The paper 'How Should Accounting Models and Techniques Be Adapted to the Needs of Small and Medium-Sized Enterprises " is a great example of finance and accounting coursework. It is apparent that the contemporary business environment has become extremely dynamic and unpredictable. In turn, this has made the role of managing organizations more demanding and hence requires the establishment and execution of effective management strategies as a way of allowing for success and survival in the competitive business world. Accounting tools and techniques become handy in allowing for efficiency, effectiveness as well as productivity of business organizations.
Small and medium-sized enterprises are not to be left behind. For instance, cost accounting could be helpful for the small and medium-sized enterprises since it advises their management on the most suitable course of action with regard to capability and cost-efficiency. Different ассоunting models and tесhniquеs can be applied in small and medium-sized enterprises to allow them to function better and fulfil their goals and objectives (Garrison, Noreen, Brewer, and McGowan, A., 2010, p. 784). This piece of paper will give a critical discussion of the manner in which different ассоunting models and tесhniquеs can be аdарtеd to thе nееds of small and medium-sized еntеrрrisеs. According to Macintosh and Quattrone (2010, p. 112), different accounting tools and techniques could be suitable for different types of enterprises.
Accounting is an essential aspect of the business world. It is a practice and body of knowledge that is involved with keeping financial records, recording transactions, performing internal audits and providing advice on taxation matters among others. An accounting model can be defined as a set of fundamental concepts, procedures, assumptions and principles that establish the methods of identifying, recording, measuring as well as reporting the financial transactions of an entity.
Some of the factors that influence the type and amount of management accounting tools and techniques adopted by organizations include the size of the enterprise where large ones apply more of them than the small ones and the external stakeholder requirements involved. The nature of the organization’ s operations and the environment in which it operates and the financial constraints and senior managers’ background experience also affect the adoption of management accounting practices (Armitage, Webb and Glynn, 2016, p. 56). Small and medium-sized enterprises are significant to the growth and development of economies.
This is more so since they have great potentials to develop indigenous entrepreneurship, generate employment, allow for diversification, and enhance local technology and forward integration with large scale enterprises and industries. To allow them to achieve maximum success in their undertakings, appropriate accounting models and techniques should be applied. It is, however, worth noting that the extent to which the enterprises use contemporary management accounting tools and techniques is not widely discussed.
According to Armitage, Webb and Glynn (2016, p. 31), small and medium-sized enterprises do not fully utilize common management accounting tools and techniques, compared to other large companies such as those in the manufacturing industry. Some of the factors that affect the adoption and utilization of management accounting tools and techniques include the perceived decision-usefulness of the techniques whereby some of them could be thought of as not being considerably helpful. Most small and medium-sized enterprises fail to leverage the potential linked to accounting tools and techniques with regard to assisting them to attain their financial objectives.
There is also the issue of complexity of the environment in which the small and medium-sized enterprises operate. Another factor is the age of the small and medium-sized enterprises whereby they could not be well established to a point of effectively adopting and using the tools and techniques. Most of them also fail even before they are fully established in the industries (Robu, 2013, p. 1) All in all, it is essential that the enterprises make use of the techniques to be in a position to enjoy the benefits involved.
In as much as the techniques could be costly initially, the return on investment is worth. Rompho (2011, p. 39) concur with the above statement that small and medium-sized enterprises are a backbone of many economies across the globe. Nonetheless, most entrepreneurs do not understand the significance associated with accounting tools and techniques and how they contribute to business growth and assist them to operate efficaciously, effectively, ethically as well as economically. According to Nandan (2010, p. 65), some of the essential accounting tools and techniques that could be utilized by small and medium-sized enterprises particularly in management accounting include financial planning, cost accounting, financial statement analysis, standard and marginal costing, management information systems, budgetary control and decision-making accounting among others.
Financial planning is an imperative tool in the achievement of business objectives. The principal objective of business organizations is the maximization of profits which is attained by making proper financial planning. Financial planning entails making decisions in advance with regard to financial activities that are required in the achievement of primary objectives. It includes establishing both short term and long term financial objectives of the business, devising financial policies as well as coming up with financial procedures aimed at attaining the objectives.
Cost accounting presents cost data as it relates to product, process, department and other elements, which are then compared with predetermined one. The comparison of the two costs is essential as it allows the management to identify the reasons for the difference and the best course of action. Financial statement analysis entails the evaluation of financial statements such as the balance sheet and the profit and loss account of a business organization.
This helps in knowing the rate of growth of the business. Some of the techniques used in financial statement analysis include trend analysis, comparative financial statements and ratio analysis. This results in the presentation of information that assists in decision making by the investors, business executives as well as creditors associated with an organization such as small and medium-size enterprises Santini, 2013, p. 93). It is helpful in the measurement of profitability of various lines of production, divisions and departments of an enterprise.
Armitage, H. M., Webb, A. and Glynn, J. 2016. The Use of Management Accounting Techniques by Small and Medium-Sized Enterprises: A Field Study of Canadian and Australian Practice. Accounting Perspectives, 15: 31–69.
Garrison, R.H., Noreen, E.W., Brewer, P.C. and McGowan, A., 2010. Managerial accounting. Issues in Accounting Education, 25(4), pp.792-793.
Lavia López, O. and Hiebl, M.R., 2014. Management accounting in small and medium-sized enterprises: current knowledge and avenues for further research. Journal of Management Accounting Research, 27(1), pp.81-119.
Lee, S., Park, G., Yoon, B. and Park, J., 2010. Open innovation in SMEs—An intermediated network model. Research policy, 39(2), pp.290-300.
Macintosh, N.B. and Quattrone, P., 2010. Management accounting and control systems: An organizational and sociological approach. New York: John Wiley & Sons.
Nandan, R., 2010. Management accounting needs of SMEs and the role of professional accountants: A renewed research agenda. Journal of applied management accounting research, 8(1), p.65.
Robu, M., 2013. The Dynamic and Importance of SMEs in Economy. USV Annals of Economics & Public Administration, 13(1).
Rompho, N., 2011. Why the balanced scorecard fails in SMEs: A case study. International Journal of Business and Management, 6(11), p.39.
Santini, F., 2013. Strategic Management Accounting and financial performance in the small and medium sized Italian manufacturing enterprises. Management Control. 31: 77-107.
SQK Accountancy (2015). The importance of management accounting education on SME performance. Available [Online] from http://sqkaccountancy.co.uk/the-importance-of-management-accounting-education-on-sme-performance/ [Accessed 6 May 2017]