BM534 Advanced Management Accounting Sample
Introduction
This study will evaluate the role of financial management in decision making and its impact on organizational behaviour. Traditional management accounting methods will be evaluated in this study to measure their necessity in the decision-making process.
Effects on the production process for implementing technological methods and customer taste will be evaluated. Contemporary management accounting techniques will be evaluated and their effectiveness in maintaining relationships among consumers, cost and product life has been evaluated in this study. Different budgeting systems will be evaluated in this study to understand behavioural change in the management team.
Task 1.1:
Role of management accountants in an organization
Efficient planning
Management accounting is used to measure available financial and non-financial resources to make an efficient strategy for an organization. As cited by Elizabeth and Ogochukwu (2018), efficiency of managing daily activities is maintained by management accounting. Role of management accounting tools is to help organizations choose efficient investments and prepare budgets to make accurate decisions for the organization.
Efficient business and development policy
Relevant cost of production is analyzed through management accounting to forecasting upcoming expenses. Accurate forecasting improves the quality of the budget of an organization because the management team gets effective suggestions from management accounting tools. Current conditional companies are evaluated through management accounting that helps to impose control over organization. In this way, companies are developed efficiently and sustain their existence for a long period.
Improve performance of employees
Idle time for a particular job is evaluated through management accounting. As opined by Puyou (2018), different training programmes are organized by the management team to motivate employees to execute their jobs efficiently. Employee’s performance improvement increases productivity of an organization and reduces per-unit fixed cost. 5AS approach, real-time analysis and overhead analysis are used to improve performance of a company.
Preparation of budget
Budget preparation, one of the main objectives of management accounting, evaluates expected income and expenses of a company to guide the management team to allocate funds for a particular work. As per the opinion of Rikhardsson and Yigitbasioglu (2018), a budget forecast profitability and allocates financial resources based on specialized knowledge of that particular task. A profitable budget attracts investors to invest in a company. Evaluation of different financial resources in a budget helps to choose the most efficient sources for a company.
Traditional management accounting techniques help the decision-making process
Traditional management tools are efficient to choose the most accurate planning for a company. Management accounting guides project managers to choose the amount of money that is to be invested in a particular job. Standard capital budgeting tools are used to calculate net present value, internal return rate, and control cost operational activities.
As cited by Appelbaum et al. (2017), organizations are able to forecast their future and forecast goals. In a traditional accounting management process expected expenses are measured through executed expenses when they get an invoice of historical transactions. Financial ratios and break-even points are analyzed manually to calculate the efficiency of a company. Public perception and expected growth of demand are forecasted through management accounting tools that help to make accurate decisions.
A large number of investors make their decision to invest in a company by evaluating different management accounting tools.
Breakeven point analysis for decision making
Break-Even point analysis is an effective accounting management tool to choose a unit of production ensuring profitability. As cited by Bibby and Dehe (2018), management teams use this technique during implementing a new product in the market or expanding business in different regions. Optimum production unit is calculated with the help of break-even analysis.
Management team easily makes decisions about production units through this analysis. Break-even point represents a production unit where the company will be in no loss and no profit situation that is profitability and is ensured by this management tool.
Companies fixed and variable and fixed cost is evaluated in break-even analysis so that expenses decisions are easily made through it. Break-Even point accurately forecasts the number of units to be sold to earn expected profit of a business organization.
Task 1.2:
Impact on production process for advancement of technology and changes in customer tested
Consumer behaviour is an ever-changing factor and it cannot be controlled by the company. Companies produce products based on the demand of consumers that affects the production process. As opined by Dadkhodaei (2018), advanced technologies have been implemented in organizations that have increased efficiency of workers and increased productivity.
Consumers are influenced by cultural, social, psychological and personal factors and these factors are different in different regions. Marketers value these factors to find the most effective factors that influence the buying behaviour of consumers and choose the production process based on it.
Using technologies in the production line enhances the performance of a company and productivity is dependent on the efficiency of implemented technologies. Several types of digital tools are used to sustain operational activities during uncertainties.
As per the opinion of Fliedner (2018), green energy sources have been implemented to reduce the cost of energy and get power supply consistently. Big Data analysis helps to collect a large amount of data of consumers that improves knowledge about consumer behaviour. Digital supply chains are used as the most efficient supply chain in the current situation and it has reduced idle time of the supply chain and changed the production process.
Needs for change of traditional methods accounting for cost and profit for internal use purpose
It is necessary to change traditional methods of accounting because it is done manually and consumes time. As cited by Moşteanu and Faccia (2020), biased data can be implemented by professionals to achieve their predetermined goals. Different types of digital software technologies are available in the market that prepares accounting analysis automatically with authenticated data.
Accounting professionals are recruited in companies to analyze a company’s performance by management accounting tools that consume a lot of money. Implementation of accounting professionals increases indirect expenditure of the company and increases production cost and reduces profitability. Digital analysis shows statistical data and suggests effective measures to improve performance of the company.
Traditional methods of accounting are not as efficient as digital methods that must be changed in organizations. As cited by Diepen et al. (2017), competitor companies use personalized digital marketing tools to make effective accounting management decisions.
A large number of data sets are evaluated through digital management tools but it is not possessive in traditional methods that this method must be changed. Only financial factors are measured in traditional management accounting that results are not appropriate as predetermined that it has to be changed to stay in a competitive market.
Evaluation of Contemporary management accounting techniques in recent years
Contemporary management tools are used to reduce expenditure of a company and solve challenges of operating activities to execute jobs smoothly. As opined by Pavlatos and Kostakis (2018), a predetermined benchmark is provided in contemporary management accounting and employees are motivated to activate it within a given time.
Several types of tools are used to improve strategy of an organization to fulfil expectations of consumers. Step by step procedure of making a product is analyzed in contemporary management accounting to identify gaps of management. Identified gaps are eliminated by value chain management techniques and utilize available resources effectively.
Activity-based costing method is used in contemporary management accounting techniques to allocate costs based on the preferences of products. Operational management is totally controlled through this method and products are traced easily. As per the opinion of Obaid et al. (2019), financial, internal business management, innovation and consumer expectations are evaluated in contemporary business management techniques.
Short term analysis can be made easily to Measure Company’s performance without spending a lot of money on contemporary management accounting techniques. Balance scorecard includes financial and non-financial activities of the company that which is a more effective management technique than traditional management techniques.
Impact of Contemporary management accounting tools to make a relationship between costs, customer taste and product life
Company’s expenses and income is measured by contemporary management techniques that are used to control cost of production to ensure affordability of consumers. As cited by Nikulina et al. (2019), a company is managed by evaluating the internal and external environment of the company that improves the quality of management.
Costs are allocated based on the value of products that ensures total utilization of available resources to satisfy consumers. Consumers’ needs and wants are evaluated to fix production units and it is necessary to sustain a business for a long time.
Innovative technologies are implemented to produce products of consumers at a low cost with maintaining qualities. As cited by Viapiana (2019), production cost is reduced due to implementation of new technologies within the organization. Product life is ensured by evaluation of consumer behaviour for a particular project. Accurate forecasting of product life reduces closing finished goods and reduces wastage of production units.
Variance analysis and cash forecasting of products are some of the most effective contemporary management tools of accounting. Companies get a competitive advantage in market by following contemporary management techniques because these tools make a relationship between cost, consumer taste, and product life efficiently.
Task 1.3:
Evaluation of different types of budgeting systems
Mainly four types of budgeting systems are followed by organizations are Incremental budgeting, Activity-based budgeting, Zero-based budgeting, and Value proposition budgeting. As opined by Esakova et al. (2020), companies’ last year data is analyzed to prepare future budgets and it is the most common method of budgeting.
Different activities are categories in activity-based costing and issue funds on these categories based on sales target and importance of products. Management team ensures that their allocation of funds must give an outcome to the company by value proposition budgeting and it removes unnecessary expenditure of a company.
Zero-based budgeting is the tightest budget and allocation of funds starts from scratch in this method. This method of budgeting during reconstruction of a company is limited in hand. As per the opinion of Amara and Benelifa (2017), available resources are effectively utilized in zero-based budgeting.
This budgeting system represents discretionary costs instead of the operational cost of a company. In the context of incremental budgeting, system managers have a predetermined idea about the change of income and expenditure of a company over years that guides them to make accurate decisions for a company.
A behavioural consequence of budgeting together with controlling measures
Managers can easily measure the current condition of a company by comparing actual income and expenditure and budget of a company. Management team tackles and necessary steps to control excessive expenses to reach its predetermined goals.
As cited by Cescon et al. (2019), organizations get a clear idea about the outcome of their efforts through a forecasted budget that motivates managers to achieve their goals. Budget brings positive behaviour among employees and controls unnecessary expenses of a company.
Employees become more fiscally minded that improves productivity and collaborative work helps to execute strategies of the company. A successful budget plan is a motivational tool to form an effective employee structure and monitor them to execute their jobs efficiently.
Companies can make further expansion plans because it has already forecasted income and expenditure that guides to calculate available funds and resources. Budget controls the finances of a company and improves managerial behaviour.
Conclusion
Based on this study it can be concluded that management accounting techniques are necessary to make effective decisions for a company. Implementation of digital technologies has affected the production process and change in consumer taste has been improved.
It can be said that it is necessary to change traditional management tools and techniques to improve productivity of a company. Contemporary management techniques are the most effective process for decision making because it effectively maintains relationships between financial and non-financial activities. Different types of budgeting systems are available in the market and companies choose their budgeting system based on their requirements.
Behaviour of management team changes for implementing an effective budgeting system for a company. Companies are able to generate profit by total utilization of available resources through a successful budgeting plan.
References
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