Links between management accounting and financial strategy
Strategies, and financial strategies in particular, are far more likely to succeed if they are understood and tested before implementation by modelling, and then tracked and monitored as the chosen path is followed. The principal tools to assist with this are appropriate models and detailed internal management reports which can indicate how current actual results and strategies are being achieved (or not) and how they may evolve. Financial accounts, the overall historic figures for the past year and months, will reveal overall success or failure of the implementation of strategy, but management accounting reports and models are required to delve into, and model detail to obtain understanding of why strategy implementation is, or is not, functioning as intended.
Content, order and logic of this chapter
Within this chapter we will cover the following topics:
- The wide scope of management accounting
- Cautionary words on modelling
- Management reports - to assist with understanding strategy and its delivery
- Sales and costing definitions and models
- KPIs, dashboards and detailed analysis
- Analytics - can there be too much analysis?
Logic and order
Management accounting can do anything you want it to: it is not a single subject, rather any analysis, report or model that assists management. More and more management accounting and analysis is done by computer, with the decisions made by the managers and executives; today, we are all management accountants. Reports that reveal the overall picture and the underlying figures are essential for strategy management. Understanding sales and cost behaviour with the help of models will identify and support future successful strategies. To conclude, we look at detailed interpretation with the help of key performance indicators (KPIs) and other reporting methods.