Management accountants are professional accountants that specialise in providing managers insightful information used in making important economic decisions. Part of the functions of management accountants is to act as scorekeepers that keep an eye on the strategic shape of a business while making positive inputs that adds value to the overall worth of a business.
WHAT IS A STRATEGY?
Strategy is the term often used to describe the collective actions and techniques that management of organizations (for profit and not for profit) employ in the bid to achieve organizational goals and objectives. Strategy has its origin in the ancient military generals and how they survive the hostile war front. Simply put, strategy is the process of aligning a company’s strengths with opportunities.
You will agree with me that modern business environment and the kind of competition that characterises it can be likened to the kind of competitive heat that generals have to deal with at the war front. The interactions of technology, innovations, competitive forces, employees and managers behaviour, regulatory requirement, political and nation-specific features all contributes to the challenges that businesses face.
To achieve the long term goal of a business entity, carefully designed management accounting control system is a very important tool that must be in the toolkit of those that controls the affairs of a business. Successful design and implementation of management control system which helps in the implementation of business strategies rests on the shoulders of management accountants as information processing and measurement experts.
Management accountants plays their roles in implementing successful strategy of a company by playing vital part in the design and development of useful management accounting tools that we will be looking at in this article. Strategies formulation and implementation revolves around six dominant forces viz:
- Activities of competitors
- Potential entrants into the market or industry
- Influence and bargaining power of customers
- Technological modification and advancement
- Close substitute of a company products
- Bargaining power of suppliers of finance, raw materials and human labour
HOW MANAGEMENT ACCOUNTANTS CONTRIBUTES TO EXECUTING BUSINESS STRATEGIES
The role of management accountants in building a sustainable business strategy are discharged in the following aspects of business operations and accounting information processes.
Balanced scorecard: management accountants are the main players in the design, development and implementation of balanced scorecard. The BSC is a unique managerial tool specifically designed to assist managements translate mission statements of organizations into concrete actionable parameters. To read more about balanced scorecard, click here.
Corporate governance: corporate governance is all about how organizations are controlled. This is a strategic area that has been making talking point in the news for over a decade now. The reason is simple, to create better businesses that would not only meet the expectations of stakeholders but to surpass it. Management accountant provides professional advice on the best practices of corporate governance that are highly optimised to promote the achievement of company strategy.
Strategic management accounting: strategic management accounting is that form of accountancy that endeavours to focus on factors that are external to a company and also long term in nature. The contributions of managerial accountants in areas of market share and profitability analysis are some examples of the roles of professionally trained accounting practitioner.
Integrated risk management: the pervasiveness of risk in modern business makes it imperative for a robust and connected approach to risk management to be implemented. As you already know, relevant information both financial and non financial is needed for sound decision making. Accountants with their managerial skills and training are best positioned to not only provide this information in the right format but to also analyse it in such a way that managers at all level would appreciate and value.
Change management process: the world has never been as dynamic as it is now in the history of mankind. Things now change in a flash and require commensurate change in the way things are done in order to keep up with the pace of the game. Management accountants act as business advisors in the overall change management process.
Developing suitable budgetary control: budgetary control is an important element of management controls which acts a monitoring and control tool. Management heavily rely on the intuitive mind of accountants to design and assist in the implementation of budgeting functions which will in the long run translate into the achievement of a company’s strategy. They produce feasibility reports alongside their recommendations as to whether to make the investment or not.
Investment appraisal and analysis: investment appraisal is an ancient wisdom which entails weighing all possible options before committing economic resources. Capital budgeting is not a comfort zone for all but for those specifically trained to deal with the complexities and difficulties that crop up every now and then.
TIPS ON IMPLEMENTING BUSINESS STRATEGY
The rule of thumb in implementing strategy is to closely manage the six forces that affect the profitability and long term survival of businesses. For example, a company that is faced with stiff competition can adopt one of the two basic strategies: significantly differentiating products or being cost leaders.
A very good example of a company that struggled with competition but seem to have found the Holy Grail is Blackberry (formerly called RIM- Research in Motion). It released its newest blackberry Z10 with incredible features and functionalities already predicted my many technology analysts to redeem the almost lost corporate market which was once dominated by blackberry. This product is not only differentiated, but, competitively priced as well.
Management accountants as information processing and measurement agents are at the forefront of business strategy implementation processes. The value of accountants to businesses have gone beyond preparation of financial statements, the strategic alliance that now exist between business and their accountants is a type of long term partnership that is poised to continue to yield result.
Business strategy implementation is too important to be left alone for people that are not trained in speaking, understanding and communicating in the language of business. The board room of a company would lack the necessary bite to face the multiple distractions that are out there to make management loss their focus.
You must have at this point appreciated the fact that though knowledge is power, but, information is the fuel that powers that knowledge. Management accountants are the information catalysts that provide the required financial information which is needed to make business strategies.