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Benefit of Strategic Manaagement Accounting for Organization

Autor:   •  April 9, 2011  •  Term Paper  •  1,052 Words (5 Pages)  •  5,727 Views

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1. Provide some discussion regarding the benefits of strategic management accounting for organizations. Support the discussion with current research, and provide some illustration and justification for your answers.

Strategic Management Accounting (SMA) is extending the Traditional Management Accounting because it not only focuses internal financial information, it also included external non-financial information about competitors and customers. Nowadays, firms are using SMA to aid business management decisions to gain competitive advantage.

One of the benefit that could derived from using SMA is developing cost leadership strategic where can help companies control cost and improve its market share in the economic marketplace. (Osmond Vitez, 2010). This is achieved by scale economies, tight cost control and cost minimization in such areas as R&D, service, and advertising. Cost leadership strategic included total quality management (TQM), Activity-base costing (ABC) , and Just-In-Time (JIT) system have been developed to update the traditional accounting model. These methods focus on cost control and the elimination of the overhead allocation problems therefore to improving the value of management accounting system. Moreover, it is also giving the company an opportunity to pass these saving on to customers so that the price will be cheaper. However, cost leadership strategic need a high implementation cost. Companies use the SMA to forecast the future profits against the implementation cost of the strategies and determine if a company needs to drops certain business lines to improve its profit margin and cut wasteful operations. Corporations which concentrate on this strategy are Texas Instruments, Black and Decker and BIC. ("ACCA: Strategic Management Accounting", 2010).

SMA helps top management report accurate and complete accounting data summaries. ( MarquisCodjia, 2010) Managerial reports differ from financial reports in their frequency. (Managerial Accounting, 2010) Many internal reports are generated monthly, weekly, or even daily in the case of information such as cash receipt and disbursements. Besides, management accounting reports are typically much more in-depth than traditional financial accounting reports. All the details are presented in summary format and helped the managers efficiently identify possible problem areas, measure the differences or variance between what they planned and what they actually accomplished, and then examine the facts within those area to determine a course of action. Adequate, complete and timely information about the operation in the company could ease financial reporting work and prevent errors in financial reports.

Next, SMA is also an effective measurement of management's performance. Managerial accountant help the company recording and classifying appropriate transactions and events; and analyzing the reasons for, and relationships

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