WHAT IS STRATEGIC MANAGEMENT ACCOUNTING AND CONTROL? MEANING | DEFINITION AND CHARACTERISTICS
WHAT
IS STRATEGIC MANAGEMENT ACCOUNTING AND CONTROL? MEANING | DEFINITION AND
CHARACTERISTICS
Strategic
management accounting and control is a relatively new
paradigm in the field of management accounting. This new perspective of
management accounting and control was made popular as a result of the criticism
of traditional management accounting that became a wave in both academic world
and practice in the late 1980s and early 1990s. The intense competition in
today’s tough business environment made it reasonable and realistic for a new
approach to management accounting to be advocated. While commenting on the
question; what is strategic management
accounting, Drury (2008) pointed out that strategic management accounting
has been identified as a way forward.
As important as this topic
is, there is however no comprehensive encyclopaedia that contains all that
strategic management controls and accounting has to offer.
EXPLANATION
OF STRATEGIC MANAGEMENT ACCOUNTING AND CONTROL
Managers and business
executives of modern and vibrant companies in the quest to overcome the
information overload that is facing corporations in the ‘now economy’ believed
by many to have emerged as a result of efficiency in the information super high
way turned to management accounting and accountants to supply information that
will help stir the business in the right direction. A major problem with the
traditional and old way of gathering and processing cost information is the
fact that too much focus is placed on internal activities that can easily be
manipulated by managers.
This problem of
manipulating the internal business processes made internal decisions biased and
more likely to be based on uncompetitive figures. Reliance on the information
produced from this system for managerial decision making puts a company in a
very uncompetitive position. Hence, a system that will gather and assess
external information that can be used to benchmark the internally processed
information is needed. Who else is more qualified to supply information of this
nature other than the accountant?
A new perspective to
processing accounting information that is more extroverts in nature is called
for. That is when the concept of strategic management accounting was first
introduced. It is officially defined as a form of management accounting whereby
emphasis is laid on information that are external to a business entity, non
financial factors and internally processed information. A closer look at this
definition of strategic management accounting reveals that it contains
traditional management accounting with extras, i.e. bringing strategy, marketing management and management accounting under one roof.
COMPONENTS OF STRATEGIC
MANAGEMENT ACCOUNTING
Balanced scorecard (BSC)
or performance measurement
Target costing
Activity based management
Costing life cycle