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Accounting is a Strategic Business Tool

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Amitavamajumdar
Accounting is a Strategic Business Tool

Strategic Management Accounting


The strategic use of accounting at times of organizational change does not mean that organizations should adopt new accounting systems, like for example Activity Based Costing or Throughput Costing. Kaplan and Norton engaged in trenchant criticism of existing management accounting tools and techniques in the 1980s. They warned that these tools didn’t satisfy the needs of senior managers in the formulation and development of a strategy and in the creation and sustenance of competitive advantage (Drury, 2012).


Whilst cost and management accounting in the past tended to be based upon historical figures and inward-looking, a movement developed from the 1980s onward, advocating the use of accounting for strategic purposes, especially for the development, monitoring, and enhancement of business strategy (Lord, 1996). Kaplan and Norton (1992), engaged in extremely sharp criticism of existing cost and management accounting tools and techniques, stating that they had not changed for several decades and were clearly outdated and unable to meet the needs of contemporary business organizations. They called upon management accounting professionals to develop new, efficient and imaginative cost and management accounting tools and techniques. This movement resulted in the development of several strategic management accounting techniques, including target costing, lifecycle costing, strategic cost analysis, activity-based costing, activity-based management, and strategic performance measurement systems (Yalcin, 2012). These costing techniques were very different from historical costing and management accounting methods.read the full article here.


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