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Strategic Management Accounting Analytical Essay


Introduction

Strategic management is founded on strategic fundamentals. Management accounting provides a theoretical framework and a language of discourse for three levels of approaches including pre-enactment, declaration and implementation.

Performance indicators are linked to the benchmarking practices and are often identified using specific piloting procedures in order to ensure best higher education programs that meet the needs of the public and responds appropriately to the relevant priorities.

The indicators provide data and information regarding the cost of operating and providing public services.

Much attention is increasingly being focused on defining what is expected of higher education institutions and the students as well as the best mechanisms that can be used to achieve the expectations.

A range of potential variables is needed to effectively evaluate the quality of an educational institution or the program it uses to offer public services.

The performance indicators refer to quantitative data that give a measure of some characteristics of the organization’s performance (Thomas 2005, p. 75).

This paper begins by analyzing some key measures of dealing with performance indication, especially in the modern universities.

It then critically evaluates the methods of dealing with product and service costing and budgeting in the higher learning institutions and then explains a number of alternative strategies that may be more useful in the perspective of operational and strategic administration in the modern universities such as the University of Newland in the Midlands UK.

Dealing with performance indicators

According to Baldoni & Chockler (2012, p. 209), the term Key performance indicator is an industry terminology that is used to describe some element used to quantify success or organizational performance.

Indicators have been used for a long time to define the economic state and labor market. However, the influences of the indicators on other aspects of the society have become a significant phenomenon (Baldoni & Chockler 2012, p. 209).

In education, the indicators are commonly used by the organizations at various levels to assess the accomplishments or the success of specific events or activities in which the organizations are involved.

In some cases, success is described in terms of the progress toward some particular objectives. However, most organizations consider success as the repeated accomplishments of some degree of operational objective.

Performance indicators have been largely integrated into the administration of higher education in various levels. Many educational organizations now understand better the importance of dealing with key performance indicators.

The advancements of the public indicators as a mechanism of public policy have gradually emerged as the interaction between the technical developments and the political significance and missions.

One significant thing about indicators is that they have to be differentially weighted depending on the discipline in which they are involved.

Cave (1997, p. 2) explains that different applications of performance indicators (PIs) can be described using four variables which include technical progress, the influence of stakeholders, the implementation of policies that PIs can advance and the political structures that allow and promote the use of the PIs (Planty, Planty & Carlson 2010, p. 23).

Corporate performance indicators

These indicators measure what is important to the management to attain the corporate dream. The indicators often need the whole organization to direct the efforts towards attaining the corporate vision.

The indicators vary from organization to organization depending on the prevailing market situation, company life-cycle, and the business financial position. Even different portions of the corporation may be evaluated using different indicators.

Maintaining the university’s high performance and research culture depends on the manner in which the university respects diversity in its problem formulation and approaches.

The research environment presented by the modern university must be adequate to support doctoral researchers to reimburse for the shortage of the local researcher.

Universities receive specific government financing that is more uneven and accompanied by the fast transforming and increasing firm output limitations in which there is an affinity to lay excessive emphasis on the short- term outcomes.

These forces activate flexible creativeness within the research community (Planty, Planty & Carlson 2010, p. 15).

National and global indicator efforts

At the national level, information on the educational conditions is gathered over time. A detailed collection of the historical statistical data and indicators is presented in the form of a report.

The reports illustrate the progression of what started as a small training center to what it has become over time. Historical statistics act as important resources to the educators and school administrators as well as policymakers.

The reported information derived from administrative accounts and collected through large scale regimented examinations often address matters regarding schooling, academic performance, determination and achievement of the appropriate indicators about schooling environment, status, facility and finances (Planty, Planty & Carlson 2010, p. 10).

Indicators of valuable teaching

The aim of teaching surveys is to establish the problems that confront the teaching process in the higher learning institutions and to enable appropriate solutions to be formulated in time in order to attain complete and high quality teaching.

Reliability analysis is an essential instrument that is used to ensure plausible and effective teaching evaluation. Reliability describes the regularity, solidity and steadfastness of the evaluation results, which is illustrated in the pattern of the internal consistency.

The greater the reliability coefficients, the more dependable, steady and satisfying the results are likely to be. According to Lin & Huang (2011, p. 46), lesser reliability coefficients lead to less reliable, less steady and less satisfying evaluation outcomes.

Reliability analysis as a mechanism for dealing with performance indication and it acts as a significant guide to the teaching process in modern universities and many other production and service organizations.

It helps improve the process and quality of teaching, evaluation and attainment of more convincing results through several years of educational activities (Lin & Huang 2011, p. 47).

Educational trend indicators

There are considerable distinctions between the part-time and full-time courses in the universities and between the postgraduate and undergraduate programs in various subjects.

The educational progress and achievements are the result of growing investment in education by the government and individuals.

With the increase in the number of individuals enrolling for courses, the university and the individuals obtain returns for their investments (Planty, Planty & Carlson 2010, p. 25).

Higher education levels are associated with the higher labor market participation and organizational employment rates.

The instruments used to measure educational performance in the present times in the modern universities are how the students perform in the regional examinations at the end of the university and college semesters.

One significant challenge in institution building practice in higher education is the need to address the impacts of educational trend (Gregg & Wadsworth 2011, p. 10).

Institutional performance indicators

The initial step is to evaluate progress toward achieving the objectives established in the university’s strategic plan. The objectives differ from institution to institution. However, most plans have several similar elements that are easy to assess.

The most common of these is to raise the total research expenditures hence increasing the various national rankings above peers. The definitive target is to look like standard institutions.

The institutional analysis data should be articulated on a per faculty constituent basis whenever that is necessary. For example, the university may have only a few active researchers but happen to receive large grants and produce high impact articles.

A superficial evaluation may not identify an underperforming faculty.

For this reason, the universities that direct resources on a few rewarding programs to optimize the spending number may achieve an institutional objective of increased research expenses but the strategy may disprove the actual status of the general university’s scholarly performance.

The average level of research financing generated per faculty at a high research action acquires two or three times much research financing compared to the high research activity colleagues (Planty, Planty & Carlson 2010, p. 12).

Gender gap indicators

Determining the results regarding the academic workforce involves acquiring information about people’s enthusiasm and contentment. All the aspects of academic careers, structures and cultures directly relate to the people’s chances and positions within the organization.

The people’s results provide an essential indicator for the quality of the organizational services and products.

European universities suffer from the large gap between the need and provision of human resources and therefore raising the prettiness of the scientific careers and keeping individuals contented are important managerial duties in all the academic institutions.

The other significant aspect of the people’s outcomes regards the working environment. Among the employees in academic institutes there is a rising need for flexible work-life arrangements which currently appear odd with the prevailing work mind-sets in many of the modern universities.

The work attitude is still wholly based on the notion of the full-time work patterns. Part-time working is not a common idea.

Universities that give the working personnel more freedom to decide their own choice between work and personal life will often find this as a winning tool in the efforts to increase the people’s contentment and to improve the institutional attractiveness.

The labor markets increasingly comprise of employees including men and women who desire part-time appointments of at least three days in a week rather than full-time employment (Hansen, Mowen & Guan 2007, p. 6).

Indicators of student characteristics and educational programs

These indicators provide information about characteristics of student enrollment and the enrollment patterns for different student categories which vary across the university.

For example, the indicators on participation in education and the learning programs explain whether the university is a preferred choice for students compared to other learning institutions.

Changes in enrollment patterns reflect the changes in attendance requirements, the value of the cost of learning and the time spent on the courses.

The modern universities must continue to look for creative ways to capture the concerns and the imaginations of the capable students who have little correlation to the courses.

A number of students have little or no idea that educational practices contain excitements of continuous innovations as well as the enthrallment of the technological functions (Hansen, Mowen & Guan 2007, p. 7).

Dealing with product and service costing

The necessities for fulfilling the initial objective depends on the nature of the item whose cost is to be determined and the reason why the management wants to define the cost.

For instance, product costs determined in accordance with the generally accepted accounting principles are required to value the inventories for the balance sheet and to determine the cost of products in the income statements.

The product costs include the expenditure for the materials, overheads and labor. Managers may want to determine all the costs linked to the products and services for the sake of deliberate and premeditated productivity.

Additional cost information may, therefore, be necessary concerning product plans, developments, distribution and marketing.

Product and service cost information also helps in planning and management. It helps managers determine the best action to be taken, reasons for taking the actions, and the ways of executing the actions (Hansen, Mowen & Guan 2007, p. 5).

Direct costs, indirect costs and overheads

When considering the cost of products and services, some costs are identified with the commodities as distinct from others. For example, a course on introduction to French uses an interactive disc to teach elementary grammar.

The actual disc is particularly constructed to be used in that particular course. Therefore the cost of making the appropriate design, manufacturing and distributing the disc is directly linked to the course. Such kind of a cost is described as a direct cost.

On the other hand, indirect cost is the cost of running an organization rather than making or providing products and services (Rumble 1997, p. 22)

Fixed costs variable costs and semi-variable costs

Institutions providing products and services often react to demand. The increase or reduction in the volume of services or goods supplied leads to the either a rise or a fall in the total cost of products and services.

Some costs are, however, unaffected by these adjustments in the volume of supplies. For instance, the university has only one vice-chancellor; those adjustments in the amount of activity do not affect the number of vice-chancellors the university has.

The costs that are not affected by the adjustments in the activity levels are described as fixed costs (Hansen, Mowen & Guan 2007, p. 22).

Dealing with budgeting

According to Butz (2011, p. 2), budgeting is a key area in management accounting. Researchers largely centralize their studies on the design of budget schemes and the process of constructing the organizational budgets. Budgeting helps in planning and control within the organization.

They serve as tools for predicting productivity, allocating resources or communicating particular knowledge regarding one section of the organization (Butz 2011, p. 2).

Financial administration in the modern universities is an extensive and difficult task that includes planning, investments and coordination among other financial activities.

The university budgeting system should be supported by various budgeting principles and should be steadfast and rational.

This implies that the underlying predictions should be based on realistic or slightly distrustful assumptions; the budgets should be organized on multiyear and multi-within-year patterns to maintain the practicality and stability of the short-term and long-term decisions, communications with all essentialities should be complete, precise and credible and should maneuver between scenarios.

The system should be favorable to the various academic divisions that contribute to the overall mission and financial well being of the university. This implies that there is a strong link between the student enrollment and the budget agreements and approvals.

It also implies prevention of ineffectiveness by means of the budgeting. When the budget is founded on realistic suppositions and when it incorporates an efficient system of regulations and rewards, it should be possible to support the distributed financial authority of the academic departments.

Deans of department heads should be in a position to approximate on their own the advantage that will mount up from the structural and curricular modifications.

Within their area of accountability, they should be in a position to tap the benefits of reallocating the expenses from one budget category to another (Butz 2011, p. 2).

Incremental budgeting

Incremental budgeting process involves placing of annual appropriations with respect to the previous year’s budget as the base from which small modifications including additions or subtractions are made to reflect the rate of inflation.

Incremental budgeting helps reduce risks and to minimize faults; hence, it discards excessive alternatives and untested techniques.

As opposed to other budgeting methods such as zero-budgeting, incremental budgeting supports gradual adoption of adjustments over comprehensive program-by-program analysis. The increments can either be negative or positive.

It is considered positive by the insertion of new programs or increases in the existing programs and negative by the decrease in other programs (Elliot & Ali 2007, p. 254).

Traditionally, nations established higher education based on prevailing costs, student enrollments and inflation associated issues. Incremental budgeting has been the most preferred for higher education and government organizations.

The process involves annual budgeting at the previous year allotment and additions or subtractions are implemented with regard to a few established decision regulations or budget strategies.

The traditional budgeting is done on a cash basis in which revenue is acknowledged and verified when cash is obtained and deposited and expenses are recorded in the accounting period that they are paid.

The budgeting format is conducted by departmental line items and it incorporates costs to continue with the items and at times funds new plans.

The budgeting process is more manageable because it basically focuses on additional funding or any decrease in financial support (Dove & Capella University 2007, p. 33).

A major criticism of the incremental budgeting process is that most of the existing budgets are never reviewed. It has also been largely criticized for lack of reasonableness, being vulnerable to political impulse and that it frequently perpetuates past inequities.

The budget process functions on the grounds that the business will continue in the same manner and that the budgets do not expire. Therefore it gives minimal room for new ideas. It is also known to apply no incentives for cost reduction from year to year.

The traditional budgeting centralizes on inputs rather than outputs, enumerating expenses by standard classifications and assumes efficient and justified spending. It also ensures safekeeping of funds and control rather than effectiveness.

Its major weakness is that it describes a little description of the institutional spending. The expenses are linked to departmental goals or outcomes that are accomplished and there is no suggestion of how funds are utilized within the programs or academic units (Dove & Capella University 2007, p. 33).

Zero base budgeting

A zero-based budget works from the bottom up. It begins with individual revenue, expenditure, asset and owner’s equity report and examines the particular report including postage expenditure and then attempts to employ logic to formulate a proper postage spending budget amount (Drury 2009, p. 100).

The budgeting person calculates the amount by taking one thousand letters and multiplies with some postage cost value.

One notable advantage of the zero-based budgeting is that it helps individuals benefit from or use some budgeted amount responsible for the budgeted funds. This budgeting is however criticized on the grounds that it is easy to make calculation errors (Nelson 2008, p. 315).

Conclusion

For several years, strategic management accounting has been treated as a potential area of development that would improve the future role of management accounting in organizations.

Drury (2007, p. 570) explains that In spite of the publicity that the strategic management accounting has attained, there is still no complete theoretical framework that accurately defines strategic management accounting.

The strategic management accounting systems are designed to support the general organizational business strategy using powerful tools such as information technology to formulate more refined costs of products and services.

Performance indicators are obtained in many multifaceted systems which deliver services such as education.

The indicators are not without faults or difficulties of characterization but they are very essential pointers to the operations and functions of a system and analyzing them is one aspect of ensuring quality control (Drury 2007, p. 570).

The product and service costing methods are useful in estimating product and service prices. Managers and organizational leaders, however, need to understand how the total costs are linked to specific objects on a particular unit level. Costing systems help in the estimation of these unit costs.

In order to achieve its institutional objectives and to ensure that the external reviewers are thoroughly aware of what the university is trying to achieve, the university must be willing to undertake the major efforts including the establishment of strong goal-linked budgetary processes that ensure maximum efficiencies and improved profitability (Hoenack 1990, p. 74).

References

Baldoni, R., & Chockler, G. 2012. Collaborative financial infrastructure protection: tools, abstractions, and middleware. Springer, New York. pp. 209-300.

Butz, C. 2011. Role and effects of budgeting in managerial practice. GRIN Verlag. Munich. pp.20-29.

Cave, M. 1997. The use of performance indicators in higher education: the challenge of the quality movement (3rd ed.). Jessica Kingsley Publishers. London. pp.1-20.

Dove, T.w., & Capella University.2007. Analysis of funding inequities in texas higher education. ProQuest, Ypsilanti. pp. 100-125.

Drury, C.2007. Management and cost accounting (7th ed.). Cengage Learning EMEA,Boston. pp.570-620.

Drury,C. D. 2009. Why teams don’t work, Harvard business review,. EBSCO, Massachusetts. 87(5), pp.98-105.

Elliot, J.M., & Ali, S.R. 2007. The state and local government political dictionaryClio dictionaries in political science. Wildside Press LLC, Pennsylvania. pp. 254-310.

Gregg, P., & Wadsworth, J. 2011. The labor market in winter: the state of working Britain. Oxford University Press, New York. pp.2-100.

Hansen, D.R., Mowen, M.M., & Guan, L.2007. Cost Management: Accounting & Control Available Titles CengageNOW Series (6th ed.). Cengage Learning, Boston. pp.5-25.

Hoenack, S.A. 1990. The economics of American universities: management, operations, and fiscal environment. SUNY Press, New York. pp.74-120..

Lin, S., & Huang, X. 2011. Advances in computer science, environment, ecoinformatics, and education. Springer, New York. pp.46-120.

Nelson, S.L. QuickBooks 2008 all-in-one desk reference for dummies for dummies (4th ed.). John Wiley & Sons. New York. pp.315-400.

Planty, M., Planty, M., & Carlson, D. 2010. Understanding education indicators: a practical primer for research and policy. Teachers College Press, New York. pp.10-30.

Rumble,G.1997. The costs and economics of open and distance learning open and distance learning series. Routledge, London. pp.22-59.

Thomas, L. 2005. Widening Participation in Post-Compulsory Education Continuum Collection. Continuum International Publishing Group, New York. pp.70-100.

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