May 25, 2022
Strategic management accounting
Strategic management accounting
The concept of strategic management accounting has been around since the 1980s and has mostly been the domain of large companies, and now smaller companies are adopting it, and in this article here's everything you need to know.
Initially, the Chartered Institute of Management Accountants (CIMA) defines strategic management accounting as "the provision and analysis of management accounting data about a business and its competitors, for use in developing and monitoring business strategy".
Purpose of strategic management accounting
Robin Roslender and Susan Hart, part of the Accounting Research Group at Heriot Watt University, conducted a literature review on strategic management accounting and identified three distinct concepts of strategic management accounting:
Take general strategy tools and consider how management accounting information can be used to better support strategy.
Aligning management accounting with marketing in order to better define strategic positioning, which basically means using management accounting within a company's marketing tools.
A comprehensive term for a number of modern management accounting techniques, which have a strategic component to them, and this generally includes any element of management accounting that includes external market-oriented information.
strategic management process
The strategic management process can be divided into several steps:
Vision, Mission and Objectives
The senior management accounting and management accounting team has set an overall goal and a series of goals that relate to this central task, and this forms the basis of the management accounting team's activity and gives them a series of questions to answer.
Information gathering and analysis
Strategic management accounting collects data from a number of sources within the business's internal environment and the external market, then this is evaluated and analyzed so that it can feed into the next stage.
Strategy formulation
The data collected and analyzed is used to inform a strategic business plan, with several options for review created, at the end of this step, some strategic choices will be made to guide the business towards its end goal.
Execution
The choices made by the management team are then implemented across the organization.
Monitoring and Evaluation
The results of implementing these options are reviewed to determine their success in achieving the company's goals and objectives.
The last three stages will all return to the information gathering stage, continuing the ongoing cycle of learning and applying new knowledge to strategic decisions.
This can occur at an aggregate level, or within a specific department within the organization - financial business partners are primarily involved in the work of strategic management accounting.
As you might expect, strategic management accounting involves a lot of work within the company, working directly with managers and non-financial teams.
Categories of strategic management accounting
- Pricing
- Business/Market Development
- product development
- Mergers and Acquisitions Activity
When it comes to pricing, strategic management accounting tends to look at margins, particularly by market segment, according to research, and when it comes to business development, management accounting is used to provide assurance.
Typical strategic management accounting techniques
bookmark
Using data collection, objectives, and comparisons, the strategic management accountant identifies relative levels of performance and underperformance, and helps identify best practices for improving performance.
the cost
More specifically, strategic management accounting will complement costing based on activity, product attributes, life cycles, quality, objectives, and value chains.
They all serve to determine whether the investment in a new or improved product or service is worth it.
budget
Strategic management accounting looks at brand value budgeting, monitoring and capital budgeting, the former involves assigning a financial value to the equity created by the brand name or image – it can be represented as the net present value of future cash flow estimates associated with the brand and the latter relating to the selection of investments long-term capital.
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