There is a drastic change seen in the accounting practices since the last few decades. The use of advanced techniques, wide use of information technology, and trade liberalization have resulted in the noticeable changes in accounting practices, both at local and international level. For an organization to survive in this market, it needs to implement responsive strategy for these market changes, thus demanding it to update regularly with the latest strategies for accounting practice.
In the past century, the management accounting was only limited to the analysis and the decisions making process by making use of financial and operational information of an organization. This traditional accounting practice has contributed lot towards the planning and controlling for the tasks of an organization. It has been arguably used for decision making for an organization, thus affecting the strategies and outcomes of an organization (Chenhall, 1998). However, the present business and economic condition of organizations force to make amendments in the management accounting practices. Now is the change in management accounting practices with the demand for business management to incorporate accounting practices with advises, to lead the business. This laid to the introduction of strategic management accounting.
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It has become mandatory for the organizations to implement management accounting into practice making use of the internal as well as external views to attain the competitive advantage and the strategic objectives. This demands the up gradation in the present management accounting practice.
The below sections discuss on the question in hand, "Does the future of management accounting lie in strategic management accounting". The initial section discusses about the process of historic accounting; and how it emerged with time to form the strategic management accounting followed by the important techniques for this new accounting practice.
Management accounting, as per the Bromwich (1994) is the procedure for identifying, measuring, accumulating, analyzing and preparing the information utilized for management by using a proper planned way followed by evaluating and controlling the entity to confirm that the resources are used in the right manner. It is also found useful for preparing the financial statements, which is used by regulatory authorities, creditors, and shareholders. Thus, accounting plays quite a crucial role for the overall management of an organization.
As per the modern definition, it is important to extend further towards elements and issues of strategic nature. Management accounting is thus considered as the system, which helps to measure and offer the information of financial and operational background that further helps in actions of management, motivating and supporting the environment to attain the strategic goals (Bell et al., 2004). This suggests that the management accounting relates with the strategies of an organization. It can be a good practice to implement strategic management in the accounting practices, as the management of accounting plays an inevitable role for the organizations' success.
Thus, Strategic management accounting for the field of management accounting is the developed version of accounting practices, which plays a crucial role for different strategic characteristics (David, 2006). The strategic management accounting has thus gained an important place for the organizational growth. The organizations are relying on this new strategic approach of accounting. Organizations would need to adopt this new approach one or the other day, to survive for long term in this competitive market.
Arguably, there were various theories found in management accounting, which demanded restudy on them due to the weak arguments, which laid to the foundation of a new practice (Simmonds, 1981; Cravens and Guilding, 2001; Hoque, 2001; Hoffjan and Wmpener, 2006; Cadez, 2006). These researchers suggested that, the traditional accounting management practices would not survive for the long term. Thus, it further can be interpreted that for the management of accounting practices, there is the need for creation of new accounting practice for an organization.
The strategic management accounting is not introduced recently, but has been the topic of discussion since long. As said by Simmonds (1981) in the early 1980s, strategic management accounting is the approach of stipulating and analyzing the data of management accounting for the company and their competitors to be used for development and monitoring of the strategies for business. This has created a foundation for growth in the field of management accounting. It has become a new concept for management accounting practices focusing on external roles too. This stood against the hypothesis of management accounting that, 'Management accounting is just for the strategic decisions of organizations at internal level (David, 2006). It suggests that there exists great potential for the expansion of this new management accounting practice. The future of organizations must demand for this new concept into practice.
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This area has been the point of discussion after Simmond's (1981) challenge to the traditional management accounting. The current theory suggests that the strategic management accounting in management accounting is an approach to attain positioning in strategic operations (Hoffjan & Wompener, 2006).
It is argued that the practice of management accounting is no longer helpful for an organization's long-term success (Roslender & Hart, 2003; Hoffjan and Wompener, 2006; Cadez, 2006). Even Cadez (2006) had suggested three important characteristics that explored since Simmonds' comments on the point such as the focus on external ideas, the long-term stability of strategic management accounting, and the third is that the decision-making demands the use of both financial as well as non-financial details.
Thus, the strategic accounting management is considered as the strategy to collect data related to sales, cash flows, market captured, volume, and costs of the organization and its contenders. The business involves competitive environment today, and this strategy can be of help under such circumstances. The business suggests more focus on the future insights of the business as compared to the accuracy in financial terms (Roslender and Hart, 2003).
The accounting practice thus has evolved more than that it was in the traditional times. This new accounting practice demands the managers to be skilled and strong to operate in diverse areas with good cooperation with the other departments of an organization (Bromwich and Bhimani, 1994). This management technique covers the fields of value based management practice along with the value added in financial terms (Mc Taggart et al, 1994).
As stated by Hilton (2005), management accounting helps add to the revenues of business by making available the data for better planning and controlling, assist management authorities for their tasks, studying the positioning of an organization, and analyzing the performance of staff. It is the responsibility of management accounting to establish the linkage in between the approach of the organization and its strategy to attain the goals.
Furthermore, Bell et al. (2004) suggests that management accounting helps in obtaining the operational and financial information required by the management to attain the organization's objectives using the culture, behaviour, techniques, and objectives as the tools to attain the outcomes for organizational success.
In order to attain the strategic objectives by incorporating the proper strategic management accounting, an organization should start with a clear focus on their targets. The environment and strategies shall not be in turmoil (D. Aveni, 1999). Thus, the future of an organization depends obviously on its environment. If an organization does not work out on its strategies, the competitive market can result in the company without profits. However, an organization can succeed in the market only by producing the products at an economical price maintaining the quality standard. Thus, the organization demands innovations to survive. It is an important aspect for an organization to minimize its costs, which would overall result in increased profits (Granlund and Lukka, 1998).
Furthermore, organization shall work towards the planning and operations strategically. The organization shall focus on its targets while carrying out its operative tasks. This can be attained only when the organization utilizes the strategic approach. It becomes tough to attain the outputs with the traditional approach of accounting. The strategic decision-making process carries out in a systematic manner. The organization can gain efficiency in it operations using the strategic planning right from its annual budgeting to cost cutting (Nadler and Tushman, 1999; Ekholm and Wallin, 2000; Hope and Fraser, 1999; Harborne, 1999).
Then is the role of strategic planning process. It shall be understood that the process here for strategic management accounting takes time. The market is turbulent due to the rapid changes in the environment of business, which results in making the situation dangerous for the organizations (Christensen, 1997). As the process of accounting involves the process of planning, it is better to use the strategic approach for this.
The tasks of future managers will become tougher with the passage of time. As per the vision of Hiltrop (1998), future organizations will be with a better-networked set of skilled people, using outsourcing as a technique to handle tasks in addition to the strategic alliances. The managers would be involved in incorporating tasks, which are mandatory for their organizations. Thus, the managers would need to perform quite different then that done at present times, as per the study of Hesselbein et al. (1996). Furthermore, change management is an approach in a strategic manner; to attain individual's attitude change for the company he is serving (Kotter, 1999). The managers for future would need specialized set of competencies to sustain in the market. This can only be possible by the use of strategic approach of management.
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It would become tough for organizations to sustain in the market without the use of research and development. The continuous research would be required for the introduction of innovative products in the market to sustain (De Meyer, 1998). The organizations need to work regularly on their core competency areas to improve their products, or launch some innovative one. It is not possible to launch such a product without the systematic approach towards R & D. Thus, it has become mandatory for the organization to continuously, improve their products, which is related to the management accounting practice (Nixon, 1998; Maccarone, 1998).
Then is the management of project type. Because of the need for regular R & D, organizations need to have control over the project kind by proper management. The projects hereon are further affected by money, time and the aims of the project. The project planning helps to realize the process of decision-making. Thus, the organizations take the large portion of their budget for investment on these project management tasks (De Meyer, 1998). The employees for these tasks should be versatile towards their contribution to the organization. The rapid changes in the business environment results in continuous renewal of the organizations operational activities. The employees are also required to get proper training programs under it. This suggests that the strategic management accounting can help gain the process with a better focus towards the profits.
The organizations need an integrated approach for its financial and non-financial matters. The competitive environment necessitates the organizations to be strong in all of their departmental tasks. The strategic operations are the key to success of an organization. These may result into the integrated approach for the future to gain competitive advantage (Ittner and Larkcer, 1998).
With the passage of time, there is the need to make amendments in the business approach. The information plays quite crucial role for the success of an organization. This information is relates to planning of organizations' strategies and goals. The tools of management accounting, which affect the decision making process for the management demands for the regular updates in their processes. This need for change is important for measuring the performance for planning of strategic objectives (Ittner & Larcker, 1998). Accounting thus relates with measuring results, which divides into; measurement process, dimensions for the factors, and the business model (Kaplan and Norton, 1996; Ittner & Larcker, 1998).
Certain parts of the strategic management accounting further differentiate to form the value chains. These value chains play an important role for the business for future (De Vriend et al., 2000; King, 1999). It would be the responsibility of an organization to make the customers happier. This is followed by the need for information exchange. There is the need of strong networking for an organization (Bodnar, 1999). The organizations would depend on information, which would become the basic need of growth.
This form of business model results into formation of the frame for accounting of an organization, which varies from one project to the other. The changes take place at such a rate that the management of traditional accounting is tough to operate. This change demands quicker and better strategies of management. Thus, the strategic management accounting helps solves the problem.
There are situations involving the use of external information for an organization to manage the financial matters. Under such situations, the management needs to handle the issues arising at the strategic level, by the use of strategic management accounting practices. This may result sometimes into competitive situations, which might help in gaining the competitive advantage, the market needs, and the businesses (Cinquini & Tenucci, 2007).
On analysing the question in the above sections, we can see that, it is important to link the information that an organization obtains by the management accounting practices, with the goals of the organization. This way, it can be possible to use management accounting in decision-making process. Thus, here it becomes mandatory to make the management accounting integrated with the organization's management.
The present market demands the organizations to work hard in the competitive environment. It has become mandatory for these organizations to work with a greater pace in their strategic implementations; else, it would be tough for them to survive for the near future. The organizations thus need to implement clear targets and strategic planning to attain these targets with the right selection of process. The clear idea for the management of changing market patterns with the R & D practices, versatility, integrity and value chains can help the organization proceed with a strategic approach towards its goals. The extent to which an organization can reduce its costs using value chains cannot be ignored. The clear thought on strategic accounting practices with the networked work is demanded too.
There is the need to rethink for the whole system working at present and implement new strategic approach for the organizational success. The activity based costing would help the organization to formulate strategic approach for decision-making process.
Thus, overall it is suggested that the accounting practices for future would demand the strategic management as mandatory factor for success of an organization. This approach would result in the organizations' success. Thus, it is rightly said that the future of management accounting lies in strategic management accounting.