Pandiri Strategic Management
Accounting management plays a crucial function stipulated by managers in various departments in a financial institution. Management accounting has four essential functions to be expounded on from the article “Functions of Management Accounting,” including Decision-making, organizing, controlling, and planning.
- Planning
Planning includes formulation of long-term and short term actions and plans to gain a specific goal. Financial planning or budget outlines how the resource allocations are supposed to be utilized and acquired within a stipulated time interval. Accounting management is interwoven closely in planning due to its information provision in decision-making. In most cases, the process of budgeting can be developed on reports affiliated with accounting. This discipline aids managers in planning using in which provided reports on finance estimate the alternative impacts on an enterprise’s ability to achieve desired objectives. The proforma statements or forecasted reports on finance are included in budgeting, thus prepared by management accountants.
- Organizing
For an organization to attain business objectives and goals, it must establish an organizational system and assign people different responsibilities. The process of organization department partitioning is achieved by establishing branches, sections divisions, and departments within the central department. Therefore, clarity is paramount for each responsibility of authority and managers. The distinct departments are hierarchically interrelated in which the flow of instructions and information are communicated downwards and upwards; that is, lower management level and top-level management. However, management accounting enables mangers to organize reports and data in regulation and adjustment of operative activities amid conditional changes.
- Controlling
In controlling, the feedback is considered the information used to evaluate or correct the stages of implementing planning. Therefore, the process of correction, monitoring, and evaluation are incorporated in control, which is aimed at ensuring that business initiative’s plans and goals are met. Feedback information creates room for accountants managers to make decisions in letting activities and operations by re-planning and rearranging at midstream of the business. Moreover, due to management accounting, the production of controlling and performance reports is enhanced, highlighting variances in actual and expected performances. The reports production plays a vital of necessitating corrective actions towards control operations. Similarly, control and performance reports adhere to management principles by exception.
- Decision-Making
In any financial institution, the decision-making process is the pillar of organizational function. It is a process based on competing alternatives. The plans of any financial institution are based on decisions made by the top management. Therefore, decision-making process involves problem identification, objective specifications, and information gathering and action alternative courses. Besides, advertisements in decision-making involve the selection of one alternative deemed perfect for running the organization. Louderback III and Dominiak’s observation states that people’s experience, knowledge, and values cannot be included in quantitative analysis. Therefore, three scholars, Datar, Horngreen, and Foster, performed three vital roles in decision-making-attention directing, scorekeeping, and problem-solving. The problem solving is seen as comparative analysis when conducting decision making in an institution that involves choosing the best available alternatives among several substitutes. On the other hand, scorekeeping accumulates data and report reliable outcomes of an institution to all management levels. This is the only role asking how best action can be conducted. Finally, attention directing enables accounting managers to properly motivate their attention by asking which problem and opportunities should be evaluated.