Management Accountant

Management Accountant is an accountant who helps managers decide how to make profits or
to save the money by examining information relating to the costs of
running a business and analysing how much the profit different parts of the business are
making Management accountants have a great experience of the business planning processes

Role of management accountant today in a computerised world

Management accounting is a process of providing financial and non-financial information for
managers which they need to include information for planning and controlling either short- or
long-term decisions. Management accounting covers all levels of management from senior
managers to shop floor supervisors in addition to providing information for costing of goods,
services, and organizational units. Similarly, information about economic processes is created
by accounting systems and for that reason management accounting systems are designed to
produce required information such as budgeting, performance report, product costs, and
several other important statements. Impact of changes In this regard, business heads expect
the management accountant to provide the detailed analysis of financial performance; explain
to them the impact of changes in internal drivers or market forces; provide accurate forecast
of the monthly, quarterly and yearly performance; responding to their query with the speedy
and accuracy to facilitate decision making; participate in the strategy formulation, advise
them on what the course of action to take to achieve business targets; and challenge their
assumptions so that the business can have more realistic targets and plans. These expectations
are not the exhaustive. Mmanagement accountants are the expected to deliver beyond that.
The expected performance identified above may sometimes cause the expectation gap
because management accountant may feel that he or she is stretching beyond his or her job
description whereas the business heads think their business finance partner is not doing the
enough to support the business. The gap can be real or perceived, but what is required is to
address it so that the organisations can attain desired prosperity. The resolution to this issue
can be the reached through various ways depending on the nature and set up of the
organisation. I recommend the digitisation, which is the current and the future trend in
finance function, as one of the solution to reduce or eliminate the expectation gap. Examples
of the digital transformation already initiated and or implemented by some organisations
include automating most of operational and the repetitive manual processes (through robotics,
artificial intelligence and/or the centres of excellence). With enough time and the less

Shivin Varghese
Stratergic performance management
operational activities, the management accountant will become forward looking, apply the
data analytics and market intelligence in advising, shaping and the driving the business. This
way, digitisation will surely enable the management accountants to be more helpful by
moving away it from traditional commentaries that in real sense explains what business heads
already know, and step up the analysis to the level that elaborate what the factors business
heads need to consider in their decisions going forward, and the point out implication of those
decisions to the business well in advance. Investment For the digitisation to be successful, it
is important to appreciate that a lot of transformation and investment needs to be done for the
individuals and respective organisations at large. Individuals require a mindset shift,
readiness to learn the new things and embrace new ways of working to deliver at the higher
levels while organisations’ management must have visions, plans and provide the leadership
to oversee implementation of digital invention and innovations. As 2018 unfolds, for the
management accountants to remain relevant, they should take bold decisions to completely
transform their career in the line with inevitable disrupting innovations and inventions
brought by digitisation. And accountants cannot be replaced in these categories

Stewardship Accounting:
Management accountant designs the frame-work of cost and financial accounts and prepares
reports for routine financial and operational decision-making.

Long term and Short Term Planning:

Management accountant plays an important role in forecasting future business and economic
events for making future plans that is long term plans, strategic management accounting,
formulating corporate strategy, market study etc

Maintaining Optimum Capital Structure:

Management accountant has a major role to play in raising of funds and their application. He
has to decide about maintaining a proper mix between debt and equity. Raising of funds
through debt is cheaper because of tax benefits. However, it is risky as because interest on
debt has to be paid whether the firm earns adequate profits or not. Management accountant
has, therefore, to maintain an optimum capital structure and give due consideration to various
cost of capital theories, leverage and possibility of trading on equity.

Control:

Shivin Varghese
Stratergic performance management
The management accountant analyses accounts and prepares reports e.g., standard costs,
budgets, variance analysis and interpretation, cash and fund flow analysis, management of
liquidity, performance evaluation and responsibility accounting etc. for control.

Decision Making:
Management accountant provides necessary information to management in taking short-term
decision e.g., optimum product mix, make-or-buy, lease or buy, pricing of product,
discontinuing a product etc. and long-term decisions e.g., capital budgeting, investment
appraisal, project financing etc. However, the job of management accountant is limited to
provision of required information in a comprehensive as well as reliable form to the
management for decision-making purposes. But the actual decision-making responsibility lies
with the management. In other words, neither the management accountant nor the internal
accounting reports can make the decisions for the management.

Future challenges of management accountants

Based on a study conducted by the Suleiman et.al (2008), in Malaysia, there were two
categories to the trigger changes in management accounting namely, Environmental factors
and the Organizational factors. Environmental factors consist of the impact of the market
competition and the emphasize of new non-financial performance indicators (Suleiman et.al,
2008). This leads to the changes in the customers behaviour due to globalization and there
was a link between financial accounting requirements and the regulations with management
accounting practices. Organizational factors were related to the changes in organizational
ownership such as acquisition and merger, organizational restructuring such as
decentralization, hierarchical structure, downsizing and the outsourcing and the
enhancement of corporate governance (Suleiman et.al, 2008). Management accountant
profession should adapt to the recent changes in order to be relevant and competitive in the
near future. Generally, there are several factors that may influence the transformation to the
current state of the management accounting profession. Prior study by the (Talhaet.al, 2010),
factors that caused the changes include:

x Environment of Business – Globalization, Customer focus and Rapid changes in

technology

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Stratergic performance management
x Responses by business – Flattering hierarchical structures, World class manufacturing,
Cell type of layout,
Business to Business, Business to the Customers, Reduce the inventory costs and Value Chain
x Management Accounting tools - Benchmarking, Activity Based Costing, Enterprise
resource planning, Balance
Scorecard,Target the Costing, Supply chain management and Just in Time inventory.
Organizational Factors
According to the Laities (2006), organizational factors can be described as the
organization, strategy, products, perceived uncertainty and competition. This is one
component of the internal operations as the organizational factors may influence directly to
the day-to-day operations. Organizational factors emphasis on the core competencies,
customer and supplier relationships, downsizing, outsourcing, flatter organizational
structures and the team work (Talha et. al, 2010) Survey done by the Yazd far and
Tsamenyi (2005), discovered that ‘information technology’ and ‘organizational
restructuring’ due to the‘take-over’ and ‘merger’ events as the top two most important
change drivers between the independent and dependent companies in United Kingdom.
Organizations are influenced by a multiplicity of the interests whereby some interests are
located primarily within the organization; some are located in the environment within which
organizations operate and some of the straddle in between organizations and the
environments (Sulaiman and Ramli, 2006). Organizational factors relate to the internal
factors within the organizations, for example, new management style. If there is new
management in the place, the organizational structure and the information flow in an
organization will also change (Cloud, 2000). There will also change in the work patterns and
attitudes among the organization’s staff. Management accountants have to liaise with both
the operation and top level. They are expected to act as the middle person to ensure both
parties get relevant and timely information (Kariyawasam, 2009). Product quality, changing
the work pattern and new management style or organizational restructuring have been more
observed as the organizational factors that leads to the challenges faced by the management
accountants (Sulaiman et.al, 2008). Other factors related to the core competencies, customer
oriented activities, size and type, form of ownership, autonomy, profitability or the
authority-driven, calls for broader scope accountability and financial position of 469 zairul
Nurshazana Zainuddin and Suzana Suleiman Procedia Economics and the finance 37( 2016
)466 – 470 organizations also contribute to challenges faced by the management accounting
profession in the 21st century (Talhaet.al, 2010) As most the organizations nowadays are

Shivin Varghese
Stratergic performance management
having flexible organizational structure with managers and accountants are working cross-
functionally, demand for the information by stakeholder has intensified. They demand
information for accountability of the transaction. The impact of the global era such on
globalization of the markets, advance in the information and production technology, core
competency and the customer and supplier relationship lead to the
challenges among the management accountants to be able to work cross-functionally (Ahid
and Augustine, 2012).
Environmental Factors
Environmental factors are also known as the external factors. For example, rapid changes in
business environment such as the globalization of markets, intensifying competition and
advances in information and the production technologies are among the major factors
contributing to the evolutions in the management accounting practices in recent years
(Allot, 2000). Changes in the business environment often lead to the changes in how
organizations do their business, operate and managed (Lobo et.al, 2004). This may
indirectly influence the management accounting profession, since the management
accountants play a vital role in providing information to facilitate and the support the
effectiveness of business operations and management (Atkinson et.al, 1997). Talha et.al
(2010) in their study highlighted that the emergence of the latest information technology and
manufacturing technologies as well as the environment trends also contribute to the
changing in the management accounting. Management accounting must take lead in
providing companies with the customer oriented information (Cloud, 2000). This is due to
the fact that management accounting practices in the organizations covers a broader scope
and it has also become an integral part of the management process (Suleiman and Ramli,
2006). Due to the globalization, firms not only compete locally but are also exposed to the
international market. It is the important to ensure an attractive price, good quality product,
speed of the delivery, and customer service is meeting the customers’ expectation. Therefore,
managers need the measures on all these factors. This is when the management accountants,
as the information provider of the organization should have play their role. The
establishment of global markets, emphasis on the customer relationships, improved product
quality and the enhancement of production technologies all served to increase the level of
competition between the organizations (Kariyawasam,2009). The availability of the user-
friendly financial and analytical software and the technological tools such as e-mail, the
Internet, Intranet as well as the intense business competition lead to challenges faced by
management accountant nowadays (Lobo et.al, 2004).

Shivin Varghese
Stratergic performance management
Artificial intelligence

Artificial intelligence has become a buzz-phrase of sorts in recent years, and while it’s
become hard to separate the hype from its practical potential, AI is rooted in a very realistic
notion. Put simply AI is one of the most advanced concepts in intelligent systems and
decision-making in years, and the initial wave of academic research and early engagements
with consumer electronics have evolved into real practical methods and technologies that are
positioned to change the way humans make decisions and eliminate the risk of human error
altogether. AI’s spike in popularity and inclusion in hype machines for tech and electronics
does not mean it’s a brand-new idea. It’s been an aspiration and goal of computer science
pioneers since the early 1950s, and has evolved incredibly in the 21st century. In recent years,
AI has integrated itself with other aspects of our lives as the power behind the chatbot
revolution, smart home networks and applications, and assistive voice-based technologies
like Alexa and SiriIn the days ahead, AI is positioned to deliver an immense opportunity to
accountants, and promises to bring a new standard of efficiency to their own specific set of
decisions and tasks. In the grander scheme of accounting advancements, AI could radically
change the profession in its entirety.

The opportunity in machine learning

Machine learning is the application of statistical models and algorithms that actually mirror
cognitive strengths like pattern recognition and contextual, specific learning. The most
powerful capabilities of machine learning exist in its ability to process large datasets, its
adaptability in learning from complex and constantly changing patterns, and its unwavering
consistency. The fact that artificial intelligence never gets tired, combined with its complete
lack of bias and smaller margin for error, makes it a technology that’s infinitely scalable in
many industries. In accounting specifically, ML’s support of decision-making turns into
offering accounting professionals impeccably referential data-driven insights and a
combination of financial and non-financial analysis. AI also equips accountants with the tools
to solve current and contemporary issues they face, such as the delivery of reliable, cleaner
and cheaper data, in addition to the aforementioned capability to let accounting professionals
allocate their time to problem-solving, advising, strategy developing, and leading, as opposed
to the mundane tasks of procuring and organizing data.

Shivin Varghese
Stratergic performance management
Problem solving

The opportunity embedded in the current digital transformation of finance and accounting is
allowing people and AI to work in unison and rely on each other to nurture and contribute in
the areas where their strengths exist. The mind-numbing, monotonous minutiae of number
crunching in accounting is taken care of, and all that’s left is for accounting professionals to
tackle the tasks their cognitive engines are geared for. Machine learning has proven that
organizing and parsing data is no longer a task for the human brain. Machines have finally
proven they can do it better, and if we let them spot the patterns and provide us with insights
on how to utilize them effectively, we’ll be better for it.

Reference
https://dictionary.cambridge.org
https://www.theunitutor.com
https://www.sciencedirect.com
http://www.yourarticlelibrary.com

Shivin Varghese
Stratergic performance management