Strategic Management Accounting John Wiley & Sons

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Discuss about the Strategic Management Accounting John Wiley & Sons.

Organization is complex set of activities in which various functions are performed to achieve certain goals and objectives. There are two parts which has been taken into consideration for completing this essay. In this report a complete study has been prepared to identify the best suitable cash receipt plan in case study. In the starting, complete analysis has been made to depict which plan would be better for Triple F Health club. With the increasing ramification of global changes, it is observed that there are several companies are incorporating offshore companies in order to enhance their business functioning at global level. Global competition put great impact on domestic business. There are several big companies in different sectors such as Tesco, ITC, Virgin media and Tata Consultancy who provide their products and services at very low cost by accepting cost leadership strategy in their business plan. In addition, it is evaluated that these companies are accompanied with high developed technology and due to its high level of productions they could offers their goods and services at very low cost. These types of global business practice put negative impact on the business functioning of global company. Nonetheless, in the recent survey it is also observed that clients are more inclined toward buying imported products and services.  Productivity of business is the main effective factor to win the market. It is related with optimum use of given level of resources. These companies mainly focus on two strategies namely cost leadership and product development to win the particular market. There are several companies such as Tesco, ITC, Virgin media and Tata Consultancy who have been following cost plus pricing strategies to win the market. Ideally, cost leadership strategies helps companies to set up price of their products. According to researchers it is observed that if companies want to penetrate the market then they have to use effective pricing strategies.  It could be observed with the recent example that Reliance communication penetrates the data connection market by providing its services and data connection packages at very low cost with a view to give tough completion to its rivals. Therefore, it could be inferred that global competitions has resulted into several benefits to clients and various problems to businessmen throughout the time.

In this part an adamantine study has been prepared over the various stages of management and how company could make effective changes in its business functioning to increase efficiency of its value chain activities (Cox, et al. 2014).

Strategic Role of Management Accountants, Contrasting with Tradition Role

Strategic role of management accountants, contrasting with tradition role

In the earlier time management accountant were associated with managing accounting and clerical work of organization (Huang, et al. 2013). As of now with the changes in economical environment management accountant is also known as corporate account. Ideally, the management accountant of big companies are more inclined toward preparing budget, handling taxes matters, managing assets to determine compensation and benefits packages and helps in determining strategic planning. Management accountant are efficient in financial computation and other accounting information. Therefore, they help organization to make effective capital budgeting decision for choosing project investment plan.  Ideally, they help in calculating NPV, IRR and profitability index of project so that best suitable investment plan could be prepared by top management department of business.  In addition to this, there are companies such as Tesco, ITC, Virgin media and Tata Consultancy who appoint management accountant to prepare their annual report with the assistance of CFO of company.

Management accounting information for variance analysis

Variance analysis needs to be performed by management department on annual basis.  The main purpose of this report is to identify the fluctuation in cost and price of products and services offered in market. Accountant provides information related with administration cost, variance explanation, cost associated with particular time period, adjusting entry in particular account and bifurcate each and every factors in significant manner. Nonetheless, it is fact to say that accountant prepares the primary books and ledger of accounts which is accompanied with all the monetary transaction. Therefore, he is efficient in evaluating all the possible changes in cost, and market factors in determined approach (Morden, 2016).

Flexible budgeting for better determination of overall results

Management accountant is the person who is proficient in handling all types of work such as posting entries, preparing financial statement and preparing inventory management of company. Being an accountant of company he knows the trend of company in context with external environment. Therefore, accountant helps financial manager to decide the project escalation amount which could be added on after making situation analysis of prepared budget. Woolworth Ltd had to face problem of availability of financial resources due to changes in price of raw material changes in price. At that Time Company did not have project escalation for proposed budgeted plan which results into increment in cost of capital for the time being in force.

Information of working capital management

Management Accounting Information for Variance Analysis

Working capital is the amount of difference between current assets and current liabilities. Management accountant has all the internal and external resources of company and helps CFO of company to reduce the operating life cycle of company. It is done with a view to reduce the blockage of amount. Management accountant prepared estimation of cost of productions and required amount of capital that will be engaged in the business operation. In virgin media it is observed that annual report of company is prepared by financial manager of company with the association of its management accountant (Konijeti, et al. 2014).

Strategic cost management

Strategic cost management is accompanied with process and activities which are engaged with a view to manage the cost of organization in determined approach. It is feasible fit between organization’s objective, skills and resources and its external changing factors. In simple words, it could be defined as long term plan to control the cost of productions and simultaneously company improve its position in the given market segment. Strategic cost management could be applied in services and manufacturing organization so that cost effectiveness could be maintained (Pawliczek & Rössler, 2016).

Life cycle cost management

It is the cost management which is used to elect particular projects in organization. In this management process is used to determine the cost-effective option between several activities. This cycle cost management helps organization to determine the best suitable project cost investment plan. It could be understand with the practical example that if a company has two projects then it could identify which project is best for organization by using life cycle cost management plan. In order to give a practical example of life cycle cost management of organization two projects have been taken (Galliers & Leidner, 2014).

Year	PV @10%	Project A	Pv of Inflow of  project-A	Cumulative Cash Inflow A	Project-B	Pv of Inflow of Project-B	Cumulative Cash Inflow B
0	0	-40,000	0	-40,000	-40,000	0	-40,000
1	0.909	10,000	9,091	9,091	10,000	9,091	9,091
2	0.826	10,000	8,264	17,355	10,000	8,264	17,355
3	0.751	10,000	7,513	24,869	5,000	3,757	21,112
4	0.683	5,000	3,415	28,284	40,000	27,321	48,432
5	0.621	5,000	3,105	31,388	40,000	24,837	73,269
Total Cash Inflow	31,388			73,269
Net Present Value	-8,612			33,269

It is identified that project A would be providing negative result to organization. Therefore project B would be accepted by organization in its business functioning (Wood, et al. 2016).

Target costing

It is costing technique which is used by organization to set up particular cost for organization for determining product life cycle cost, price point, and setting target cost by subtracting desired profit margin from competitive market price.  It could be understood by an example that given below (Lowe & De Loo, 2014).

Let’s just suppose a firm is having total cost of its products $ 30000 then in order to reduce its total cost company could implement internal control system and inspection process to reduce by products of company.

Flexible Budgeting for Better Determination of Overall Results

Kaizen costing

It is the costing system which is used to reduce the present level of cost of products. It is developed or defined by yashihuro as maintenance of cost level and reduce it to the desired level by making efficient efforts. This could also be understood with its practical approach (Soltanizadeh, et al. 2016).

Particular	Practical details
Cost of production	Expected- $ 4million  and  Actual- $ 5 million
Issues	Frequently production stops, not achievement of set targets and low productivity
Analysis	Work load is more and supply chain management of company is not efficient
Implementation	Planning and set up of benchmarking in each cost system process, personal lay out design review, training development program
Results	Semi target achievement, reduction in process system cost, low labor turnover

Business process reengineering

It is process to make changes in inbound and outbound activities of organization. It involves the radical redesign of core business process to attain improvement in productivity and efficiency of business functioning. It could be defined with the example that if a company wants to reduce the time involvement in its value chain activities then it could do it by adopting enterprises resources planning in its inbound and outbound activities. It will result into automation in its existing business activities (DRURY, 2013).

Activity based management

It is a method of identifying or evaluating process activities of organizations that a business performs and finding itself in tough situations. In simple words it could be said that if company is having problem in value chain activities then management department of company could either manage that problem or would go for eliminating that part of problems. Ideally, management department of organization is more inclined toward mitigating the problem in particular area to make improvement in existing process system (Huang, et al.2013).

Benchmarking

It could be defined as course of action or standard which is require to be achieved by organization. There are several organizations which use benchmarking to make improvisation in their value chain activities. However, benchmarking should be done in the same group mapping companies otherwise it may result into de-motivation in corporate team (Gibassier, et al. 2015).

Companies name	Benchmarking companies
Tata	Maruti Suzuki
Wes farmer	Woolworth
Virgin Media	Vodafone

Quality cost management

It is elaborated that quality is the prime concern if company want to sustain its business for longer time period. Quality cost management is the process of management in which value chain activities are completely supervised by management department.  It is an integrated system that anticipates needs and wants of clients. It helps in determining the level of quality that is required to be maintained by organization.  Cost of quality consists of prevention cost, appraisal cost, external failure cost and internal failure cost.  The failure of quality cost management could be understood by the recent example of Apple phone. It was evaluated that Apple introduced its new I Phone- 6 which had several quality problems such as bending, hanging and slow process system. It is found that if management department of company had implemented quality cost management program at the earlier time then this type of problems would have avoided in significant manner (Potter, et al. 2013).

Information of Working Capital Management

Tripe F health club has been providing physical fitness activities to its clients. Now with a view to increase its cash receipt, organization want to make changes in its existing cash receipt plan. There are following answers having been given to determine whether the changes made in existing fee structure is beneficial for the organization or not.

Cash receipt is a specialist account that is used to evaluate all types of receipt for organization. in this case study cash receipt of Triple F health club will be accompanied with two factors annual cash fees and hourly court fees.  It is evaluated that Triple F health is more inclined toward promoting annual plan for their clients. Annual cash receipt will increase the cash inflow of organization and helps organization to sustain with its clients. On the other hand hourly rate is fluctuation in nature and uncertain as well which could either be available for the company in future or not.  Now company has changes its annual receipt plan to attract more clients and also given offers to its existing members to renew their old membership.

Triple F health will see the following benefits if it makes changes in its existing annual fee structure

Annual fees will bring certain amount of inflow in advance which will increase liquidity position of Triple F health.

Hourly rate structure will vary as per the season, clients choices, their hours spent in clubs and their inclination toward accepting offers. These fluctuations are not predictable and certain.

By having new annual cash receipt Plan Company would be fetch more money from market.

There are several factors which should be considered by triple health club

Nature of business, seasonal plan, competitor’s strategies and clients inclination toward physical fitness activities

Financial factors are also need to be evaluated such as existing fees structure, capacity of club and contribution per unit of organization with its existing members.

 After analyzing each and every factors company need to use profitability analysis with its existing cash receipt program and its proposed program then only organization could identify which option is best suitable.    

Triple F health club could indulge in adopting profitability analysis to identify whether the changes made in existing fee structure is acceptable or not. This analysis will provide the revenue, profitability ratio and price volume ratio and breakeven point. Therefore, Triple F health needs to use these analyses to identify the profitability of company after making changes in its existing fee structure.

Existing annual fee structure of Triple F health
Particular	Club-1	Club-2	Club-3	Club-4
Members	2000	2000	2000	2000
Individual	600	600	600	600
Student	400	400	400	400
Family	1000	1000	1000	1000
Annual fees
Individual	45	45	45	45
Student	30	30	30	30
Family	100	100	100	100
Total annual fees
Individual	27000	27000	27000	27000
Student	12000	12000	12000	12000
Family	100000	100000	100000	100000
Variable cost	83400	83400	83400	83400
Contribution	55600	55600	55600	55600
Fixed cost	50000	50000	50000	50000
Profit	5600	5600	5600	5600
PV ratio	40	40	40	40
Breakeven point	25	25	25	25

Strategic Cost Management

PV ratio= Contribution/ total sales *100

Breakeven point= Fixed cost/contribution per unit

Proposed annual fees structure will result into increment in cash inflow by given amount

New Club receipt fees
Members	2000	2000	2000	2000
Individual	1000	600	600	600
Family	1000	1000	1000	1000
Annual fees
Individual	300	300	300	300
Family	500	500	500	500
Total annual fees
Individual	300000	180000	180000	180000
Family	500000	500000	500000	500000
Variable cost	960000	816000	816000	816000
Contribution	640000	544000	544000	544000
Fixed cost	50000	50000	50000	50000
Profit	590000	494000	494000	494000
PV ratio	40	40	40	40
Breakeven point	25	25	25	25

Conclusion

Strategic management accountant is the key person who handle all accounting and financial matters of organization. The main role of management accounting is to perform certain level of task such as ensuring company’ financial security, handing essentially all financial matters and assist in overall business functioning It is the forward looking way by merging organizational strategic objectives with management accounting information. As per the research of London based retail store Tesco reflects that by strategic management accounting company monitors competitor’s products pricing and their market share. Afterward, Tesco use information to reduce client’s prices and maintain to provide quality of products. Tesco has also enhanced its loyalty card technique to track client’s choice of action, their value and belief in context with offered products. Strategic management accounting of Tesco evaluates the organizations up stream cost structure and helps company to determine to redefine its pricing strategies. Now in the end it could be inferred that strategic management accountant is crucial person who have all the information of business either related with internal business functioning or external business environment. Therefore, in preparing strategic management plan, Company should take his assistance in significant manner.

PV ratio= Contribution/ total sales *100

Breakeven point= Fixed cost/contribution per unit

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