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Should a Management Accountant Be More about Being a Management Consultant Than Being an Accountant - Literature review Example

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Intensely competitive global business environment requires business managers to become aggressive in order to make use of emerging market opportunities in an effective manner. Without a great deal of knowledge in business management, a CEO or other top executives cannot gain a…
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Should a Management Accountant Be More about Being a Management Consultant Than Being an Accountant
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Should a Management Accountant be more about being a Management Consultant than being an Accountant? By Introduction Intensely competitive global business environment requires business managers to become aggressive in order to make use of emerging market opportunities in an effective manner. Without a great deal of knowledge in business management, a CEO or other top executives cannot gain a competitive edge in the marketplace or lead the business to the next level of growth. Management accounting and management consulting are two interrelated terms, and they are of great significance when managing a business in the current fast changing market landscape. In management accounting or managerial accounting, managers use the provisions of accounting information so as to keep themselves informed of the various crucial organisational matters for decision making, better management, and performance of control functions. In contrast, the concept of management consulting is the practice of assisting organisations to improve their overall performance efficiency. Generally, this is achieved through the evaluation of existing organisational information/issues and the development of improvement plans. Organisations commonly seek the services of a management consultant for several reasons like obtaining external advice and accessing a specialized knowledge base. Management accountant is one who is an expert in management accounting whereas one who delivers management consultancy services is called management consultant. The functions of a management accountant and management consultant are overlapping in many areas, and therefore under many circumstances, it is justifiable for a management accountant to be a management consultant than being an accountant. This paper will discuss why a management accountant should be more about being a management consultant than being an accountant. Literature Review Management accounting is the sensible presentation of accounting information in a way that would assist management in developing policies and dealing with daily operations of a business concern (Kulkarni & Mahajan , 2008, p.15). Management accounting specifically focuses on internal reporting. Based on the nature of the these internal reports and the parties who receive these reports, it is obvious that the management accounting is primarily concerned with the furnishing of significant and relevant data to the managerial personnel for the purpose of enhancing planning, controlling, and decision making (Ibid). The area of management accounting embraces all accounting services that are required to render assistance to the management in carrying out their managerial functions (Coombs, Hobbs & Jenkins 2005, p.7). This branch of accounting also benefits the management to deal with the execution of its plans and performance evaluation in an efficient manner (Needles, (1999, p.243). The concept of management consulting is very important today in the wider context of the current development and use of various forms of management knowledge, ideas, and practices (Sturdy,et al 2009, p.na). Traditionally, it is believed that management consultants can render a wide variety of services to organisations as they have deeper knowledge in the particular subject and an outsider status (Ibid). In the modern world, the importance of management consulting has increased to a higher level because today business complexity has reached its peak and the degree of market rivalry is increasingly high. As a result, currently corporate managements depend on internal and external management consultants to obtain expert advices in various managerial tasks and organizational affairs and thereby enhance informed-decision making. Evidently, this situation forces corporations to increase their managerial spending and devote more time to interact with the consultants. According to Jackson et al, “managerial accountants have traditionally been thought of as the bean counters or number crunchers in an organisation” (Jackson, Sawyers & Jenkins, 2008, p. 33). The recent advancements in AIS and other technological changes occurred in the last few decades led to the automation of traditional accounting functions such as data collection, data entry, and data reporting. Subsequently, those traditional accounting functions shifted from management accountants to clerical staff (Ibid). As a result, the major role of a management accountant is to focus on analyzing the information and to create knowledge from it rather than merely collecting and reporting data. Today management accountants play the role of decision-support specialists, who are supposed to interpret the information; convert it into a useful format; and facilitate management decision making (Ibid, p.33). These functions are almost similar to those performed by management consultants. In the modern business context, management consultants are also hired to interpret the data/information and to suggest their clients the most potential solution to address a particular issue(s) (Westervelt, 2001, p.105). The only notable difference between the duties of a management accountant and a management consultant is that the former uses only accounting information to support organisational decision making whereas the latter considers various prospects of knowledge to facilitate decision making. In spite of this difference in the function, management accountants have a crucial role to play in providing consultancy services to firms in different areas of organisational operations and strategic execution of managerial plans. Management Accountant as a Management Consultant In order to clearly identify whether a management accountant should be more about being a management consultant, it is vital to analyse the difference between an accountant and consultant. It is clear that the primary duty of an accountant is to create or assess the firm’s financial records, ensuring that there is a balanced flow between income and expenses so as to improve operational efficiency (Brooks L & Dunn P, 2009, p.349). Although management accountants also perform almost similar functions to make the firm’s decisions financially viable, they have the additional responsibility to ensure the feasibility the firm’s financial strategies. When management accountants operate as the employees of the organisation, they cannot often make independent decisions in the long term interests of the company as they may be forced to function in such a way to render short term gains to the management (Lambert & Sponem, n.d.). In contrast, when management accountants work as a management consultant, they would be free to take independent decisions without any pressure from the part of the management. Under this working environment, the management accountant can even fulfil the role of a CFO (Chief Financial Officer) temporarily (IFAC, 2013). In addition, he/she can oversee the firm’s financial strategies and take immediate steps to amend the policies if necessary. As discussed already, management accountants and management consultants share many roles and responsibilities in common. Management accountants are required to maintain an objective stance as they are expected to use the current accounting information to support the growth of the company (Kholeif, 2011, p.523). At the same time, a management consultant can evaluate the situation personally and recommend the management whatever seems necessary to achieve long term operational success. To make this point clear, management accountants and management consultants think and operate from two different perspectives and it is never easy for a management accountant to perform his duties and responsibilities freely and independently. Management accountants need to focus more on each and every detail of the accounting systems because they mainly depend on accounting information to facilitate organisational decision making (Grabski, Leech & Sangster, n.d.). However, their job is completed once they render adequate accounting information for the management to support decision making. In contrast to this role, management consultants apply their accounting knowledge in corporate management to assist the top executives in every stage of the decision making process (Nich, n.d.). When a management accountant restricts himself to his ordinary roles, he cannot make potential recommendations to the management. To illustrate, if the management accountant finds that excessive employee costs hurt the firm’s financial stability, he cannot suggest the management to cut down the number of employees because some of his colleagues may lose their jobs. Hence, management accountants need to face many such ethical dilemmas, and this situation would limit the scope of their work. As management accountants play a crucial role in strategic decision making, such emotional considerations should be compulsorily avoided to ensure long term sustainability of the organisation (CIMA, 2012). In this context, the management accountant should assume the role of a management consultant who is independent and whose recommendations would be unaffected of emotional considerations. Management accountants generally try to protect the interests of the top management in order to gain job promotions and increased financial incentives. As a result, they may often close their eyes to suspicious managerial affairs that are likely to threaten the financial sustainability of the organisation in the long term. In short, management accountants sometimes fail to communicate a clear and true view of the company’s state of affairs to the top management and the situation in turn would reduce the competitiveness of the business. However, those niggling situations can be avoided if the management accountant assumes the role and responsibilities of a management consultant who is able to enjoy an outsider status. For a management accountant, the main source of information is the accounts department and hence he does not generally pay attention to other organisational areas to gather information (Thukaram, 2007, p.15). A management accountant uses only accounting figures or financial outcomes to support management decision making and therefore the soundness of the decision may not be guaranteed always (Greenwood, 2002, p.12). Hence, it is recommendable for a management accountant to act as a management consultant, who gathers information from a variety of sources within the organisation to identify and resolve problems. As a management consultant, management accountants should work to address a specific problem if the organisation requires so. In other situations, they can focus on broad areas such as increasing profitability. To perform the roles of an external consultant, a management accountant must use their research and critical thinking skills. Such an approach would assist management accountants to develop potential solutions and alternative practices to address a particular organisational or operational issue. It is obvious that organisations generally hire a management consultant to accomplish something that they cannot manage alone. Management consultants always bear challenging responsibilities and hence they tend to be innovative in their work (Bohn et al 2001, p.n.a). When a management accountant is able to contribute something extraordinary to the organisational success, the firm would give him a great source of fulfilment. Being innovative in the work may assist the management accountant to replace the roles of a management consultant and to direct the organisation in a competitive manner (Barbera M, 2000, pp.201-202). Such an attitude may assist the management accountant to become a crucial contributor to the firm’s strategic planning. Similarly, this type of a change in roles may benefit the management consultant to evaluate the firm’s various project engagements efficiently in the light of its strategic and tactic objectives, ensuring that everything is proceeding along the track. In a broader sense, management accountants can analyse whether the firm’s operations are in line with its stated corporate mission and vision (Kathwala, n.d.). Referring to Kinney and Raiborn (2012), a management accountant is really familiar with the daily operations of the firm and hence he would need less ramp up time on a project and would be able to guide the project right from the strategic planning phase to implementation. This process would incur additional costs if the organisation hires an external management consultant. Hence, assuming the function of a management consultant can enable a management accountant to cut down the operating costs of the organisation. Unlike an external management consultant, a management accountant is not an outsider and hence the proposed change in roles is a better option to keep the firm’s private business information secret (The Economist, Feb 24th 2011). It would also assist the company to operate without the fear of losing the business to its competitors. The change will certainly persuade the management accountant to watch every organisational activity suspiciously, and this approach may be beneficial to report to the top management with greater efficiency. Furthermore, this policy can also aid the management accountant to prevent errors and fraud to a considerable extent and make employees accountable for their operations. Conclusion In total, a management accountant should be more about being a management consultant than being an accountant. Researchers identify management accounting as the presentation of accounting information in a thoughtful way to assist the management to make well informed and sound decisions. In contrast, management consulting is the practice of assessing the operations of the company from the perspective of an outside person and recommending potential solutions to improve the overall operational efficiency of the business. When a person is assigned to perform the duties and responsibilities of a management accountant, he needs to consider the short term interests of the management, and hence he may be forced to conceal some key observations that would ruin the current image of the top management. However, when the management accountant assumes the role of a management consultant, he would try to make independent decisions in the best interests of the organisation and pay little attention to emotional considerations. For the better future of the organisation, I would strongly recommend a management accountant to act as a management consultant. Finally, this strategy would assist the organisation to save the costs associated with hiring an external consulting firm or professionals. References Barbera M (2000) Strategic Management Accounting. Deep and Deep Publications Bohn EA et al (2001) International whos who of professionals: the ultimate professional directory. US: Whos Who Historical Society. Brooks L & Dunn P (2009) Business & Professional Ethics for Directors, Executives & Accountants. Cengage Learning Coombs H, Hobbs, D & Jenkins E (2005) Management Accounting: Principles and Applications.US: SAGE. CIMA (2012) Can neuroscience inform management accountants? 16: 7. Available at: http://www.fm-magazine.com/feature/depth/can-neuroscience-inform-management-accountants# The Economist (Feb 24th 2011) Companies and information The leaky corporation. Available at: http://www.economist.com/node/18226961 IFAC (2013) ‘The role and expectations of a CFO: A Global Debate on Preparing Accountants for Finance Leadership’. Available at: https://www.ifac.org/sites/default/files/publications/files/Role%20of%20the%20CFO.pdf Greenwood RP (2002) Handbook of Financial Planning and Control. US: Gower Publishing, Ltd. Grabski S, Leech, S & Sangster A (n.d.) Management accountants: a profession dramatically changed by ERP systems. CIMA, 4 (5): 1-9. Available at: http://www.cimaglobal.com/Documents/Thought_leadership_docs/cid_ressum_management_accountants_and_erp_dec08.pdf Jackson S, Sawyers R & Jenkins G (2008) Managerial Accounting: A Focus on Ethical Decision Making.US: Cengage Learning. Kathwala A (n.d.) Essentials of Strategic Management Authors: David Hunger & Thomas. L. Wheelen Book review. Available at: http://biotechconsultancy.net/files/news/management/Strategic-Management-Essentials.pdf Kinney M & Raiborn,C (2012) Cost Accounting: Foundations and Evolutions.US: Cengage Learning. Kholeif A (2011) “The positive approach to Management accounting”. In Review of Management Accounting Research. Magdy G. G & Abdel –Kader A Editors. Kulkarni M & Mahajan S (2008) Management Accounting. India: Nirali Prakashan. Lambert C & Sponem S (n.d.) Roles, authority and involvement of the management accounting function: a multiple case-study perspective. Research Paper. Available at: http://www.hec.fr/var/fre/storage/original/application/9a676ea67849ffa2dd9ddf242ab3efce.pdf Needles BE (1999) Study guide [to accompany] Principles of accounting, 7th ed., Principles of financial accounting. US: Houghton Mifflin. Nich C (n. d.) ‘Guide for Financial Management Majors’. WorldWideLearn. Available at: http://www.worldwidelearn.com/online-education-guide/business/financial-management-major.htm Sturdy A, Handley K, Clark T & Fincham R (2009) Management Consultancy: Boundaries and Knowledge in Action. UK: Oxford University Press. Thukaram RME (2007) Management Accounting. UK: New Age International. Westervelt J (2001) Simulation Modeling for Watershed Management. Springer Science & Business Media. Read More
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