Management accounting Essay Example | Topics and Well Written Essays - 1500 words - 4

Management accounting - Essay Example Question 1 A modern firm is a learning firm which learns from history and plans for the future (Campbell and Huffington, 2008). This is where management via accounting comes in as a way to learn. Accounting processes gather and organises information which can then be used to identify trends in the market (Bhimani and Bromwich, 2009). Just like humans look at past trends and predict the future, organisations can look at these trends in the past and know what the future will be. The modern organisation has not only learnt how to predict the future, it has also learnt how to change the future and determine what the future will be. According to Chandler (1977), this ability of the organisation to not only know and predict the future, but also change the future and determine what will happen with a high precision is what makes the modern organisation so different from the enterprises of earlier days. Chandler looks at the modern organisation not only as a person, but as a society of peopl e. As he says, instead of the earlier model of organisation which used to be run as stand alone unitary organisation, the modern organisation is a network of sub divisions, each of which are sophisticated enough to be run on their own. In other words, these subdivisions within the organisation are like organisations on their own, only that they are run under a bigger umbrella organization. When an organisation is made of a network of organisations, sharing of information between these units in order to make sure that processes among these organisations are carried out efficiently becomes critical (Hoskin and Macve, 1990). This is because this leads to the following important factors; Increased efficiency Increased efficiency in an organisation is important as it does not only reduce costs but also makes it possible for the organisation to be able to access the market in an easier way (Freeman, 2010). For instance, if the marketing department in an organisation is able to share accur ate information about the market with the manufacturing department, it becomes easier for the manufacturing department to plan their manufacturing processes. This makes it possible for the manufacturing department in such an organisation to plan for labour, raw materials and storage facilities thus saving on costs and also being able to deliver the products to the market at the right time. Management via accounting only helps an organisation to achieve efficiencies if the organisation acts like a society of people which can learn from each other and make the society better. Modern organisation therefore use management via accounting like a mind that is always learning to be better and to perform better as times passes along. Cash Flow Predictability Organisations can easily predict and plan for cash flow processes. If the organisation can easily know when the demand will rise in the market, they are better prepared to know when to produce, when to hire more labour, when to do market ing and when to borrow money. This is only achieved through sharing of management information within the organisation and thus making it easy for the firm to know when it will receive the money and when to get external funding (Bardoliwalla, Buscemi and Broady, 2009). Furthermore, when an organisation has this kind of information, they are able to have