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Business Aspects of Management Accounting - Essay Example

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Business Aspects of Management Accounting

Thus the strategic management accounting techniques developed to provide business solutions and assist the management in taking strategic decisions.
Cost management techques of SMA- ABC costing which focuses on the cost associated with activities which are the cause of indirect costs, their management so as to achieve competitive advantage, Life Cycle costing; This tries to trace the cost of a product from its inception, growth, maturity and delcline,thus give a broad long term view to the management from marketing perspective. Quality costing; the costs which arise due to quality control, quality failure prevention, quality achievement etc. These costs are considered essential these days as quality of a product sets the survival benchmark for any brand. Strategic Costing; the wholistic view of the band position and market pentration strategy is kept as the prime focus under this for competitive positioning and marketing. Target Costing; thorough analysis of how much profit can be supported by the market and refining the product design to ensure that the target profit is achieved. Thus external environment affects its outcome tremendously. Value chain costing; The cost under this is supposed to include all activites from the design of the product to its distribution. It strategically considers companies likages with external entities ie. vendors and customers to bring in economies of scale resulting in greater efficiency. All these costing techniques help the management in its strategic decision making process be it for curtaing inefficienct activities or designing a product for specific target market.
Performance Appraisal techniqes-Bench marking- this is a technique wherein best practices are identified and internal position is then evaluated against the idenfiied practices so as to bring about improvement in the processes and systems. This techniqe considers competitiors' practices and so is externally oriented. Integrated performance measurement- An integrated approach to performance appraisal which considers both financial and non financial measures. It is considered a balance approach and its role in strategic planning is important. Customer Accounting; this practice appraises cost, sales or profit by considering customer or customer segments as the base for accounting analysis. It is considered a relational marketing analysis tool.
Competitor analysis- Competitive position monitoring; the monitoring is done by benchmarking various heads like, unit cost, market share, product mix and volume of competitors and plotting own data against it. These help in quick evaluation against main competitors and devise a game plan for future course of action. Competitor Cost Assessment; this is a variation of the earlier technique and focuses on cost patterns of competitors. The source of information is considered dubious like, ex-employees, common vendors or even close observation. Competitor Performance Appraisal based on public finacial statement; it is a fairly straight ...Show more

Summary

Strategic Management Accounting (SMA) is basically refined Management Accounting, which overcame the short comings of prevalent management accounting ideas and techniques of 1980s. It consist of a range of various management accounting ideas which utilise the accounting database and knowledge in assisting the management in taking strategic decisions for the future rather than just number crunching exercise of historical figures to analyse the past performance.
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Business Aspects of Management Accounting essay example
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