A Changing Practise of Management Accounting
...adsheets. They prepared budgets, checked expense reports, produced inventory cost reports, and generated a variety of standardized financial statements. They were, in fact, the scorekeepers, the bean counters, the corporate cops. Fulfilling the traditional accountant role, they were the keepers of financial records, the historian of the organization.” (Siegel and Sorensen, 1999, p.3) Evidence suggests that the roles of management accounting changed dramatically during the last decade. The new management accountants tend to spend most of their time on consulting and analysing both financial and managerial issues within the organizations. “Technological advances have liberated them from the mechanical aspects of accounting.” (Siegel and Sorensen, 1999, p.3) Their jobs mainly deal with analysing and interpreting relevant information rather than preparing standardised reports. Management accountants, consequently, play leading roles in the organisation because of the valuable information they provide. “The role of management accountants has evolved from serving internal customers to being a business partner. A business partner is an equal member of the decision-making team. As a business partner, a management accountant has the authority and responsibility to tell an operating executive why particular types of information may or may not be relevant to the business decision at hand and is expected to suggest ways to improve the quality of the decisions.” (Siegel and Sorensen, 1999, p.4) The revolution in business environment which consists mainly of technological developments, intense competition in many industries, and changing market demographics has helped bring about this change. To survive in such the environment, the organisations have to continuously adapt themselves to the fast-changing environment. This is good news for customers since the overall business transformation has led to lower product or service prices and higher qualities. However, this new environment has caused difficulties for entire businesses and their employees, particularly management accountants because of their expanding roles in assisting “continuous innovation and the creation of the competitive tomorrow” (Hiromoto, 1991, p.1) besides analysing and interpreting relevant information. It has been said that management accountants face both opportunities and pressures. The dynamic changes in the environment have increased the need for innovativeness and it is the management accountant’s responsibility to satisfy that need. Therefore, their traditional roles in “routine accounting tasks”, such as transaction processing, have been expanding into “internal business consultants.” (Burns and Vaivio, 2001, p.391) With these rapidly expanding roles, management accountants face pressures from new and innovative management accounting systems, such as activity-based costing and management (ABC), target costing, strategic management accounting (SMA), and product life cycle costing and management (Lukka and Sheilds, 1999). Owing to new management accounting systems and techniques developed modern management accountants have to cope with unfamiliar programs used to analyse and interpret information. Moreover, they have to “be intricately involved in developing the specifications and testing the systems before they are deployed.” (Anon, 2004, p.29) However, changes in information technology have also provided management accountants with new opportunities. New information technologies on modern management accounting systems and techniques are likely to help them spend less time completing their tasks. For example, it seemed that traditional management accountants spent the first two weeks of each month preparing and justifying the results of the financial reports. However, use less time to complete that task if they use new techniques. As a result, management accountants are able to spend the rest of their time on other initiative or innovative roles as a “business planner, leader, communicator, and internal consultant,” (Anon, 2004, p.29) rather than “being a ‘bean counter’ focused on scorekeeping and external reporting” (Lukka and Sheilds, 1999, p.33) Take as an example the use of an activity-based costing system with SAP accounting software, the new management accounting technique. The activity-based costing creates cost information by tracking products and processes based on the underlying ‘drivers’, which are the cause of the costs (Bennett and James, 1997). According to the website (www.sap.com), ABB Industries AG, the leading company in power and automation technologies, has implemented activity-based costing system into the accounting process since 1997. It was generally agreed that the use of this system is a very demanding task. This project led to the change to a process-oriented corporate culture, which has to be made step-by-step with extra care. Management accountants of the company, then, faced pressures from the new unfamiliar and complex works. For example, they are required to give more specialised report based on the activities, instead of the cost centres. Although this form of costing, compared with the traditional cost system, seems to be tougher to master because it has much more detail, its cost numbers are likely to be more accurate (Needy and Roztocki, 1998). It enables management accountants to develop the requirements for allocating process costs to sales and distribution processing orders and project systems orders. Moreover, the use of SAP accounting programme has helped management accountants save time in processing detailed data and dealing with a lot of numbers so that they can spend more time on strategic issues, such as internal consulting, long-term and strategic planning, and performing financial and economic analysis. In addition, the development of this programme has also led to the improvement in the quality of data in respect to accuracy and timeliness. However, some people believe that traditional management accounting still has been performed and has not changed by itself. As Forsaith et al (1999) noted, Burns et al stated that the tasks conducted by management accountants had changed in the extent to which “the way management accounting information was used rather than change in management accounting systems and techniques per se” (p.9). Burns et al believed that there is a tendency that modern management accountants continue using the conservative management accounting methods; but the outcomes are analysed and interpreted in broader points of view. Whether the roles of management accountants or the ways they interpret the information have changed, the skills and the education levels required now tend to be much higher than in the past. Before the business revolution, it seemed that the person who had professional skills in computational, statistical, interpretative, and analytical and financial information system design could be a good management accountant. But these characteristics are not enough for today’s challenging competitive environments. Generally, management accountants now have to be more progressive and have a higher level of education. They should be able to adapt new technologies in management accounting to current forms of the manufacturing process. Moreover, a deep understanding of organizational structure, function, and process is required. Not only the management accountants’ financial knowledge should be developed, but also their personal skills and commercial capabilities. (Burns et al, 1999) They should be able to increase their personal and impersonal skills in tolerance of ambiguity, ...