Strategic Management Accounting
戰(zhàn)略管理會計
1.0 Executive Summary 執(zhí)行摘要
With the development of society and technology, the competition is fiercer among companies. Companies must take new tools to meet the changing challenge.
隨著社會和科技的發(fā)展,企業(yè)之間的競爭越來越激烈。公司必須采取新的工具來滿足不斷變化的挑戰(zhàn)。
As a consequence, the strategic management accounting is popular in the companies, which is taking the responsibility of meeting the challenge.
結果,戰(zhàn)略管理會計在公司很受歡迎,它的責任是迎接挑戰(zhàn)。
In the report, several aspects are discussed. First of all, the role strategic management accounting takes in the company is put forward. A brief introduction about the characteristics of strategic management accounting and the information they provide are described in the report. Then, some aspects that the strategic management accounting must take into consideration are talked about from the relevant cost tot irrelevant cost. Of course, several small numerical examples are essential to give a clear image about the influence of relevant and irrelevant costs on the revenue. Last but not the least, the cost and benefit analysis is used as a tool to evaluate the feasibility of an activity in the company. In this report, acquisition activity is taken as an example to practice the cost and benefit analysis in the company.
在報告中從幾個方面進行了討論。首先,提出了公司戰(zhàn)略管理會計的作用。關于戰(zhàn)略管理會計與他們提供的信息特點,簡要介紹報告中描述的。然后,一些方面的戰(zhàn)略管理會計所要考慮的是談論從有關成本到無關成本。當然,一些小的數(shù)值例子給出關于稅收的相關和不相關的成本影響的清晰的圖像至關重要。最后,成本效益分析是用來作為一種工具來評估在公司活動的可行性。在這份報告中,以收購活動為例,分析公司的成本效益。
All in all, the strategic management accounting is becoming more and more important in the company; it will bring great benefits to the company. Therefore, every company should make great use of the strategic management accounting and make profits.
總之,戰(zhàn)略管理會計對企業(yè)越來越重要;它將給公司帶來巨大的好處。因此,每一個公司應充分利用戰(zhàn)略管理會計獲利。
2.0 Introduction 引言
With the speedup of the process of economic globalization, global competition is becoming fiercer, making the external environment of enterprises more and more uncertain, which urges enterprises to enhance their management activities to strategic management level. Urged by the roily external environment, enterprises in our country are eager to assimilate advanced technological achievement and management experience from other countries.#p#分頁標題#e#
As the new economy is coming, managers make great efforts to be in the ascendant by advanced theory and methods in field of management. In fact, it can be said that all competitive ways in the world is the competition of stratagem. The strategic management gradually becomes the guidance for the companies’ long term development and detailed goals. There is a large need of management accounting’s information, including inner& outer, financial & in financial, absolute& opposite, historical& practical, so the enterprise can confine the operation, found the strategic target, constitute the stratagem, implement the stratagem, evaluate the strategic achievement and adjust the stratagem. As a consequence, it causes an urgent demand for the strategic management accounting, which is the reason for the management accounting is evolving into strategic management accounting. (Tobias, J., 2009)This is also the academic base of setting up strategic management accounting.
Strategic management accounting is a fiscal information system. It affords and analyses data that strategic management needs, it consists of cost, price, operation, market share, cash flow and requirement of resource, which reflects relatively level and change trend of fiscal information.
Basic methods of strategic management accounting not only comprises new methods such as activity-based costing, target cost, value chain analyses, produce life cycle cost, the balanced scorecard in field of management accounting. The most basic approach of the strategic management accounting is the attribute costing method based on the strategic cost analysis matrix. (Bromwich, 1996& Bromwich and Bhimani, 1999)
3.0 Theoretic Foundations 理論基礎
3.1 Strategy
3.1.1The Definition
The strategy means a whole plan for setting goals and realizing goals for the company. It is the macro-level, which has six characteristics, such as guidance, overall, long term, competitive and systemic. (Jean, N., Silvia, P., Manon, C., 2005)
3.1.2Importance of the Strategy
The strategy is important for it matters the most important and basic issue influencing the future development for the company. The corporate strategy matters the whole company, which includes every factors and functions. Strategy means combining all departments together with great efficiency rather than simply addition.
3.2 Cost
3.2.1The Definition
The cost means the price paid or required for acquiring, producing, or maintaining something, usually measured in money, time, or energy.
In the field of advertising and public relations, the mainly cost are as follows. They are advertisement fee, printing fee, prolific fee, book bounding fee and business entertains cost. (Kyle, B., 2007)#p#分頁標題#e#
What’s more, there are many kinds of cost, for instance, direct cost and indirect cost, relevant cost and irrelevant cost. Usually, the irrelevant cost has no relations with the future operating of the company, so the manager does not need to take them into consideration when making decisions.
3.2.2Role of Cost Control in the Development of the Company
First of all, cost control is an important measure for cost management. It is a qualitative index which gives a clear accomplishment about the managers did. Number gives the managers knowledge about the process of the company.
What’s more, cost control provides the power to improve the business management. Just as the old saying goes, the success is decided by the cost, for high cost will lead to high price, then fewer consumers, vice versa. So a good control of cost is especially important to the long term development of a company.
Last but not the least; cost control is an important condition to set up the economic responsibility system in the company. Because there are many kinds of cost and every cost is important to the whole cost, an economic responsibility division based on the cost is a good way to control the whole cost of a company.
All in all, the low cost is a great advantage for the long term development of the company. As we all know; price is dependant on the cost. The low price and high quality provide a great competitive to meet the serious competition in the market. (Nadine, H., Onesimo, H., 2000)
4.0 Strategic Management Accounting 戰(zhàn)略管理會計
Just as what has been mentioned above, strategy and cost are two most important factors, which have great influence on the development of the company. As a consequence, the strategic management accounting becomes popular in companies, especially in the fast growing companies, such as Jessup Ltd, for cost is especially important for a fast growing company.
4.1 Characteristics
4.1.1Entirety
Strategic management accounting aims at enterprise’s long target and whole benefit. It pays more attention to entirety. As the strategic management accounting, it not only provides traditional accounting information, but also several strategies for the companies’ development. They do the work not just based on the accounting materials but also the whole information about the company.
4.1.2More Non-Financial Information
Strategic management accounting provides more non-financial information that related to strategy, for example, the environment around the company, or the economic situation at the exact time. What’s more, it enlarges management accounting personnel’s function range and quality requirement.#p#分頁標題#e#
4.1.3New Method
Strategic management accounting uses new strategic evaluation of performance, for example the method called cost and benefit analysis.
Compared with traditional management accounting, strategic management accounting not only pays its attention to the results, but also the process. Strategic management accounting uses the strategic evaluations, which is a combination of evaluation and strategy used in the company. It is a wholesome performance evaluation. (Robin, R., Susan, J., 2003)
4.1.4More Attachments
Strategic management accounting attaches importance to corporate culture and individuality, because culture is really an important factor, which should be paid more attention when making plan for the operation of the company. Besides, it provides the report of performance evaluation on time and in effect.
4.2 Role in the Company
4.2.1It provides comprehensive management information
The strategic management accounting should strength management and use limited resources to improve economic benefits to the largest extent if the company wants to develop itself. In order to develop, it depends on the legal accounting forms and fitted accounting model to submit its accounting statements. What’s more, the inner information applying to the company’s own characteristics is also essential. For these reasons, the strategic management accounting is responsible for the task in the company.
In such a competitive society, the success depends on the knowledge which the company owned. In order to be successful in the quick change world, whole information about the company is necessary. So the strategic management accounting is needed to the success. They do their work by analyzing the environment around the company and put forward the most feasible measures for the long term development.
4.2.2It takes part in the economic decision actively.
Economic decision is the core of the modern business management, besides, it is also the important content of modern management accounting. It is a fact that those who are successful in the competitive society are making correct economic decisions in the daily performance.
The presupposition of the decision making is objective prediction, including selling, cost, profit, capital forecast. Of course, capital forecast is especially important among them. If something is wrong with the capital operating, it may cause the company to stop producing, but may be in bankruptcy at worst. Nowadays, all companies almost operate with large debts. If they have a good capital function plan and make their capital operate in a good cycle, they will take a more serious risk than before.#p#分頁標題#e#
Although the companies are in more serious risk now, the strategic management accounting can reduce the risk of such kind, for strategic management accounting plays a role in forecasting the total demands of capital and the capital demands tendency. The strategic management accounting is different from the traditional accounting in two aspects. First of all, the strategic management accountings pay attention not only to the accounting materials, but also to the surrounding situation. They make decision by thinking and analyzing. What’s more, the strategic management accounting perform as a manager in the company, they do their work in the whole situation, not just the accounting department.
What’s more, the strategic management accounting can also help the leaders financing and make preparation ahead of the changeable markets. The strategic management accounting use advanced tools to analyze the exited materials and forecast the trend of the cash flow. It plays a great role in guaranteeing the company with plentiful funds.
4.2.3It makes a plan for operating goals and controls the process effectively.
It is the key for the successful operating of business that the company has a business goal and comprehensive budget managements. The accounting data distortion and budget failure will lead the company to mis-function in control system. As a consequence, the company will lose the control in the comprehensive operating. Only having a perfect operating budget and control for financing can the company makes a good budget control. In fact, the strategic management accounting just does the exact work in the company.
4.2.4The strategic management accounting practices the performance examination system strictly.
Our society is taking a great advance, and everything is changing, the increasing accuracy of labor division is an unavoidable tendency, as a consequence, the company must complement the sharing of power system. However, it also brings negative influence to the company. For instance, the company would sacrifices its long term and comprehensive benefits, or more fierce competition among different department.
In order to preventing such questions, the strategic management accounting becomes popular in the company. They divide decision power among managers in different level, make responsibility budget and goals, exam working performance and set up the rewards and punishment system. By doing so, they select the appropriate talents and mobilize the workers’ creative.
All in all, downsizing the cost is the eternal goal of the company. No matter how popular our products are and how successful our marketing strategy is, it could not replace the role of downsizing cost. As the strategic management accounting, it just plays the most important role in making strategy and downsizing cost.#p#分頁標題#e#
5.0 Relevant and Irrelevant Cost and Revenue 相關和不相關的成本和收入
5.1 Definition
Relevant cost is a cost which must be taken into consideration when operating and analyzing management decision.
Basically, relevant cost mainly including the following kinds. They are opportunity costs, cash costs, reset costs, marginal costs, avoidable costs, post-ponable costs and exclusive costs. All these costs must be taken into consideration when making budget, for they are all relevant with the operation in the company.
Irrelevant cost is a cost which should not be taken into consideration when analyzing decisions. Usually, irrelevant cost is unavoidable, for it always happens no matter what plan it is chosen. There are also several kinds of irrelevant costs; they are the book value, the sunk costs and future costs. Accounting should not pay attention to them when evaluating projects, for all these have no relation with the future development of the company.
Revenue means the money that a business or organization receives over a period of time, especially from selling goods or services. Revenue represents the whole operation situation of a company. It is an important element which represents the company’s operating achievement. What’s more, almost all shareholders pay more attention to the revenue than other elements.
5.2 Consideration of Relevant and Irrelevant Cost
5.2.1Relevant Cost
In this part, opportunity cost is taken as the example. For example, A Company wants to set up a new company, but he does not have enough money, so he borrows 8 million from the bank and uses several private capitals he owned. In fact, the capital he owns can earn 50,000 if he deposits them in the bank. So the 50000 is the opportunity costs, which should be taken into consideration when A Company decides that whether it is essential to set up the company.
5.2.2Irrelevant Cost
In the part, the sunk cost is taken as an example. For example, almost all companies may put a lot of money on the advertisement when promoting their products. Once they pay out the advertising fee, no matter 5 billion or 1 dollar, it becomes the sunk cost. When making decision, it should not be taken as a factor.
All in all, it is of great importance to distinguish the relevant cost and irrelevant cost. It is dangerous for the long term development for a company if they mistake the relevant and irrelevant cost. It is a common scene that some companies mistakes irrelevant cost for the relevant cost. As a consequence, they underestimate the profits of their company. Gradually, they leave all shareholders a bad image; at last, it goes into bankruptcy.#p#分頁標題#e#
5.2.3Revenue
Revenue mentioned in the decision making is to emphasis the importance of revenue management, which is taken by the accounting. (Bai, C. & Wei, Y., 2010)
Revenue management is an important duty in a company, which has a great influence on the continuing development of a company. Revenue management demands a centered focus on the financial analysis to earn its ability to generate business profits and make a great success. (Ronald, J., James, A., 2008)
In a word, refereeing to cost and revenue, there is just one goal, which is pointing out the importance of the strategic management accounting. What’s more, all the problems on the cost and revenue will be settled by the strategic management accounting.
6.0 Cost and Benefit Analysis 成本與效益分析
As the Jessup Company is a fast growing company, it may try to make itself larger by mergering other small companies. In the report, cost and benefit analysis is used to analysis the acquisition activity. In this report, Omnicom is taken as an example to analyses the cost and benefit of merger in the advertisement industry.
6.1 Method
Cost and benefit analysis is such a tool that used to guide the possibility of a business activity. Once the marginal revenue is beyond the marginal cost, the activity is feasible. (Harry, F. &Richard, P., 2005)
6.2 Analyses
In the report, merger is taken as an activity in the advertisement industry and Omnicom is an example. Like Jessup, it is unavoidable to acquit other companies if it wants to be larger.
6.2.1Cost
More manpower: the company will become larger than before after acquitting. As a result, more manpower will be needed in the company, following more salary and benefits for them. Of course, it will increase the payments on management, for it will meet great challenge when working so many employees. (William, C. & julapa, J., 2003)
More capital: usually the company who wants to acquit other companies needs to pay out a large number of capitals at one time; it will put more pressure on the company without hesitation.
More conflicts: because different company has different corporate culture, it is really difficult for the company to manage all employees with different backgrounds without confliction.
6.2.2Benefits
Advanced technology: it is common scene that almost every company has its own technology. By mergering, the company can own the technology of the acquisitive company. It will become the great advantage with the combination of two technologies. (John, C., Valerie, G., & Linda, H., 2002)#p#分頁標題#e#
More customers: as we all know that the advertisement industry is an industry which is limited in an area. It may be strange beyond the area. After acquisition, it will large the customers than before. More and more people will know the brand. The more the customers are, the larger profits it will bring.
More competence: as we know, after acquisition, the company will be larger than before. What’s more, the company will acquire advanced technology and experienced employees in such industry. Most, maybe the company will be the only one company in the particular area. So it largely promotes the company’s competence in the industry.
To sum up, it should not make comments on an activity just by subject feeling. Some tools must be used to analyses the feasibility of an exact activity.
7.0 Conclusion 結論
I n conclusion, the strategic management accounting plays an important role in the development of the company. The strategic management accounting is different from the common accounting, for it not only provides the business information, but also the strategies for the long term development for the stable development. Therefore, every company should employ a strategic management accounting to improve its business.
8.0 Reference 參考文獻
Bai, C. & Wei, Y., 2010, a revenue management model for products with two capacity dimensions, European Journal of Operational Research, 205, pages 412-421.
Bhimani, A.1999, British management accountants: strategically oriented. J. Cost Manage.Spring, 25-31
Bromwich, M., 1996, strategic management accounting,in:Drury,C.(Ed.),Management Accounting Handbook. Butterworth-Heinemann, Oxford.
Harry, F. &Richard, P., 2005, a multiple account framework for cost-benefit analysis, Evaluation and Program Planning, 28, pages 23-32.
Jean, N., Silvia, P., Manon, C., 2005, about “strategy” and “strategies” in supply management, Journal of Purchasing &Supply Management,11,pages 129-140
John, C., Valerie, G., & Linda, H., 2002, conclusion-reaping the benefits of mergers and acquisitions, Reaping the Benefits of Mergers and Acquisitions, pages 241-255.
Kyle, B., 2007, Chapter 28 the Economic Analysis of Advertising, Handbook of Industrial Organization, volume 3, pages 1701-1844.
Nadine, H., Onesimo, H., 2000, limiting optimal discounted-cost control of a class of time-varying stochastic systems, Systems& Control Letters, volume 40, pages 37-42#p#分頁標題#e#
Robin, R., Susan, J., 2003, in search of strategic management accounting: theoretical and field study perspectives, Management Accounting Research, 14, pages 255-279.
Ronald, J., James, A., 2008, the role of accounting information in revenue management, Business Horizons, 51, pages 245-255.
Tobias, J., 2009, why is research on management accounting change not explicitly evolutionary? Taking the next step in the conceptualization of management accounting change, Management Accounting Research, volume 20, pages 146-162
William, C. & Julapa, J., 2003, an analysis of advisor choice, fees and effort in mergers and acquisitions, Review of Financial Economics, 12, pages 65-81.