Strategic Management Accounting of Electronic Boards - Essay Example

Electronic Boards plc is an electrical engineering company and it has been in the business since the 1970s. The company has almost 200 employees and it has been profitable over the last several years. Since its establishment in 1985 company has been conducting operations without maintaining true accountancy systems. However, the financial crisis has hit the company and it recorded a loss of £1.7 million. This loss also had an impact on the liquidity position of the company. The company’s managing director Jack Watson has recently decided to develop the management accounting system for the firm to keep the track record of entire operations and to make sure that the company can understand how different products are performing. This report will analyze and outline the main factors that the company needs to consider in establishing a useful management accounting function within the company.

The main factors that the company needs to consider are:

1) True And Precise Information. One of the major factors that the company needs to consider in establishing a useful management accounting system within the organization is that the system would give true and precise information about the costs and benefits from different products (Keown, Martin, & Petty, 2011). Therefore by identifying the profitability of each of the products, an accounting system can help the management in making different kinds of decisions, and thus, it can help in increasing the profits of the company.

2) Investing In Different Projects. It has been found that the company directly purchases new technology or equipment to improve productivity without analyzing the cost and benefit ratio of the investment. Therefore after establishing an accounting system, the management would be able to make decisions by analyzing the cost and return of the investment and thus it can help increase the profitability as only profitable investments will be accepted and others will be rejected (Jaffe, 2007). Moreover, it will help reduce the interest charges and high bank charges as the company will not be investing in every other technology that comes up.

3) Identifying Areas Of Improvements. As the company will have a proper management accounting system, so with this the company will be able to identify areas where it can reduce costs, and thus it can help increase profitability.

The management accounting system, once developed, will provide more insight into the current status of the business and would enhance its capacity to the ability to develop and enhance its capacity to compete and forecast its future needs. Moreover, the company would be able to improve its profitability and at the same time manage situations like recession in a better way.