Managerial Accounting Innovation

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Accounting may be described as a practice that aims at providing essential information to the managers and other senior officials within the organization. The managerial accountants are in this case required to compile regular reports which show the performance of the respective departments within the organization. The overall aim of management accounting which is also referred to as managerial accounting is to enhance the smooth running of the activities and operations in the organization. The practice can also be said to be more directed towards assisting the internal stakeholders to coordinate and control the various departments efficiently. Basically, the major difference between managerial accounting and financial accounting involves reporting patterns whereby, while MA provides reports to be used within the organization, FA reports are intended to be used by both internal and external users. Moreover, while managerial accounting aims at improving the internal operations within the organization, financial accounting improves the firm’s image to the creditors and the shareholders.

Managerial accounting is however a wide concept which involves many differentiated fields such as regular budgeting cost allocation and analysis and strategic planning amongst others. The regular reports and information provided assist the managerial department to counter deviations and problems more confidently. Managers are able to solve the internal crisis as they have a clear knowledge of the root course of the problem. The practice has also been widely acknowledged for its proactive measures which have consistently enabled firms to save the available resources. Accounting management also involves the practical utilization of the information provided in the decision-making process. This paper will seek to analyze the key innovations in management accounting as one of the core themes driving modern organizations.

Management accounting evolutions

The current expansions and move towards globalization have forced businesses and organizations to innovate new management techniques. In addition, the large size and the diverse nature of operations have triggered the invention of new ideas which have significantly improved the organizational performances (Coombs, Hobbs & Jenkins, 2005, p. 23). Balanced scorecards and strategic planning are among the key innovations which management accounting has received in the modern world. The two practices not only ensure excellent performance but also enable the organization to strategically position its operations efficiently and effectively.

Balanced scorecard

It is a management tool that assists the organization to undertake its projects and plans efficiently in order to realize the overall objectives. The structure of the balanced scorecard is usually supported by some approved guidelines on how to implement the plan. The structure also seeks to translate the firm’s mission, vision, and objectives into a practical plan which can be monitored and evaluated. The main aim of a balanced scorecard is to ensure that the managers maintain the required procedures while executing, controlling, and monitoring the overall activities of the firm.

The balanced scorecard framework will tend to lay more emphasis on the four major perspectives. Each of the four perspectives will be developed using a well-balanced scorecard format. Moreover, metrics and target limits are also necessary when formulation the scorecard structure (Kaplan & Norton, 1996, p. 25).

Customer perspective

This section basically aims at improving the relationship between customers and the organization. The customer perspective section requires the organization to create and add value for its customers. Basically, the major concerns have been to ensure that the organization seeks to satisfy the needs of the customers. In such a case, the customers’ feedback becomes critical in the decision-making process. Moreover, the organization also has to continuously aim at retaining its existing customers and expanding its market share. While determining the market share, it is important for the organization to evaluate its customer’s profitability. All these objectives however are required to have proper metrics on the delivery time, the expected returns, and the satisfaction ratings which the organization should target in order to realize the expected returns.

Growth perspective

The perspective mainly focuses on creativity and innovations within the firm. The firm should therefore ask itself whether it’s innovative enough to create value for its customer on a continuous trend. In order to succeed in this, the organization must ensure that it transforms itself into a knowledge-based organization by providing the learning environment which the employees require. This transformation has really assisted many organizations to improve their performances with the prevailing technological advancement. The perspective has also enabled the employees to continuously learn through regular training, as well as enabling many organizations to build up corporate cultures which encourage self and corporate growth. In addition, many organizations have been forced to set funds for arranging regular training for both managers and employees. It also encourages staffs interactions as it’s a way in which people get to learn and understand one another. Organizations have also used modern technologies such as the internet to facilitate learning and growth perspectives. Firms can efficiently evaluate whether they have succeeded on growth perspective by checking on the employee’s satisfaction; the satisfaction can be evaluated by the retention and increased productivity within the firm (Niven, 2002, p. 45).

Internal process perspective

This perspective ensures that the organization offers quality products and services. This perspective, therefore, tends to be the major determinant of business success and assists managers to make sure that the internal processes meet the consumer’s requirements. Additionally, the managers can use the feedback obtained from the customers to improve and better the products and services provided in the firm. This perspective also enables the firm to gauge its competencies and perception within the market. The internal process perspective also aims at ensuring that the firm efficiently relates well with its suppliers. Moreover, the perspective can effectively use some metrics in determining productivity and quality services rendered by the organization’s staff.

Financial perspective

In order to effectively strike the balance, the financial perspective enables the firm to retain its financial soundness throughout its operation. It, therefore, seeks to use comparative analysis to gauge the firm’s performance within the economy or industry. Although the key indicators are financially measured, the non-financial measures are also considered while evaluating the financial performance of an organization. Basically, the profit margin and return on investment are some of the metrics which can be used to indicate financial performances within an organization. The measures however have a lagging effect since the past and current performances are used to project future performances. Moreover, the financial perspective enables the firm to determine whether the project implemented has a positive impact or not.

The core values of the balanced scorecard

A balanced scorecard enables the firm to realize its overall objective as portrayed under the various perspectives. For instance, the profitability growth depicted in the financial perspective and the worker’s satisfaction analyzed by the growth perspective. The scorecard uses measures that enable the firm to evaluate and distinguish between successful projects the unsuccessful ones. Additionally, target limits used in the balanced scorecard enable the firm to be precise on how long the plan implementation will undertake. Through it, the managers are able to design proper initiative plans which counter the difficulties and challenges experienced during the project implementation process (Pandey, 2005, p. 7).

Strategic planning

Immense innovations have also been observed in the strategic planning field. Strategic planning is a process that enables organizations to effectively make prudent decisions that direct and guide the resource allocation within the firm. Basically, strategic planning seeks to implement and evaluate the functional decisions within the organization with an aim of achieving both short-term and long-term objectives. It also specifies the mission statement of a firm and ensures its implementation by establishing small goals and targets. For an organization to be successful, proper plans must be put in place to guide and coordinate operations within a firm (Flood & Flood, 2000, p. 35). In most cases, different firms come up with different strategies which help them to suit well in the market. The key areas that assist firms and organizations to establish effective strategic planning include the development of the mission statement, market analysis, and plan implementations and checks. All firms will therefore work towards ensuring that the above three fields are excellently and effectively managed.

The mission statement

Businesses require a vision, mission, and values in determining the strategic direction. The mission statement, therefore, enables organizations to forge ahead strategically and progressively with effective monitoring and evaluations. Certain objectives however need to be set in order to ensure the viability of the business. The mission statement establishes the image and reputation of the firm in the market. The values, qualities, and traits that the business upholds greatly determine its relationship with other stakeholders and the general public. One of the major values that a firm should fully commit itself should be to offer quality and reliable products.

The mission statement should also prioritize meeting the demands of its consumers. For instance, the production and service delivery should be focused on meeting the consumer’s satisfaction. in this case, clear management guidelines should be established in order to direct and remind the staff of their duties and responsibilities in the firm. The management team should also be committed to ensuring efficiency in the firm’s operations. The mission, vision, and values act as a guide to the firm and are directed towards ensuring profitability in the venture (Haberberg & Rieple, 2008, p. 55). However, the three should work intertwined in order to ensure economic growth and progress. The firm nevertheless requires a functional plan which should seek to actualize these plans and the objectives. The plan should therefore be synchronized with a workable time and financial budget. Moreover, an all-inclusive budget with a proper assessment and monitoring schedule should be established.

The company should also commit itself to offer quality and efficient products always. Innovativeness and efficiency should be the core objective of the firm. Ideally, flexible production techniques should be adopted in order to enhance the firm’s competitiveness in the market. The flexibility will also enable the firm to cope well with the changing market environment. The firm should understand that the overall success is only attained through combined contributions of the senior staff and the subordinate staff; thus employee’s welfare should be highly regarded as it increases the overall output of the company due to the increased worker’s motivations (Hill & Jones, 2009, p. 4).

After clearly defining the mission statement which a firm can use to come up with a workable and viable venture, organizations have seen it necessary to analyze the market they intend to operate or are operating in. in this regard a thorough market analysis has to be undertaken by the firm before engaging itself into business. Such analysis assists the firm in effectively penetrating the market. Among the commonly used strategic planning techniques is SWOT.

SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis

This is a strategic planning tool that is used to evaluate the internal and external environments of a given firm; its aim is to ensure that the firm allocates resources efficiently as it pursues its objectives. Critical evaluation of the favorable and unfavorable internal and external environment is done to assist the firm to realize the set objectives. In this case, the firm is required to fully exploit its strengths and opportunities. Similarly, a positive countering of threats and weaknesses should be undertaken in order to enhance competitiveness and economic sustainability.


These are the positive aspects of the firm, which it can capitalize on to ensure continuous growth. Aspects such as the production of quality and reliable products and services can enable the organization to maximize its returns and profitability level. It is however important to understand that quality and reliability can only be attained if a firm has an active research and development program (DuBrin, 2009, p. 289). Such programs ensure the timely implementation of technology within the firm. The management should also be deeply committed to the firm’s objectives. The commitment will not only enhance accountability but will also ensure improved customer relations. Moreover, organizations should use qualified and competent personnel at all times.


These are usually the internal drawbacks that may hinder the firm from attaining its objectives and can cause immense damage to the firm if not well and timely improved. They can however be transformed into strengths if proper remedies are taken to overcome them. Surprisingly, most of the firms venture into the market without having a detailed marketing plan (Griffin, 2007, p. 68); the marketing plan in this case enables the firm to effectively and efficiently penetrate into the market. It is therefore advisable for the firm to have a detailed market plan on how it intends to have a market breakthrough.


These are the potential areas and fields which the organization can use to maximize its output. Opportunities are however mostly determined by the external factors surrounding the organization. For instance, the relaxed statutory regulations and taxes may greatly advantage the firm’s operations. The removal of international trade barriers may also positively encourage the activities of the firm, and these are some of the international moves that can aim at improving trade between nations (Ferrell & Hartline, 2007, p. 120). The firm should therefore fully exploit such advantages to ensure maximum returns and profitability.


These are external changes that negatively affect the operations and progress of a firm. A firm can experience some threat if the reverse of opportunities invades the market. Such instances happen when stricter regulations and increased trade barriers are enforced by the state. The market dynamic and flexibility in the products demands may also pose a major threat to the firm which may have greatly invested in rigid production techniques. In order to positively enhance growth in the firm, the responsive mechanism should be employed in order to assist the firm to cope with the changing environment (Stapleton & Thomas, 1998, p. 79).

Implementation and checks

After a thorough market analysis, the organization should fully implement its strategic plan by actualizing it in the real market. Basically, the plan should have a time limit in order to ensure efficiency. Indeed, the market analysis will enable the organization to strategically position its operation well in the market. Moreover, proper checks and measures should be enforced in order to gauge the firm’s progress while corrective measures should be implemented in order to counter any shortcomings.


Management accounting has greatly assisted the organization in efficiently utilizing the available resources in production, administration, and marketing services. Through MA, organizations have made tremendous growth as the resources are accumulated and channeled towards realizing the firm’s objectives. In addition, the continued innovations that have coupled with the practice have made it easy for the firms to use. The balanced scorecard is one of the major innovations that management accounting has had in recent times, which enables an organization to realize its overall objective as portrayed under the various perspectives. Strategic planning on the other hand enables organizations to effectively analyze the prevailing market conditions in the positioning of their operations. Through it, organizations have been able to enhance competitiveness and economic viability.

The market analysis enables firms to critically evaluate the favorable and unfavorable internal and external environment. In this case, the firm can fully exploit its strengths and opportunities. Additionally, a positive countering of threats and weaknesses is also applied in order to enhance competitiveness and economic sustainability.


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