Management Accounting Innovation - Essay Example

Management Accounting Innovation Name: Institute: Introduction Changes in modern's competitive setting, Emsley (2005) posit that business organizations must change or attempt to look for means to handle firms that have the ability to survive and compete sustainably. Above all, manufacturing industry is enduring a competitive account of the innovation management, which according to Mouritsen, Hansen, and Hansen (2009) is one of the management accounting methods. Modern as well as valuable competitive advantage information is the sustainable value and imperative for operating in the intensely competitive market. Innovation Management Accounting has lately advanced moderately and generally in the accounting field as well as in innovative management accounting within the significance of literature. Still, according to Aghion and Howitt (2007) the literature is uncertain concerning what makes up operations, accounting, and innovation management. Scientific investigations have concentrated on the dissemination of accounting, management, innovation, or utilization of innovative management accounting. In this regard, this essay seeks to explain why Management Accounting Innovation is one of the core themes driving modern organizations. Furthermore, the essay will seek to explain if the role of a Management Accountant has been adequate in driving innovation. Finally the essay will analyse Emsley (2005) assertion with regard to role involvement, then afterward explain how Management Accountant can accelerate the innovation within an organization. Why Management Accounting Innovation drives modern organizations A number of management accounting innovations such as the Balanced Scorecard (BSC) have in past decade been created for application by nearly all business enterprises. According to Emsley (2005) scholars in this field have proved that implementation of Balanced Scorecard together with other innovations has been of assistance for nearly all organizations. In contrast, the shortage of firm proof to sustain this detail has made the cynics to call innovations unreliable and diversifiable risk (Davila, Foster, & Oyon, 2009). Globally, however, firms have either espoused the innovations or are ascertaining the overall benefits brought about by the implementation of the accounting innovations. Other management accounting innovations such as Activity based costing (ABC) discerns that in a contemporary industrial unit shunning manufacturing troublesome procedures is important than only decreasing the raw materials’ cost (Emsley, 2005). The ABC theory place less emphasis upon direct labour as a cost driver instead it broods over actions that drive costs like the product component manufacturing or service provision. Considering the theory of management control, Smith et al. (2008) concurs with Emsley by positing that management accounting is a means for management control that offers supervision in the firm. Emsley (2005) affirm that management accounting is fundamental to the processes of control and management that classify the goals, determines progress as well as incentives or chastises organizational performance. Mairesse and Mohnen (2002) maintain that management accounting innovation must act in response to available or forthcoming adjustments in the business industry for the reason that a collapse will depressingly affect the organisational performance of the company involved. In essence, this is because the discipline restricts management insights, measures, as well as responses to organizational occurrences. Therefore, without doubt Innovation in management accounting is one of the core themes driving modern organizations. Role of a Management Accountant has not been adequate in driving innovation No I disagree that the role of a Management Accountant has been adequate in driving innovation. Basically, management accounting innovations are well thought-out as concepts, exercises or bits and pieces that are acknowledged as novel by the firms espousing the innovations. According to Aghion and Howitt (2007) the novel signifies that every innovation entail modification, even though not all modifications involve innovations. Consequently, according to Smith, Abdullah, and Razak (2008) management accounting is the exercise of assessing as well as accounting both financial and nonfinancial data required by executives to make decisions, which are inclined towards the accomplishment of business’ objectives. Still, the role of Management accountants has failed to sufficiently drive innovation in the organisation: this is based on several studies results carried out in the field of management accounting (Naranjo-Gil, Maas, & Hartmann, 2009). Entity dissimilarities between chief financial officers (CFOs) read aloud the use of management accounting innovation in the organisation. Correspondingly, attributes of CFOs control the level to which firms become reasonably accustomed to environmental eventualities. Naranjo-Gil, Maas, and Hartmann (2009) study results indicated that the implementation of innovations in management accounting, particularly in the state-owned enterprises is extremely regulated by the government. Ever since early 90s experts in accounting field have been busy striving to modify the outmoded accounting practices, by supporting a more innovative and dynamic approach to management accounting. Emsley (2005) maintain that the distinction between conventional and modern practices in management accounting may be based on the development of cost control methods. In the contemporary practice of management accounting, Pacharn and Zhang (2006) claim that cost accounting is utilised as the fundamental technique whereas variance analysis was used by conventional management accountants as their main method. Therefore, the role of a Management Accountant in driving innovation is far from being achieved, and this can only be realized after CFOs stop thinking conventionally, and instead be modern. Role involvement is expected to affect innovativeness I undoubtedly agree that the role involvement is affects innovativeness. Even though innovations may either be attributed as organizational or technological initiative, Emsley (2005) posit that innovations in management accounting are exclusively administrative and revolutionary. Still, nearly all innovations entail novel administrative as well as technical aspects and the adoption of a few certain innovations demands espousal of other administrative as well as technical innovations. For that reason, the adoption impact assessment is time and again seen as a worldwide package of several components (Davila, Foster, & Oyon, 2009). In addition, the adoption of management accounting innovation rarely lead to direct benefits, but instead indirectly by behavioural change in the organization. Plainly, the effects of enhanced information in management accounting bring about the long run subsequent to application. Since innovation is a key element of a business strategy, Mairesse and Mohnen (2002) observe that a prosperous organizational strategy around innovation needs a solid grip of the innovation process. Even if scores of business have failed to clearly define the process of innovation, the process according to Pacharn and Zhang (2006) is made of cohort as well as enlistment of a concept; screening and backing; testing; commercialization; and dissemination along with adoption. Above all, the innovation process success will be established by the readiness of the partakers to work out the distinct anxieties, outputs, as well as interests that are associated with every phase of the process. Even though the process of innovation is a fundamental element of nearly all organizational business strategies, Emsley (2005) claim that its adoption as well as management has demonstrated to be challenging for a good number organizations. Intrinsically, the complex process calling for the involvement of all organization’s members could prove by and large difficult and strenuous. As a result, Ferreira, Moulang, and Hendro (2010) maintain that the accomplishment of a designed process will compel management to espouse eye-catching strategies so as to allow organisation’s members to completely partake. Ferreira, Moulang, and Hendro (2010) further notes that incentives such as rewards, re-training as well as goals realizations courses may effortlessly persuade a worker into taking part in the change process. How the Management Accountants can accelerate the innovation During evaluation as well as accounting of financial and nonfinancial data required by executives to make decisions, Emsley (2005) posit that the role played by management accountants in the process of accelerating innovation is extremely vital. Importantly, the effort of accountants must be coupled with the decisive action intended for the accomplishment of organizational goal as well as objectives. Based on this perspective, the task lying on their shoulders may at last chip in towards the prompt accomplishment of organizational objectives (Mairesse & Mohnen, 2002). Besides that, the behaviours as well as roles of management accountants are susceptible in modern’s organizations for the reason that they have manifold connections to the firm. To begin with, they serve as strategic providers as well as partners of decision-rooted operation along with financial information. Subsequently, they are tasked with business team management as well as having to report errands and associations to the finance organization of the company (Davila, Foster, & Oyon, 2009). Therefore, the activities embarked on by management accountants consist of; projecting as well as scheduling, analysing and supervising costs intrinsic in the company, and variance analysis. Such activities according to Emsley (2005) are the ones, which offer twofold responsibility to the business and finance team. For this reason, responsibility is more pertinent to the team of business management rather than the department of corporate finance for the reason that it is accountable for costing newly developed artefact, analysis of consumer profitability, score carding of sales management and operations research. Conclusion In conclusion, the essay has analysed various aspects of management accounting as well as discusses innovation of management accounting in contemporary corporations. Subsequently, the essay has described the roles of different partakers in the corporation as well as their contribution in the process of the innovation. As a consequence, the roles of management accountants, novelty suitability, as well as acceleration of innovation by management accountants have been analysed extensively. Conclusively, I can affirm that innovations in management accounting have added much in the triumph of contemporary organizations. References Aghion, P., & Howitt, P. (2007). Capital, innovation, and growth accounting. Oxford review of economic policy, 23(1), 79-93. Davila, A., Foster, G., & Oyon, D. (2009). Accounting and control, entrepreneurship and innovation: venturing into new research opportunities. European accounting review, 18(2), 281-311. Emsley, D. (2005). Restructuring the management accounting function: A note on the effect of role involvement on innovativeness. Management Accounting Research, 16(2), 157-177. Ferreira, A., Moulang, C., & Hendro, B. (2010). Environmental management accounting and innovation: an exploratory analysis. Accounting, auditing and accountability journal, 23(7), 920-948. Mairesse, J., & Mohnen, P. (2002). Accounting for Innovation and Measuring Innovativeness: An Illustrative Framework and an Application. American Economic Review, 92(2), 226-230. Mouritsen, J., Hansen, A., & Hansen, C. O. (2009). Short and long translations: management accounting calculations and innovation management. Accounting, organizations and society, 34(6-7), 738-754. Naranjo-Gil, D., Maas, V. S., & Hartmann, F. G. (2009). How CFOs determine management accounting innovation: an examination of direct and indirect effects. European accounting review, 18(4), 667-695. Pacharn, P., & Zhang, L. (2006). Accounting, innovation, and incentives. Journal of Engineering and Technology Management, 23(1-2), 114-129. Smith, M., Abdullah, Z., & Razak, R. A. (2008). The diffusion of technological and management accounting innovation: Malaysian evidence. Asian Review of Accounting, 16(3), 197-218. Read More