Challenges faced by multinational organizations
Question:
Discuss about the Challenges of Accounting in Global Organizations.
The accounting practices in global organizations have changed a lot in the recent times. The financial crisis that has occurred in the recent times has significant effects on the accounting practices of the organizations. There is a relationship between the financial crisis globally and the accounting practices as well. The accounting practices of the global organizations are different in different countries and this is a major challenge for the organizations. The relationship between the business organizations and the capital providers of the organizations is a major issue related to the accounting practices (Bebbington, Unerman and O’Dwyer2014).
The differences related to the accounting practices in various organizations is also based on the restrictions that are placed on issues related to the raising of money and also borrowing funds from the local investors in the area where the organizations are operating. The other issues that affect accounting related practices in organizations are includes the issues related to inflation-accounting, income from foreign source, difference in the taxation systems of various organizations. Other taxes that affect the accounting practices are indirect taxes, the withholding tax and value-added tax or VAT. The other issue related to the risks related to foreign exchange and the exposure to the environment as well (Kornberger, Pflueger and Mouritsen2017).
The major objective of the project is to analyse the impact that the global technological changes and revolution has on the accounting practices in the global or multinational organizations. The literature review will be provided in a concise manner to analyse the relationship of changes in technology and the practices related to accounting of the organizations.
The scope of the project lies in the ways of distinguishing between the set practices of accounting in the global organizations and the problems or issues that have occurred in the accounting practices. The major role that can be played by the literature review of the topic is to analyse the research problem and find ways to solve the issues as well.
According to, Albu, Albu and Alexander (2014), the challenges or crisis related to the accounting practices in the organizations have increased in the recent times following the financial crisis that has occurred globally. Accounting related to the management of global organizations mainly refers to the ways of tracking the internal costs related to the organization. Management accounting provides assistance to the management regarding the decisions that can be taken related to the operations, production and investments that are to made in the market. The organizations require management accounting in the systems to check the efficiency of their budgets as well. The costs related to the operations of the company and the allocation of funds are also dependent on the management accounting practices.
Weiss and Wilkinson (2014), stated that, management accounting also plays an important role in the collection, recording and finally reporting the financial data of the organization. The estimated costs of the raw materials, costs related to manufacturing, advertising and sales and networking related to social media are all related to the management accounting practices of the organizations. The major role of management accounting is budgeting and the budgets made by the companies act as a guide for the expenses and the costs related to the companies.
Importance of management accounting in decision making
As discussed by, Thistlethwaite and Paterson (2016), the other major perspective related to management is the factor of time as the various management practices related to accounting are mainly time bound in nature. The management accounting practices play an important role in forming the budgets of the company and the perfect usage of the working capital that is available for the company. The accuracy of the information that is gathered by the management accountants needs to be taken care of so that the decision making process is not hampered. The technological changes that have occurred in the environment have majorly affected the practices of management accounting. The process of maintaining financial records, the analysis of the records and the forecasting related activities have changed due to the introduction of new technologies. The software that have been introduced related to the management accounting related practices provide tools that may be required for the keeping the records of financial transactions and the analysis as well.
According to, Warren Jr, Moffitt and Byrnes (2015), the time that was previously required for the analysis and processing of the data has been majorly reduced due to the usage of these tools and software. The major challenge that is faced by the management accountants is related to the awareness that is required regarding the political situation of the market where the business is operating. The changes in the regulations and laws formulated by the governments also play a major role in the management accounting process. The major changes that have occurred in the external environment based on the competition, costs related to labour, changes in costs related to raw materials, changes in the internal operations of the company(Cooper, Dacin and Palmer 2013). The coordination and the changes that have occurred within the various departments of the organizations also affect the process of management accounting. The major responsibility of the management accountants is to assist the management of the organizations regarding the decisions that need to be taken related to the risks of the external environment and the financial crisis.
As discussed by, Clegg, Kornberger and Pitsis (2015), the accounting professionals are facing major challenges due to the changes in the business environment. The accounting services are changing constantly and the processes are being reorganised and thereby many challenges are faced by the accounting systems. The revolution in technology is major challenge that is faced by the accountants in the modern business world. The accounting related software and tools have become an important part of the organizational systems. With the increase in the speed of the information, the demands related to more updated information has also increased. The use of technology for the functions of accounting in the organizations has also been able to eliminate the requirement for staff in many levels of the organizations. The complexity of the tasks has also decreased, which has decreased the need of staff. The steps involved in various types of transactions have also become quite less. The number of people involved in the transactions and the tasks has also decreased a lot. The internal controls of the organizations have been compromised in the process which has led to the increased risks related to various types of fraud.
Changes in accounting practices due to technological revolution
According to, Wickramsainghe et al. (2017), the other major challenge that is faced by the accountants in the modern business world is the lack of enough skills for the professionals. The accounting professional now need to acquire much more skills in the modern environment as compared to the situation previously. The communication between the accountants and with the clients need to be improved. The process of communication needs to be effective as well. The use of technology in various aspects of accounting has not decreased the need for communication between the different departments. Moreover, the need for communication between the various departments has increased much more so that the high levels can be maintained and errors are decreased as well. Another major skill that is required for the accountants is the need to be more analytical regarding the various accounting transactions that are taking place.
Beattie (2014), states that, the accountants should be able analyse the usefulness of the data along with performing complicated calculations and making financial reports. The accountants in the modern business world need to adapt to the different changes that occur between intervals in the environment or the market where the business organization operates. The accountants need to acquire the right amount of skills that are required after the occurrence of the different changes in the business environment. This will help the accountants to adapt in the environment and remain useful for the organizations.
According to Bebbington, Unerman and O’Dwyer (2014), the different practices in accounting are generally implicated in the financial crisis as well as in proposals in the current scenario for properly recapitalizing the different financial institutions as well as bringing proper stability in the entire financial system globally. There are different gaps as well as other issues and failures that have been anticipated in order to understand the crisis that is faced by the individuals in the different organizations globally. There are different issues that are leading to repercussions in the entire accounting system of different organizations in all over the world.
However, according to Eisenhardt, Graebner and Sonenshein (2016), there has to be properly interdependence among the different companies as this will help them in reducing such issues and complexity and the impact can be more rapid as well as proper value chain webs can be introduced that will have huge positive impact on the entire organizations all over the world. In the present era, there is ambiguity in different organizations as there is no proper generation of proper knowledge and there is less clarity in the different kind of information provided by them as well. In today’s world, it is difficult fir different businesses to understand their value drivers and this is causing huge issues related to services as well as knowledge related issues as well.
Eisenhardt, Graebner and Sonenshein (2016) commented that there are different other complexities as well that included flux or change in the organizations and this is causing huge issues in their work that is performed by them. The managers are trying to find out proper solutions for such kind of flux or change that is taking place in the organization, however there are no such permanent solutions to such issues and this is not helping them in becoming independent and the decisions that are taken by them is not up to the mark as well. The solution that is generated by them is not valid or outdated in nature in the next phase as well.
As per Endrikat, Hartmann and Schreck (2017), the interdependence that is created and is required among the managers in the different global organizations is essential in nature as this will help them in making as well as generating proper decisions in the organization and this can help them in sorting such issues, but the contemporary literature of management is traditional in nature and is misleading that can cause different issues of accounting in the global organizations as well. The accountability of the different managers in the organizations all over the world is arbitrary in nature as the managers of different organizations are equally responsible in nature for the different happenings in the organization and proper measures has to be sorted out by them in order to reduce such issues in the future as well.
Prencipe, Bar-Yosef and Dekker (2014) commented that the most practical consequence of the complexity in the organization is relating to dilemma that is faced by the different managers of the organizations and this leads to different wrong methods of decision making that is taken by the different individuals who are working globally in different organizations as well. There are different companies in the financial service industry that are properly set up in a proper channel of distribution that is competing in nature and with the help of this, the companies expect a proper as well as high range of cooperation across the entire company as well (Islam et al. 2017). On the other hand, in the manufacturing companies, the most essential dilemma that is taking place presently is related to the different global standardization and proper response across the entire global market and accessing the local market requirements as well. These kinds of issues have to be properly changed and this will help in proper process of solving such issues as well with proper implementation of different strategies as well. There are different ways to cope from such issues with proper implementation of technologies as well as with proper implementation of different decisions that will help in solving the crisis that has taken place globally in different organizations (Doherty, Haugh and Lyon 2014).
Brusca et al. (2018) commented that the different global companies need to properly understand the different policies along with the different structures that can be adopted by the different companies in order to generate proper decision making process in the entire organizations globally. The different ascertainment has to be made by the different companies globally as this will help them in gaining competence as well as centre of excellence in the different kind of decision makings that has been made by them as well. () stated that the companies globally can acquire different policies as well as structures that can help them in making the complex situations more easy and this will help in creating a proper value chain analysis as well.
Cho et al. (2015) commented that the companies globally can use their weaknesses as well as complexity elsewhere as an opportunity as this will help them in gaining proper competitive advantage and this will help them in properly be aware about the different needs as well as realities as well. This can be properly understood by the companies with early awareness system and this can help them in reducing the different complexities with ease and this can help them in analyzing the values as well as purposes of the business as well.
According to Ebrahim, Battilana and Mair (2014), core processes are the ones that is properly sued by different companies globally and this will help them in sharing proper knowledge regarding the different issues that are faced by them in an effective manner. The core processes of the different firms globally have to be standardized in nature and this will help them in leading a complex organization as well. There are different techniques that have to be properly handled by the organizations in order to entirely reduce the complexities in the organization and this will help in leading the organizations towards entire success as well. Proper leadership is essential in nature as this will help in analyzing the most difficult situations that can be encountered in a workplace relating to the accounting problems such as outstanding cheques, huge amount of account receivable in nature as well.
The different steps that can be taken by the different organizations globally is to understand the interest of the individuals in the organization as this will help in analyzing the situation that is problematic in nature and suggesting solution to solve such issues with proper implementation of strategies as well (A. Adams, Muir and Hoque 2014). Proper evaluation of the different options is essential in nature as well as this will help in separating the different listing of the options and proper evaluation of the options is essential as well.
Conclusion
Therefore, it can be concluded that there are different issues related to the accounting that is faced by different organizations globally. The accounting related problems has to be properly analyzed as this will help in solving such issues relating to the different outstanding amounts as well as other issues such as account receivable that has to be generated as well. There are different strategies that can be adopted by the companies globally in order to solve such issues and this will require effective leadership strategy as well in order to reduce such complexities in the different organizations related to accounting
References
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