Management Accounting Innovation in Modern Organizations - Coursework Example

Introduction The process of preparing management accounts that is aimed at providing timely and accurate statistical information which is desired by accounting management agents in a company that can be department managers or the chief executive officer for deciding on important matter can be defined as management accounting. These reports indicate the cash available, the money to be received, any outstanding debts, and the amount of raw material as well as in-process inventory. Management accounting can vary from one organization to the other in term of structure and policy (Seal, Garrison & Noreen 2009, p. 675-680). As per Chadwick (2000, p. 676) management accounting is able to use accounting, management and finance combined with the technology that is required for driving success in the business. It can be said to be a useful tool for advising managers on the financial implications of the projects that may have been initiated in the past; it can also be used to explain the consequence in terms of financial for taking decisions which could be made in the business. Being an instrumental tool for formulating strategies in the business, it has been aimed for providing desirable performance; Management accounting is able to offer a platform for conducting audits internally and also checks that can be used as a tool for making an impact for competitive landscape that surrounds the business enterprise. Management accounting innovation in modern organizations As per Emsley (2005, pp. 14–16) most of innovation in management accounting happened in the last fifteen years were developed by organizations, one of them being Activity-Based Costing (ABC) as well as Balanced Scorecard (BSC). Most of the research done in the field attested the fact about adopting ABC or BSC or together has been very helpful. On the other hand, the lack of evidence and support may have caused skepticism in the innovation made and thus rendered it to be non-systematic. Globally, most of the organizations have been able to adopt innovations; most of the firms are also in the process of adopting these innovations; or may be determining the net benefits for adopting these innovations. One of the common characteristic in the cases is that, it has been adopted by organizations which are higher revenue generator. The Activity based costing is able to recognize that in a modern day factory for avoiding or disrupting production is the core of the business than being able to reduce cost of the raw materials. These concepts that is based on activity based costing is able to deemphasize direct labor being the cost driver than dwelling on activities which drive the cost up, that can be service provision or even producing product component. Management accounting is also called as a mechanism for managing and controlling cost that provides surveillance in an organization (Emsley, 2006). Role of Management Accountants in driving innovation In managing accounting innovations is also considered to be practices, ideas or even objects which are recognized being new by the organization which adopts innovations. One of the fundamental perception which denotes that innovations also involves change but all the changes may not involve innovation at all. Thus, management accounting can be defined as the practice for reporting and measuring nonfinancial and financial information which is needed by the managers for making decisions that can be geared towards achieving organizations’ objectives and goals. Although, the role of these Management accountants cannot be termed adequately for driving innovation in the organizations as per the results of a number of that is conducted in the field research. In order to study the role of the CFO for adopting and implementing the new management accounting systems has been concluded with a number of explanations that may be conflicting. At first, the individual differences in between the CFOs who dictate the use of innovation in the management accounting field. In the same way, this is postulated by the characteristics of the CFOs for moderating the level by which organizations are able to adapt in rational environment contingencies. As well, the dissemination of the management accounting practices that is followed in the public sector is also explored in the methods and manner for diffusion as well as drawbacks for adopting with regards to innovations. The survey conducted on the public sector managers also indicated that the adoption of the management accounting with regards to public sector organizations has been to a greater extend was greatly extended by the government (Abrahamson 1991, pp. 586-592). Ever since the late 80s accounting experts were engaged in trying for changing the redundant accounting practices, they advocated for innovative and dynamic approach towards management accounting. Some of the difference that exists between innovative and traditional management accounting practices can be seen in the invention of techniques taken up by cost control. As per the management accounting practice in the modern time, cost accounting is being used as the central method. On the other hand, the traditional management accountants considered variance analysis as one of the principal technique. While the later was also used for systematically comparing the budgeted and actual costs particularly towards the raw materials also with labor in a production period. These approaches have been used by company although, it is blended with an innovative technique which is life cycle cost analysis also, activity based costing that can be designed for suiting specific aspects of business environment in the modern times. As per Durry (2008, p. 136) opines that the life cycle costing has been able to recognize that manager has ability for changing cost for manufacturing a product at the stage when it is in designing. It is actually as most of the modern factories of manufacturing costs has been determined by level of activities which can run in the factory is key for ensuring effectiveness and should be optimized for the efficiency of activities for minimizing machine breakdowns as well as quality control failures in some cases(Hopper, Northcott & Scapens, 2007). Role involvement and suitability of innovations incentives As innovations can be characterized as technical or administrative initiative; these innovation in management accounting are purely administrative and radical. Although, most of the innovations involves around new administrative and technical elements and implementing of some particular innovation also necessitates towards adopting other administrative and technical innovations. Thus, this evaluation for implementing the impact has been often viewed to be a global package for a number of components that can be both technical and administrative innovations. Also, implementing innovation in the management accounting has often resulted in benefits directly although indirectly through the changes in organization behavioral. Also, some of the impacts of added management accounting information have resulted in the long run after it has been implemented. Management Accountants and innovation acceleration While conducting the process for measuring as well as reporting the nonfinancial and financial information which is desired by the managers for making decisions, management accountants becomes a pivotal for greater role for accelerating the process of innovation. The efforts of the accountant could be linked with ultimate activity which is aimed towards achieving the organizations’ objectives and goal. Also, responsibility has been rested in the position have to contribute towards achieving the goals of the organization. The actions and roles of the management accountants have been very sensitive in the modern day business environment as it can have multiple relationships towards organization. At the onset, it becomes a strategic partner and helps providing decision that is based on financial and operation information. Also, it has been charged with responsibility of overlooking and managing teams and reporting responsibilities and relationships to the finance. As a result, these activities which is undertaken by management also accountants for including; planning and forecasting, variance reviewing and analysis as well as management accounting information is the core for management system if it not well analyzed and handled can lead at making wrong decisions that can affect the operations of the company. It is becomes important for engaging in planning towards management accounting as well as controlling the accountants should realize that accounting information can be affected by business environment in the modern times that is very turbulent and dynamic also complex thus, accounting systems should be designed for enabling and withstanding environment like these (Coombs, Hobbs & Jenkins 2005, p 25). The flexibility in management accounting also enables management accountants for gaining experience and knowledge from the various fields and functions in an organization such as information management, marketing, auditing valuation, logistics and pricing. As per Seal, Garrison & Noreen management (2009, p. 780-788) accounting goes beyond three areas. At the first, it is able to cover strategic management that entails furthering the role of management accountant to become strategic partner in a firm. With the second being performance management, that is aimed at developing these practiced for making decision, as well as managing the performance of the organization, while at the end, managing risk also contributes to the practices and frameworks for identifying, managing, measuring and reporting risks towards the firm’s objectives and aims (Hopper, Northcott & Scapens 2007). Conclusion This paper is able to examine the definition of management accounting as well as presents management accounting innovation in the current business environment. At the second end, the paper also describes the practices adopted by various participants in the firm and the contribution they make towards the innovation process. As a result, the role of the management accountants, innovation appropriateness, innovations acceptance, incentives, as well as acceleration provided for innovation done by the accountants has been analyzed. Thus, management accounting innovations has contributed great deal in the success of the organizations in the modern times. References: Abrahamson, E (1991), Managerial fads and fashions: the diffusion and rejection of innovations, Academy of Management Review, vol 16, no. 3 , pp. 586-612. Banker, R D., Chang, H & Pizzini, M. J (2004), The balanced scorecard: judgmental effects of performance measures linked to strategy, The Accounting Review, Vol 79 no. 1 , pp. 1-23. Chadwich, L. (2000) Essential Management Accounting. FT Prentice Hall. 2,Pp 34-78. Chenhall, R. H (2005), Integrative strategic performance measurement systems, strategic alignment of manufacturing, learning and strategic outcomes: an exploratory study. Accounting, Organizations and Society, vol 30, no. 5, pp. 395- 422. Coombs, H., Hobbs, D. & Jenkins E. (2005) Management accounting: Principles and applications. Pp 1-30. Durry, C. (2008) Management and Cost Accounting. Thompson. 1, Pp 102-143. Emsley, D (2005), Restructuring the management accounting function: a note on the effect of role involvement on innovativeness. Management Accounting Research 16:2, pp. 157-178. Emsley, D 2(006), Discipline of Accounting and Business Law, School of Business, University of Sydney, NSW, Australia. Hopper, T., Northcott, D & Scapens, R (2007), Issues In Management Accounting, 3rd Edition, Financial Times Prentice Hall. Seal, W., Garrison, R. H., & Noreen, E.W (2009), Management Accounting, McGraw- Hill, Pp. 675-788. Read More