Future Developments in Management Accounting

Executive Summary
Drivers of change have been taking place over the last 20 years, therefore management accountancy profession have pressure to continue to add value in the organisation. The drivers of change like technology and globalisation have allowed management accounting to play a bigger role in supporting the businesses, to survive in competitive markets.
This report will highlight the three questions:

What are the main drivers of change in management accounting?
How drivers of change have affected the role of management accounting professionals?
What skills are needed to adapt to the changing environment?

This report also identifies, the challenges faced by management accounting professionals in the near future that will have an impact on the technical and interpersonal skills, as well as competencies of management accounting professionals. The management accounting profession will include many drivers of change over the next few years:

Regulations and governance
Technology
Globalisation
Ethics
Environment

(ACCA, 2012)
INTRODUCTION
This document will outline and critically analyse, the drivers of change in management accounting profession. There are over 100 drivers of change, which can have an impact on the management accounting profession directly and indirectly (ACCA 2016). Archibugi, and Michie, (1995) argues at present technology and globalisation remains the two biggest drivers, where all the others are directly or indirectly been affected by the two biggest drivers. Successful and sustainable businesses have management accounting functions in place to adopt and respond to these changes.

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This report will also, highlight ways in which management accounting professionals can become effective and adapt to the rapid changing environment. Over the years the role of management accountant has changed, from being financial focused to both financial and non-financial focused in a new role as a finance business partner. Furthermore, Yazdifar and Tsamenyi (2005) have witnessed how the role of management accounting has been affected by new the techniques and automated systems.
Many articles and books have also witnessed the role of management accountant is not the same as it used be in past, now management accounting professionals are part of a bigger team, having new set of skills and techniques like activity- based techniques to support day-to-day operations and influence in decision making process.
(Study Notes 2014)
 
Drivers of Change 
According to ACCA (2012) there are number of drivers of change, and not a single change can be isolated from each other, because they have an impact with each other directly or indirectly. The drivers of change within the management accounting profession are:
      Global economic and financial environment
      Information Technology
      Data sources (Big Data)
      Environmental and ethical matters
      Nature of work place
Robbins (2011) explains that drivers of change can be categorised into internal and external factors and drivers of change are purely independent and natural in organisations, allowing organisations to improve in quality. However, Robbins research also emphasis on three key drivers of change, which are linked to the management accounting profession.

Information technology
Business structure
Competition

Oakland and Tanner, (2007) claims internal change means a desire to improve in efficiency. However, Griffiths and Webster (2010) demonstrate internal change is a change in organisation structure and culture, which leads to a change in attitude of professionals. Internal change is affected by both internal and external factors, but mostly it is a result of external impact directly or indirectly. For example, change in organisation style, will have an impact on how management accountants perform tasks.
John, (2015) argues external change occurs outside the organisations. These are systematic changes, in which organisations do not have control over and these are developed by world trade environment. Moreover, Gordon and Miller (1976) suggest more pacifically customer behaviours in terms of taste and actions are the biggest cause behind external change.

                                           (Commercial Business Solutions 2018)
Information Technology
Burns and Scapes (2007) highlighted three main drivers of change technology, business structure and competition. However, Ashton ATL (1995) suggests, globalisation and technology are the main two drivers of change in the last two decades, changing the role of management accounting. Due to increase in Information technology, the role of management accountants has been under reform to fit management accountants with internal operations.
Information technology is driving management accounting into new dimensions. Ashton (1995) survey, in Denmark discovered 58% of management accountants believe development in information technology is the biggest driver of change, changing their role within the organisation.
Traditional vs Modern management accountant role
                                                   VS

 (ACCA 2016)
Hansen, (2006) describes that capability of improved technologies and focus towards the performance measurements and information changed reformed the role of management accounting to finance business partners.  Byrne & Pierce, (2007) expand on this and explains that information systems have allowed management accounting professionals to move over to ‘higher analytical level’ to take on new role with new responsibilities.
Business Structure
Over the last two decades, Information technology caused organisation to change their structure and style, moving away from ‘centralising to decentralising system’ (Quattrone and Hopper (2001).This is also supported by Quattrone and Hopper (2001) who clearly states de-centralising has grown influence of management accountants within the organisation, thus management accountants now emerging into a new role as finance business partner to assist managers in decision making process. In the past management accountants worked independently in ‘managing routine financial instruments’ of the organisation, such as bookkeeping, record-keeping and monthly reporting (Quattrone, 2010).On the other hand, according to Ashton,(1995) In 1979 management accounting did not exist in china and they were under huge reform, replacing planned economy with market place economy and change of object lens of from maximising output to maximising profits. In relation to this O’Connor (2004) explains despite a reform in china it did not work very well for management accountants, thus china looked to adapt western management accounting.
Advance information systems
Spaarkman (2010) argues advance information systems are taking over financial factors within the orgnisation, allowing mangement accountants to get involved in non-financial instruments, which are as important as financial factors .Moreover, Bhimani (2007) highlights the importance of looking beyond the financial factors, which are becoming increaseingly important within the orgnisation.In addition, Granlund and Malmi (2007)   explains increase in automated information systems, does not emlimante the role of management accountants. This is also supported by Bruns and Baldvinsdottir (2005) that management accounatants are now moved into a new role of hydrid accounting, where they get involved in operational and strategic process to fulfil the need of managers.The change in role of management accountants has happened through the use of advance information systsms, allowing better particpation and communication in top to bottom level. Furthermore, Zarowin (1997) research illustrates management accountants are becoming leaders and taking on more risks.
Big Data
CGMA, (2014) highlights ‘value creation’ helps organisation achieve success. Organisations have become data-driven, moving away from traditional environment. On the other hand, SAS report (2013) explored, that number of data analytics required in the near future will double in the UK, thus IT and Finance department will be taking responsibility of big data.
Johnson (1987) demonstrates traditional management accountants had access to the management systems and data within the organisation to report to the managers. However, Brands (2014) argues the future of management accounting professionals is driven by technology and big data, which is getting bigger and complex. This will require management accountants to bring together their financial and non-financial knowledge to, analyse and influence in decision making.
ACCA (2016) explains, the next fourth generation revolution of automating processes is more complex processes than before. The emergence of advance information systems has seen businesses to turn towards the creation of knowledge. Leonard.K (2018) justifies in today’s competitive environment, data have become a number one priority, for organisations to respond and react to the changing demands, to stabilise long-term future. Alternatively, Columbus (2017) found about 53% of organisations continue their effort to adopt big data process.  This is also supported by Gartner (2014) that big data helps organisation financially and non-financial, to improve their business performance efficiency, with the capability of achieving profitability in ROI of around 20%.
 
Globalisation
Giddens, (2018) explains globalisation is a procedure, where companies are always looking for opportunities to grow their influence in international economies. Furthermore, Park (2003) argues globalisation is a change in terms of ‘management’ change. This is also support by the research of Ernst (1997) that globalisation is change in strategic planning and management, for companies who are operating on international scale and management accounting should adapt to this change.
Competition
Globalisation has taken place through, smarter and faster information technology, to expand networks, where organisations build relationships through buying and selling. Thus, market conditions are demanding, to keep global markets at competitive position (Wickramasinghe and Alawattage 2012). On the other hand Prahalad Hamel (1999) explains competition in global markets occurred because of Japanese challenge. They were the first country to create new global brand, which was followed by the western and Asian countries.
Kogut (1985) argues, global competition is a process for organisation to continue to improve their business model and performance for long-term. Traditional management accountants had a short-term vision, because competitive global markets did not exists. Now businesses believe profitability is achieved by long-term stability, thus the role of management accountants expects to look beyond numbers and forecast business future. This is also supported by Hansen (2006) research, illustrates that globalisation competition has shifted management accounting to a modern resource management, while using advance techniques like ABC Costing. The management accountants are now the presentation of accounting information and a tool to aid business managers (CIMA 2008).
Environment & Sustainability 
Globalisation is pushing, the management accounting profession to step up. Markets have become competitive and objectives and priorities have changed for businesses. ACCA (2016) findings states globalisation means businesses, to think about the environment and rising prices of fuel and energy, in the near future. This is directly linked to politics, but it affects management accountants, because they will influence everything in strategic decision, by designing revenue models, balancing international economy, environment and financial stewardship. However, Bloom and Heymann (1986) research figures out that traditional management accounting ignored environment and external factors completely. This is also supported by Milne (1996) evidence that in New Zeeland and many countries around the world, businesses are required to produce a sustainability report to minimise the damage caused to the environment. This means management accountants, will assist managers in reporting process to report to stakeholders on ethical and sustainability matters.
Rules and Regulations
Due to globalisation, companies are operating in different economies means they are always facing changes in regulations. On the other side ACCA (2016) illustrates, improvements in corporate finance and regulations are likely, to have a greater impact in the next decade on management accounting profession. However, Hyvönen, T, (2003) thinks currency will have a greater impact on management accounting.
These drivers are always changing and will have an impact directly or indirectly in all levels of management accounting profession. Similarly, many professionals are affected by the change in tax system, which will require the need to management accounting to step in. Management accountants continue to perform some of the traditional tasks along with new tasks and roles. However, for professionals who are involved in tax advice and planning, needs to be aware of new rules and regulation and be able to respond to the ethical and technical challenges.
How management should prepare for the change
Strong technical skills
In the past, management accountants worked independently, to carry out routine tasks. However, those skills are still important, but now stronger technical skills are needed as the role of management accounting has changed along, with business structure. This is referenced by, Wickramasinghe and Alawattage (2012) the technical change in form of three fundamentals:
      Technical–managerial – developing tools and techniques to support organisation management accounting.
      Pragmatic–interpretive: analyse what is being learned and what can best to help management accounting keep-up with the change
      Critical–socio-economic: figure out the key concerns of using accounting techniques.
On the other hand, ACCA (2016) discusses, the development of new frameworks, while updating the existing framework to develop and improve management accounting technical skills. The following areas will need stronger technical are:
      Taxation
      Corporate Governance
      Strategic and management planning
Auditing and Assurance
Commercial awareness
All management accountants will be expected to look beyond financial instruments, to demonstrate internal, external, and personal, knowledge to help organisation achieve their short-term and long-term goals to become effective in a new role as finance business partners (ACCA 2016). Moreover, management accounting will be faced with questions like; do you know about financial markets? Can explain trends? Can you back up arguments with commercial awareness? (Speight, 2015).
Interpersonal skills
CIMA, (2002) explains in the United States communication, teamwork, and accounting knowledge with business strategies is necessary for management accounting professionals. On the other hand, Islam and Kantor (2005) research reveals  management accountants in China are facing problems in all areas, having the ability to handle all traditional skills easily, but taking far too long to adopt to the new  business environment. Similarly, Burns, atl (2004) found that Japanese businesses identified the change before management accounting evolution, thus management accounting profession was, pushed towards training and skills development to become effective in new roles as finance business partners and in all business areas to influence in decision-making to help make big investments decisions. Having strong communication skills and connecting with all level of people within and outside the organisation are important for a finance business partner role. The ability to critically analyse data, forecast and plan will help management accounting to face-off big challenges and become effective in all situations (ACCA, 2016).
Conclusion
Overall, it is witnessed that information technology and globalisation has changed the role of management accounting profession significantly over the last two decades, and will continue to change as we are nearing the 4.0 industrial revolution. According to Boer, (2005) the expectations from management accounting profession are greater in comparison with traditional management accounting roles. All business is demanding management accounting to ‘contribute’ and ‘add value’ as finance business partners. This is also supported by Cooper (1996) who argues management accounting to move away from ‘historical role’ to ‘strategic supervising’ and ‘feedforward governor’.
Management accounting still lack of important skills like communication skills, having the ability to communicate effectively at all levels within the organisation to influence decision making. The important skills like analytical, strategic, planning, technical and interpersonal skills can help management accountant to overcome difficult situations and to take on the new role as finance business partner or business analysist.
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