Business Environment

Question:

Explain business environment upgrading the quality of management.

Answer:

Introduction

In this current business environment upgrading the quality of management has become the topmost priority. As a result of the hasty altering complexity in the business processes and intense competition from foreign competitors, companies now require introducing quick alteration to their strategies. This leads to the outcome of the rise in the demands, which further leads to the necessity of top notch accounting system in the management which is within the expense limit and is capable of aiding the management to prepare superior decisions. The principal objective of a managerial accounting is that it provides the necessary information to the management required for them to make better decisions relating to the company’s internal affairs (Appio et al. 2013). These decisions may regard to the service or products the company is offering or looking forward to introduce, the expected price for the service or product, the type of equipment the company is going to need, decisions on promotions etc. are devised by the management based on the accounting information the management prepares. 

The pre-requisite for the accounting information that the management uses is the managerial cost-benefit, which explains that the gains from the information must exceed the expenditure incurred in acquiring that particular information. In most scenarios, there are no pre-determined standards or principles that govern decision making, accounting processes like GAAP for the management to make use of for their accounting processes. This sort of accounting is actually an instrument employed by the management which ensures an increase in the profits of the business. In order to make the most out of this accounting system the management is required to make observation of the operations on a daily basis, in order to ensure the even functioning of businesses (Djuwito, 2010). Furthermore, it requires the assimilation of each and every data in due time. Managerial accounting does not only act as an instrument that can be used to identify the scope of an individual’s economic authenticity, but also aids in revealing the ways through which the it can be revealed by upgrading the accounts and records of the concern. In a nutshell managerial accounting can be referred as an efficient system that provides the management with the required information and aids the management in preparing better plans for controlling and directing the operations. This in turn helps the management to come up with better decisions for the company.

Problem Statement

The decision making process in any kind of business can be quite the task. As most of the activities including the entire nature of the business rests upon appropriate decisions carried out by the management thus, making the right decision is a very crucial activity of the management. The providence of the entire corporate structure like services and products, internal and external operations, supply lines, business goodwill, and market value of the company rests upon the decisions that the management makes (Frishammar, 2003). Therefore, the lack of accurate accounting system or operation in the enterprise might result in drastically deconstructing the entire enterprise. Furthermore, without proper accounting system the enterprise might observe a drop in the share market, untimely recession, moribund wages, and a collapse in the sales. If this kind of problem persists then the management should opt for better accounting systems, or it might result to the shutting down of the entire business.

Smaller business concerns suffer the most due to the lack of good accounting systems, which results in series of heavy losses right at the beginning and reduces the profit turnover drastically. In due course of time the entire business operations become liability for the small businesses and further results in the premature end. Furthermore, smaller enterprises believe managerial accounting to be an unnecessary expenditure at this early phase of their business and thus, do not incorporate managerial accounting or do not regard managerial accounting to be one of the day to day management activities. In an analysis it has been observed that small enterprises disproportionately suffered massive downturns in their human resources as a result of poor decision making and lack of proper managerial accounting system (Garrison et al. 2008). This occurred as a consequence of these small enterprises giving little or no regard to managerial accounting which in turn did not provide them with the approximates that they could have used for making better decisions, the companies incurred huge losses and as a consequence had to cut down their working force to slower the downgrading process of the entire infrastructure.

In such sort of scenarios the smaller enterprises delve into the less important factors rather than focusing on incorporating managerial accounting systems. This does not help them in any manner, in fact the lack of managerial accounting system does not even provide the smaller enterprises with the exact information on the concerning issue. Therefore, in order to save the business process from its imminent downfall it is required for the managers to incorporate an accounting system which would collect and assimilate vital information on the day to day business activities and further provide them with the precise idea on the decisions that would benefit the business (Hanifi & Taleei, 2015).

Research Objectives/Questions

The purpose of this assignment in particular is to look into the importance of accounting information used by managers for their decision making process and the effect accounting information has on making better decisions and overall performance of the business operations. To be specific, this research aims to seek the following questions:

RQ1: How does Managerial accounting help businesses?

RQ2: What is the impact managerial accounting in the present entrepreneurial environment?

RQ3: How does the decision making gets affected by Managerial accounting information?

RQ4: How does managerial accounting and decision making process co-relate?

The answers of these above mentioned questions will help in understanding the crucial role that accounting has on the management (Jago & Scamell, 2012). To seek out these answers is the prime goal of this research project and help develop a better understanding the ways that managerial accounting plays a vital role in the decision making processes of the management of an organization.

Justification of the Project

Information in this particular context relates to the data retrieved or processed from the day to day operations of the company. The entire functioning or the operations of a company i.e. the way the company carries its day to day operations bears the data or the information required for the accounting process. It is from the day to day operations the primary data has to be taken from. This data then needs to be processed in the accounting tool in order to assess the outcome the company might expect (Ježovita, 2015). The outcome will indicate the overall income and expenditure the company will be witnessing for a certain stipulated time. This will provide the management with a clear perspective on their decision making processes. The procedure is simple; 

1. The company has to incorporate managerial accounting system in its infrastructure.

2. The accounting system will analyze the company operations on a daily basis, and will provide an overview on the financial status of the company (Jiambalvo, 2007).

3. After reviewing the financial status the management will be able to make better decisions as regards to the changes that they can implement and also assess the results that will come out of the changes.

Therefore, the information accounting will be providing to the management should maintain the future financial prospects of the company as well. Crucial information on forecasting, extrapolation, and estimating the financial consequences will provide an in-depth understanding the course the operations of the company are leading to.

Keeping these in mind the benefits of this research proposal are stated as under:

I. It will help the management understand the way each of the operations are influencing the financial structure of the company. Furthermore, it will help the management come to better decisions on ways they could strengthen the financial position of the company.

II. This study on managerial accounting will also help the management expand their conception on the shape that they are going to give to the overall structure of the company (Kochetova-Kozloski & Salterio, n.d.).

III. Small business management can make use of the analysis and consider implementing managerial accounting in their businesses in order to prevent the imminent hassles they usually face at the start of their businesses. However, there is no assurance involved in this study; the purpose of this study is to point the benefits that small businesses could reap from incorporating an accounting system in their business operations. The concerned businesses will be liable for the actions they take.

IV. The results that will come out of this research will be of great help to the other researchers, policy makers, and small and medium entrepreneurs (Lale & Andjelkovic, n.d.).

V. This research proposal is going to orient on the topic that will involve the benefits that large enterprises draw from an efficient accounting system and the assistance they get from the information that the accounting system provides them with for making better decisions. Therefore, small and medium enterprises will largely benefit from this study in gathering an understanding the crucial role managerial accounting plays on the company’s growth and the way growth, decision making process and accounting information co-relate.

Expected research output/outcome

The outcome of this research will provide in particular an analytical framework for the small and medium enterprises on the factors that involve in the decision making process and the contribution of the managerial accounting to these factors. This will eventually aid in the predicament these sort of businesses usually suffer as a result of inadequate accounting system and lack of appropriate financial structure. This in turn will aid these small and medium enterprises get an overall concept of the financial stage they are facing and the strategic decision they can make on their businesses based on the proper financial report from the accounting system (Lewis, 2012). Although the responsiveness of the infrastructure of small and medium businesses will greatly vary still it will provide the businesses with an apprehension on the vital role of managerial accounting system and the important parts of management they have overlooked so far. This will the small and medium businesses adapt and perform based on the information they gather from the accounting system and develop a comprehensive knowledge based on their expenditures on employees, labor, manufacturing etc., and external influences and the available resources. This in turn shall be helpful for the small and medium businesses at the time they opt implement new decisions in their day to day operations (Lin et al. 2014). The outcome of this research shall be taken into context as simply an academic work that has focused on identifying the need for resolving the predicament identified for this research proposal.

Conceptual framework and research hypothesis

When it comes manage small or medium businesses the entrepreneurs face numerous challenges regarding their day to day decision making. The data driven information provided by managerial accounting system helps in acknowledging the correct decisions that the management should adopt and implement for the progress of the business. Managerial accounting information is a very powerful tool that will help the small and medium business owners in assessing the information generated by the accounting system and come up with the better decisions which could result in turning the entire prospect of the business (Managing Information, 2013).

Relevant Cost Analysis: managerial accounting system will provide the management with relevant cost analysis on the day to day operations. The management will be able to analyze and determine the objects that should be sold in the market in order to gain more profits. Furthermore, it will also provide vital information on the way that particular object should be commercialized in order to meet the costs involved in the entire operation. For instance, most of the small and medium business entrepreneurs are uncertain on the marketing endeavors that they should be focusing on (Noreen et al. 2007). In order to better assess this particular decision, the accounting manager will be providing the management with the information on the cost analysis that the accounting manager has prepared. Such analysis will incorporate:

Advertising options available at the stipulated budget.

Advertising options for each of the company’s products or services.

Differences in each of the advertisement alternatives, regarding costs and the outcome of each advertisement activity.

The exact figure of costs that the company can actually overlook (Salari et al. 2013).

This relevant cost analysis will also aid the small and medium business enterprises on determining or deciding whether they should discontinue certain operations in order to cope with 

Costing techniques based activities

Once the company has decided the type of product it is going commercialize, the company now has to decide upon the aspect that will concern on the targeted market. Here, the company will have to decide on whether they are going commercialize their products on a global market or they will be targeting a specific market. By making use of costing techniques based on the activities the company will be able to decide upon the service and production line (Sciulli, 2014). This information will also provide apprehension on the cost that the company will incur on the account of its customers, based on the analysis on the affordability of the targeted customers. The more the buying power of the targeted customer the more expense the company can bear on its services and products as, they will be able to set their price in concurrence to the purchasing powers of the customer (Tracy, 2008). This will help small and medium businesses avoid extra and unnecessary cost on product and services.

Data Utilization

The information obtained from the managerial accounting will provide an outlook to the small and medium businesses that will exclusively be data driven. Furthermore, they will get an comprehensive understanding on the nature of the business they are running further, assist them in developing the business. They will be able to assess projections on financial statements, observe the balanced scorecards and plan on budgeting. By maintaining this procedure and keenly observing the information included in the data the companies will be able to sustain the growth process and assess whether the decisions are justifiable or not.

Methodology

With the view to analyze and follow the objectives of this research, the following methodologies have been undertaken:

Literature review:-For the completion of the objectives of this research proposal, materials have been collaborated from Science Direct, Google scholar and research hypothesis studied from various authors (Varajao, 2010). Research of these records manages the scope to evaluate the relevancy of accurate and timely managerial accounting information that can be used by the managers looking forward to resolve the predicament involved in the decision making process.

Data series :- Managerial accounting information provides an assistance to the entrepreneurs and managers for forecasting and predicting the financial situation and analysing the company’s performance by means of accumulating both the financial and non-financial information and making well-organized use of the existing data in form of efficiency ratios, cash flows, investment appraisals, budgets, deviations between standards and actual, financial statements, produce or purchase, and financial forecasts with proper utilization of a variety of cost management techniques like activity based techniques, standard costing techniques for evaluating the meticulous department performance.

Key indicators: – There are two key research indicators for the observational purpose of the implementation of managerial accounting information. These two key research indicators are quantitative and qualitative research analysis (Vlahos & Ferratt, 2005). Fundamentally, by means of using these two analyses, the decisions on the subject of evaluating, inspiring and overseeing performance as well as the decisions involving the proficient use of company’s resources are validated by this managerial information obtained from accounting system. This also lays importance on the ways the management’s decisions will be affecting the businesses future prospect and performance.

The focus of this research proposal will revolve around a mixture of the methodologies mentioned in the above context with the view to arrive at solution that will be precise in regards to the predicament stated in the problem statement. With a comprehensive understanding from the literature and the other indicators and data series management this research will present relevant answers to the questions in the research objective/questions (Vlahos, Ferratt, & Knoepfle, 2014). The analyses have been arranged according to the appropriate methods of presentation and have been grouped in manners that will help in understanding each of the criteria comprehensively.

Organization of the Study

The budget presumed for this research will be around a figure of $3500 to achieve its completion within the stipulated time.

The specifications on the budget are as under:

1. The expenditure incurred upon the literature review alone costs $800 and are based on journals, textbooks, articles, and resources gathered from online which are available only at a price.

2. Collection of data from surveys which include travelling, printing questionnaires and costs incurred on mailing and posting are around a figure $1900. The method exercised in this procedure was with the orientation to avail first hand data from the surveys (Wouters, 2013).

3. Lastly, accessing government databases for the analyses on the various small and medium enterprises led to an expenditure of $800.

The set expenditure shall not exceed the budget. It has been thoroughly analyzed and planned accordingly to meet the financial limitations. As per the analysis and plan, all sorts of logical expenses are covered and there is less chance exceeding the budget in terms of logical costs. The financial plan drafted by the analysts is realistic as per the given market and are in no terms unrealistic or inconvenient in any nature (Zhang, 2010). 

References

Appio, F., Achiche, S., McAloone, T., & Howard, T. (2013). An inquiry on managers use of decision-making tools in the core front end of the innovation process. IJPD, 18(6), 461. http://dx.doi.org/10.1504/ijpd.2013.058546

Djuwito, D. (2010). THE INLUENCE OF ACCOUNTING KNOWLEDGE AND PERSONALITY TOWARDS THE USE OF ACCOUNTING INFORMATION IN INVESTMENT DECISION MAKING. Journal Of Economics, Business, And Accountancy | Ventura, 13(2), 175. http://dx.doi.org/10.14414/jebav.v13i2.415

Frishammar, J. (2003). Information use in strategic decision making. Management Decision, 41(4), 318-326. http://dx.doi.org/10.1108/00251740310468090

Garrison, R., Noreen, E., & Brewer, P. (2008). Managerial accounting. Boston: McGraw-Hill/Irwin.

Hanifi, F. & Taleei, A. (2015). Accounting information system and management’s decision making process. Management Science Letters, 5(7), 685-694. http://dx.doi.org/10.5267/j.msl.2015.5.004

Jago, A. & Scamell, R. (1982). Decision-making styles of MIS managers: A comparative evaluation.Information & Management, 5(1), 19-29. http://dx.doi.org/10.1016/0378-7206(82)90015-5

Ježovita, A. (2015). Accounting Information in a Business Decision-Making Process – Evidence from Croatia. Zagreb International Review Of Economics And Business, 18(1). http://dx.doi.org/10.1515/zireb-2015-0004

Jiambalvo, J. (2007). Managerial accounting. Hoboken, NJ: Wiley.

Kochetova-Kozloski, N. & Salterio, S. Judgment and Decision Making Accounting Research: A Quest to Improve the Production, Certification, and Use of Accounting Information. SSRN Electronic Journal. http://dx.doi.org/10.2139/ssrn.533422

Lale, V. & Andjelkovic, M. Validity of Accounting Information for Management in the Process of Decision Making (((((((((( ). SSRN Electronic Journal. http://dx.doi.org/10.2139/ssrn.2561218

Lewis, L. (2012). The Power of Accounting. Hoboken: Taylor & amp; Francis.

Lin, Y., Cole, C., & Dalkir, K. (2014). The relationship between perceived value and information source use during KM strategic decision-making: A study of 17 Chinese business managers. Information Processing & Management, 50(1), 156-174. http://dx.doi.org/10.1016/j.ipm.2013.07.006

Managing Information. (2003).

Noreen, E., Brewer, P., & Garrison, R. (2007). Managerial accounting for managers. London: McGraw Hill Higher Education.

SALARI, L., POOR, E., FAHIM, I., & AZIZI, S. (2013). Studying the Effect of Official Automation on Making Decision Process of Governor’s Offices’ Managers. IJARAFMS, 3(3). http://dx.doi.org/10.6007/ijarafms/v3-i3/36

Sciulli, N. (2004). The use of management accounting information to support contracting out decision making in the public sector. Qualitative Research In Accounting & Management, 1(2), 43-67. http://dx.doi.org/10.1108/11766090410813355

Tracy, J. (2008). Accounting for dummies. Hoboken, NJ: Wiley Pub., Inc.

Varajao, J. (2010). ENTERprise information systems. Berlin: Springer.

Vlahos, G. & Ferratt, T. (1995). Information technology use by managers in Greece to support decision making: Amount, perceived value, and satisfaction. Information & Management, 29(6), 305-315. http://dx.doi.org/10.1016/0378-7206(95)00037-1

Vlahos, G., Ferratt, T., & Knoepfle, G. (2004). The use of computer-based information systems by German managers to support decision making. Information & Management, 41(6), 763-779. http://dx.doi.org/10.1016/j.im.2003.06.003

Ward, K. (1992). Strategic management accounting. Oxford: Butterworth-Heinemann.

Wouters, M. (1993). The use of cost information by managers when making short-term decisions.European Accounting Review, 2(2), 432-436. http://dx.doi.org/10.1080/09638189300000044

Zhang, J. (2010). ICLEM 2010. [Reston, Va.]: American Society of Civil Engineers.

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