ACCT 2105 Accounting in Organisations and Society

Week 4 – Topic Overview

Accounting for Management – Setting the Scene
This topic provides you with an introduction to the broad roles of internal management and the way
in which accounting information can support these roles

Section 1: What do managers do?

There are five broad roles of managers
1. Developing plans – operational plans, strategic plans
2. Organising - identifying the most appropriate processes and activities required to undertake
plans
3. Making decisions - about how to undertake the processes and activities required
4. Monitoring performance - Identifying whether plans and goals are being met and if not, why
not.
5. Revising - using the information (feedback) from monitoring to alter plans, activities
processes or decisions (and the cycle continues).

Planning - key points:

 If the planning process is not undertaken successfully its very unlikely that performance
outcomes will be valued
 An organisation requires both short term (operational) plans AND long term (strategic) plans
 Plans provide the benchmark for assessing future performance
 Plans should not focus solely on financial outcomes
o Non-financial outcomes should be planned for – e.g. product quality standards
 Plans shouldn’t focus solely on the short-term
o Plans need to consider long-term (strategic) outcomes that the business values

Section 2: The benefits of high-quality internal management – Value Creation

The benefits of high-quality management include:
 Quality planning, which leads to;
 Efficient and effective use of resources, which leads to;
 Successful performance outcomes, which leads to;
 Strategy achievement, which leads to;
 Satisfy stakeholder expectations

All these benefits result in the business CREATING VALUE

To be successful most businesses need to focus on creating value for ALL stakeholders

 This means creating value for

o Shareholders and creditors AND
o Customers
o Suppliers
o Employees
o Communities
o The environment
Porter’s Value Chain
 Porters Value Chain is a common and popular tool to understand how a business creates
value for its stakeholders
 It identifies the common activities businesses undertake that help create value
 These activities are divided into:
o Primary activities
 E.g. Inbound logistics, Operations, outbound logistics, sales and marketing
and servicing
o Support (secondary) activities
 Administrative, finance, infrastructure activities (includes accounting)
 Human resources management
 Product and technology development
 Procurement

Section 3: The management accountant’s role in supporting management

 Managers cannot fulfill their roles of planning, organising, decision-making, monitoring and
revising without INFORMATION

The role of management accounting is to provide this information

o Remember that management accounting information needs to be:
 Relevant and timely to support the roles managers perform
 Detailed and specific to the tasks managers undertake
 Primarily current and future oriented
 You are provided with a simple example of some tasks a manager may undertake and the
management accounting information which could be provided

The role of management accountants is also to provide information to support:

 Organisational accountability
 Value creation for ALL stakeholders
 Identification, reporting and measurement of externalities

One final issue: value creation – creates tensions for management

 Creating value for all stakeholders may not be financially cost free for organisations in the
short-term
 It may require a business to spend on protecting the environment or communities from any
negative impacts from their activities
 This reduces profits in the short-term

Key Points to Take Away from Topic 4

1. Managers undertake 5 broad roles
a) Developing plans
b) Organising
c) Making decisions
d) Monitoring performance

e) Revising

2. Managers who perform these roles successfully – i.e. high-quality managers – provide several
benefits to an organisation that all lead to VALUE CREATION for the organisation’s stakeholders
3. Porter’s Value Chain is a useful tool for understanding the activities an organisation undertakes
to create value

4. The role of management accountants is to provide information that supports managers in their 5
broad roles

5. This information should be

a. Relevant and timely to support the roles managers perform
b. Detailed and specific to the tasks managers undertake
c. Primarily current and future oriented
6. Management accountants must also recognise that their role is to provide information to
support management to
 Fulfill organisational accountability – i.e. corporate social responsibility
 Management of externalities