident that the paper has been able to analyze the transformation of managerial accounting within the era of digitalization. The paper has been successfully able to identify how management accounting can be greatly improved in respect to the speed of information and accuracy of the data. Further, it has been also identified from the research that digitalization can allow business to use their current financial information more efficiently and provide the third party users to improve in the current environment. The multiplatform based financial transactions and networks can be managed with the help of the digitalization process. After globalization, there has been an evolution of the use of financial information and data within the business framework and without the understanding of the business function, it will not be possible for the business to improve the current accounting atmosphere within the organization. With use of automation and big data can allow a firm to comprehend its structured as well as non-structured financial information and understand how it can improve its financial functions significantly. Management accounting with the help of digitalization can ensure that the errors related to financial entries are reduced and the existing process is improved with great efficiency. The inward looking function of the business can be also understood with the implementation of digitalization therefore the implementation of different variables related to digitalization are needed to understood and interpreted.
References
Baidybekova, S.K., Shomshekova, B.K., Kydyrbayeva, E.O., Sharipov, A.K. and Kasseinova, M.I., 2021. Accounting and Financial Reporting in the Context of Globalisation and Digitalisation: Problems and Improvements. Public Policy and Administration, 20(2), pp.248-259.
Bhimani, A., 2020. Digital data and management accounting: why we need to rethink research methods. Journal of Management Control, 31(1), pp.9-23.
Bredmar, K., 2017. Digitalisation of enterprises brings new opportunities to traditional management control. Business Systems Research: International journal of the Society for Advancing Innovation and Research in Economy, 8(2), pp.115-125.
Brennen, J.S. and Kreiss, D., 2016. Digitalization. The international encyclopedia of communication theory and philosophy, pp.1-11.
Cagle, M.N., Y?lmaz, K. and Do?ru, H., 2020. Digitalization of business functions under Industry 4.0. In Digital Business Strategies in Blockchain Ecosystems (pp. 105-132). Springer, Cham.
Evstafyeva, E., Kislaya, I. and Kruchanova, I., 2019. Advanced accounting perspectives in the light of leading economic digitalisation processes. Advances in Social Science, Education and Humanities Research, 359.
Gray, J. and Rumpe, B., 2015. Models for digitalization. Software & Systems Modeling, 14(4), pp.1319-1320.
Oncioiu, I., Bîlcan, F.R., Stoica, D.A. and Stanciu, A., 2019. Digital transformation of managerial accounting-trends in the new economic environment. EIRP Proceedings, 14(1).
Rikhardsson, P. and Yigitbasioglu, O., 2018. Business intelligence & analytics in management accounting research: Status and future focus. International Journal of Accounting Information Systems, 29, pp.37-58.
Wadan, R., Teuteberg, F., Bensberg, F. and Buscher, G., 2019, January. Understanding the changing role of the management accountant in the age of industry 4.0 in Germany. In Proceedings of the 52nd Hawaii international conference on system sciences.
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