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What Are Applied
Management Accounting Techniques ?
These are a combination
of traditional and newer innovative techniques used by Management
Accountants to extract, analyse and interpret accounting
and other quantitative information to aid business managers
in planning, control and decision-making.
A Management Accountant can :-
- Identify and measure company key revenue indices.
- Design and implement management reporting structures.
- Analyse the management of working capital elements, e.g. work in progress,
credit control and supplier payments.
- Analyse components of profitability, e.g. product or project costs,
gross margin analysis, sales mix and customer profitability.
- Analysis of activity costs. Looking at costs and associating them with
business activities to produce cost/volume relationships
to monitor the business.
- Implement a strategic scorecard management reporting process (the Balanced
Scorecard).
- Identify and measure individual's key performance indicators for line
manager empowerment.
- Implement customer value management reporting.
- Develop walk-through budgets and financial plans.
Typical Reporting Routines
In Successfully Controlled Businesses
Short Term (Usually Weekly)
Some examples :-
Statement of short term
key indices
Purchase
order control report
Cash
control report (daily if things are tight!)
In manufacturing,
materials and labour usage reports
Short term reporting should be tailored to the need for
control information and will be a function of the
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volume of events monitored
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cost of the detriment of
not reacting
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reaction time to modify
a situation
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anticipated lead time for
changes to take effect.
Monthly
Many organisations build their budgets for the financial
year by assessing what can be achieved each month. They
then use these as a yardstick for measuring progress on
a monthly basis.
| ME* - 2 |
Pre close prediction of
turnover and profit. |
| ME + 1 |
Flash result of turnover and profit, and any key indices. |
| ME + 4 |
Profit & Loss account, reconciled Balance Sheet. |
| ME + 6 |
Management accounts pack including detailed indices, variance analysis
and narration. |
| ME + 8 |
Summary report of key numbers and narration if reporting to people not
close to the business, e.g. Non Executive Chairman
and Directors, stakeholders |
In addition there should be periodic reviews of the year end position
and/or rolling annual predictions and of course, constant
monitoring of key cash crunch points.
This is a fair representative of what should be achievable
by a proficient finance department, but clearly the time
required to produce any management information is a product
of its complexity and the resources available to produce
it,
*ME = Month End
What's a Balanced Scorecard?
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