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Assignment
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Strategic Management Accounting
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Word count: 2,878 words excludin co!er "ae and list of references
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Table of Contents
Page No:
#art a $%&$7
#art b $8&''
(ist of references '2
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Part a
Concept of working capital cycle
Wor)in ca"ital cycle *WCC+ is one of t,e most interal as"ects of a manufacturin
com"any- .ccordin to (onnec)er et al- *2$'%+ wor)in ca"ital cycle is defined as t,e
amount of time t,at it ta)es to turn t,e net current assets and current liabilities into cas,
wit,in a com"any- T,ey ,a!e also mentioned t,at wor)in ca"ital cycle ,as some )ey roles
and contributions in a com"any to critically discuss and analyse cas,, accounts recei!ables,
accounts "ayable and in!entory wit,in t,e com"any a "articular "eriod of time-
/n similar !iew, Saner *2$'$+ ,as defined t,at wor)in ca"ital cycle refers to a cyclic
"rocess in w,ic, t,ere is in and out of money into a business- Saner *2$'$+ also
mentioned t,at t,ere are t,ree ma0or concerns in manain t,e wor)in ca"ital cycle in a
com"any t,at include: ris) manaement, efficiency and li1uidity-
T,us, it is clear t,at wor)in ca"ital cycle is an im"ortant as"ect for a com"any t,at mainly
concern wit, in or out of money durin a "articular "eriod of time wit,in t,e com"any-
T,e wor)in ca"ital cycle can be s,own as follow:
2iure: '-'- Wor)in ca"ital cycle in a com"any
Source: Saner, 2$'$
Major parts of working capital cycle
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/t ,as been re!ealed t,at t,ere are some ma0or "arts of wor)in ca"ital cycle and t,ese
include *3,an and 4ain, 2$$5, (onnec)er et al-, 2$'%6 and Saner, 2$'$+:
Cas: /n wor)in ca"ital cycle, t,e "art of cas, is one of t,e most common and
im"ortant for a com"any to manae t,e business as well as to remain com"etiti!e and
sustainable in t,e defined mar)ets- /t can be said t,at wit,out ,a!in or eneratin
enou, cas, by a com"any in a "articular "eriod of time, it is !ery ,ard for t,e
com"any to sur!i!e and sustain in t,e mar)et"lace- /t can also be said t,at cas, is
termed as t,e blood of a com"any and t,us reard as a )ey "art in strateic
manaement accountin of t,at com"any-
Tra!e recei"ables: Trade recei!ables are anot,er im"ortant "art of wor)in ca"ital
cycle of a com"any- Trade recei!ables are defined as t,e amounts due to a business
followin t,e sale of oods or ser!ices to anot,er com"any and are classified as current
assets on balance s,eet of a com"any- T,us, it is clear t,at trade recei!ables are most
im"ortant for t,e strateic manaement accountin of a com"any-
#n"entory of raw materials: /n!entory of raw materials can be reard as most
im"ortant "art of wor)in ca"ital cycle in a com"any- T,ey are defined as t,e total cost
of all com"onent "arts currently in stoc) t,at ,a!e not yet been used in wor)&in&
"roress or finis,ed oods- /t ,as been re!ealed t,at a com"any may ,a!e some
in!entory of raw materials and t,us it is re1uire to calculate cost for all in!entory in
relation to ensure effecti!e strateic manaement accountin at t,e com"any-
$ork in progress an! finise! goo!s: T,e term 7wor)&in&"roress8 and 7finis,ed
oods8 are most !ital "art of wor)in ca"ital cycle of a com"any t,at mainly focuses on
t,e all materials and "artly finis,ed or fully finis,ed oods at t,e com"any- Based on
t,e wor)&in&"roress and finis,ed oods, a com"any can ma)e rele!ant and a""ro"riate
decisions on strateic manaement accountin at t,e com"any-
Tra!e payables: Trade "ayables are most interal "art of wor)in ca"ital cycle in a
com"any t,at refers to t,e amount t,at t,e customers owe for t,eir "urc,asers to sellers
or su""liers- Trade "ayable also )nown accounts "ayable- /t ,as been re!ealed t,at
trade "ayables ,as )ey influence on eneratin or con!ertin cas, wit,in t,e com"any
and t,us to ensure sur!i!al and sustainability of t,at com"any in its mar)et"lace- So, it
is clear t,at trade "ayables are most !ital "art in strateic manaement accountin in a
com"any-
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#mpro"ement on eac part of working capital cycle at %&' Company
/n accordance wit, identified ma0or "arts of wor)in ca"ital cycle in a com"any, t,e aut,or
would li)e to "ro"ose followin )ey initiati!es to im"ro!e eac, "art of WCC at 9:;
Com"any *Bender, 2$'%6 and Tale)ar, 2$$<+:
#mpro"ing cas at %&': Cas, is termed as life blood of a com"any and for t,is reason,
t,ere is need to im"ro!e cas, and cas, flow wit,in t,e com"any- T,e aut,or would li)e to
mention followin initiati!es to im"ro!e cas, and cas, flow at 9:; Com"any:
T,e 9:; Com"any s,ould ma)e a ood and standard forecast of cas, incomin or
outoin from t,e com"any for a "eriod of time suc, as durin a year6
T,e 9:; Com"any needs to ma)e "ro"er e!aluation of different terms and conditions
on trade "ayable and trade recei!able6
T,e 9:; Com"any s,ould enforce a ood "ayment system or collection system in
order to s,orten trade recei!able "eriod wit,in t,e com"any6
T,e 9:; Com"any s,ould focus on sementation of customers, su""liers and
in!entory in relation to im"ro!e cas, inflow and t,us im"ro!in cas, at t,e com"any6
and
T,e 9:; Com"any s,ould ma)e "riority tas) on im"ro!in cas, at t,e com"any
t,rou, ma)in sure all em"loyees as well as ot,er sta)e,olders understand t,at
"riority tas) at t,e com"any-
#mpro"ing tra!e recei"able: T,ere are se!eral ways to im"ro!e trade recei!able in a
com"any and some of t,e most common and im"ortant ones for im"ro!in trade recei!able
at 9:; Com"any can be s,own as follow:
T,ere s,ould be collaborati!e effort and relations,i" between t,e 9:; com"any and
t,e customers or anot,er business to im"ro!e its trade recei!ables6
T,ere s,ould be effecti!e and a""ro"riate collection systems, "lans and su""ortin
systems in order to collect money from t,e customer or from t,e business by t,e 9:;
com"any6
T,ere is need to de!elo" timely billin and timely collection systems and "rocedures at
t,e 9:; com"any to im"ro!e its trade recei!ables6 and
T,e 9:; com"any may need to ensure effecti!e and efficient use of resources for t,e
collection systems and t,us to im"ro!e trade recei!ables at t,e com"any-
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#mpro"ing in"entory: T,ere are se!eral ways to im"ro!e in!entory in a com"any and t,e
aut,or would li)e to recommend some to im"ro!e in!entory at 9:; Com"any as follow:
T,ere is need to im"ro!e t,e accuracy of sales forecast at t,e 9:; Com"any in order
to im"ro!e in!entory at t,e com"any6
T,ere is need to brea)&down of in!entory into different cateories at t,e 9:;
Com"any and t,us ta)e a""ro"riate initiati!e to ensure effecti!e in!entory manaement
system at t,e com"any6 and
T,ere is need to de!elo" and im"lement stoc) control system and stoc) manaement
system at t,e 9:; Com"any to im"ro!e its in!entory at t,e com"any-
#mpro"ing work(in(progress an! finise! goo!s: T,e aut,or would li)e to recommend
followin initiati!es to im"ro!e wor)&in&"roress and finis,ed oods at t,e 9:;
Com"any:
T,ere is need to de!elo" and im"lement most effecti!e and a""ro"riate su""ly
c,ain manaement system at t,e 9:; Com"any6 and
T,ere s,ould be a fine balance between customer ser!ice suc, as industrial
customers8 ser!ice and t,e 9:; Com"any8s finis,ed oods-
#mpro"ing tra!e payable: T,e aut,or would li)e to recommend some of t,e followin
"oints to im"ro!e trade "ayable at t,e 9:; Com"any:
T,ere is need to de!elo" a rele!ant and a""ro"riate accountin system to calculate
and measure "ayable for a "eriod of time at t,e com"any6 and
T,e 9:; Com"any may use credit card for "ayin due of t,e business and t,us to
im"ro!e its trade "ayable-
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#mplications of te impro"ements of part of working capital cycle on %&' Company
/n case of im"ro!in eac, "art of t,e wor)in ca"ital cycle at 9:; Com"any, it can be
noted t,at t,e com"any may ,a!e some benefits as well as some c,allenes to im"ro!e
t,ose "arts at t,e com"any-
2or instance, it is !ery im"ortant for t,e 9:; to ensure effecti!e and efficient ,uman
resources to calculate and measure all of t,e com"onents and elements of wor)in ca"ital
manaement at t,e com"any-
.not,er exam"le s,ows t,at t,e 9:; Com"any s,ould in!est some money as well as time
to de!elo" and im"lement most rele!ant and a""ro"riate accountin system and strateic
manaement accountin at t,e com"any-
Des"ite of ,a!in some c,allenes and disad!antaes of manain and im"ro!in wor)in
ca"ital at t,e 9:; Com"any, it can be o"ined t,at wor)in ca"ital cycle is an im"ortant
as"ect for t,e com"any to ensure its effecti!e and efficient strateic manaement
accountin-


5
Part b
)ele"ant costs an! income for sutting !own or open part of te business to enable
strategic management accountant *SMA+ to reac !ecision
/t ,as been re!ealed t,at a com"any may need some costs for strateic accountin
decisions and t,us to ensure its better financial manaement and "erformance at t,e
com"etiti!e mar)et"lace-
Based on se!eral aut,ors and sc,olars *e-- Drury, 2$$86 Ward, 2$'26 and =unt and
2owler, 2$$>+, discussion and ex"lanation, t,e aut,or would li)e to re"resent some
rele!ant costs for s,uttin down a business and t,us enable SM. to reac, to decision at t,e
com"any:
. business may loss its mar)et s,are and mar)et "osition if t,e business s,ut down "art
of t,e business and t,is may cost ,ue for t,e business to encounter financial
"erformance of t,e business6
. business may loss number of customers at t,e business and t,us to face loss or less
"rofits?returns from t,e mar)et and t,us t,e business may ,a!e difficulties in financial
manaement and "erformance wit,in t,e mar)et"lace6
. business may loss some talented and s)illed em"loyees due to s,uttin down "art of
t,e business and t,us to face some c,allenes and difficulties in manain ,uman
resources at t,e orani@ation6 and
. business faces some "roblems and c,allenes in financial statement, accountin
re"ort and ot,er features of strateic manaement accountin system at t,e
orani@ation-
T,us, it is clear t,at a business may face some "roblems and c,allenes for s,uttin down
"art of t,e business in terms of bot, financial and non&financial "erformance and
manaement at t,e business and t,us to ac,ie!e its o!erall oals and ob0ecti!es-
T,e aut,or would li)e to mention some rele!ant income for o"en "art of a business and
t,us enable SM. to reac, decision as follow:
. business may increase its mar)et s,are and mar)et "osition and t,us to ensure its
sur!i!al and sustainability of t,e business in t,e ri!al mar)et"lace6
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. business may create customer con!enience and t,us it may lead to ,i,er
customer satisfaction and customer loyalty towards t,e business as well as leadin
to better financial and non&financial "erformance at t,e business6 and
. business may be able to im"ro!e its o!erall wor)in ca"ital as well as its
strateic manaement accountin system to remain com"etiti!e and sustainable
wit,in t,e mar)et"lace-
T,us, it is clear t,at a business may ,a!e some benefits to o"en "art of t,e business eit,er
in financial or non&financial or bot, "ers"ecti!es-
)ele"ant costs an! income for pricing pro!ucts or ser"ices to enable SMA to reac
!ecision
.ccordin to Bloc,er et al- *2$$<+ "ricin of "roducts and?or ser!ices is one of t,e most
)ey as"ects of a business to create a better "osition as well as better financial "erformance
wit,in t,e defined mar)et"lace-
/n case of "ricin of "roducts or ser!ices, a business may ,a!e some followin costs to
reac, strateic manaement accountin decision at t,e business:
. business may face some difficulties and c,allenes in identifyin a rele!ant ty"e of
"ricin stratey for t,e "roducts or ser!ices6
. business may need to conduct mar)et study to identify "rice for substitute "roducts
or ser!ices in t,e mar)et and t,is may re1uire financial budet and in!estment at t,e
business6
. business may re1uire s"ecialist and ex"ert accountant to calculate or measure cost
for "roducin "roducts or ser!ices and in t,is case t,e business may needs to "ay
,i,er waes or salaries to t,at "ersonnel6 and
. business may face some c,allenes to set "rice for its "roducts or ser!ices due to
c,anes in raw materials as well as c,anes in "rice of substitute "roducts or ser!ices
in t,e mar)et"lace-
/n case of "ricin of "roducts or ser!ices, a business may ,a!e followin income and t,us
to ma)e strateic manaement accountin decision at t,e business:
. business can ac1uire lare number of customers for its com"etiti!e "rice of "roducts
or ser!ices and t,us it can lead to better financial "erformance at t,e business6
. business may ,a!e o""ortunities to increase customer satisfaction and customer
loyalty and t,us to ensure its stron "osition in t,e mar)et"lace6 and
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. business may ac,ie!e its o!erall strateic and accountin oals and ob0ecti!es
t,rou, settin most effecti!e and a""ro"riate "ricin of its "roducts or ser!ices-
T,us, it is clear t,at a business may ,a!e some costs and income for "ricin of "roducts or
ser!ices and t,us to reac, to most effecti!e strateic manaement accountin decision-
)ele"ant costs an! income for pro!uct mi, an! limiting factor analysis to enable
SMA to reac !ecision
#roduct mix is one of t,e most common and im"ortant "arts in strateic manaement
accountin of a business- #roduct mix is defined as t,e total number of "roduct lines t,at a
com"any offers to its customers in its defined mar)et"lace *.t)inson, 2$$7+-
#roduct mix is also )nown as "roduct assortment- /t ,as been reconi@ed t,at "roduct mix
,as been "layin !ital role in yieldin larer sales re!enue and for t,is reason it is !ery
im"ortant to consider rele!ant costs and income for "roduct mix to ma)e strateic
manaement accountin decision at t,e business *(amb et al-, 2$'2+-
Some of t,e most rele!ant costs for "roduct mix at a business include:
. business may need to "urc,ase more raw materials as well as !ariety of raw
materials for "roduct mix at t,e business6
. business may need to de!elo" most effecti!e and a""ro"riate su""ly c,ain
manaement system for "roduct mix and t,us may need effecti!e manaement of
,uman resources and ot,er resources at t,e business6 and
. business may face some c,allenes to source raw materials from different "arts of
t,e world and t,us may incur ,i,er trans"ortation and loistics costs at t,e business-
Some of t,e most rele!ant incomes for "roduct mix at a business include:
. business may offer wider rane of "roducts for its customers and t,us may enerate
more returns or more sales of "roducts in t,e mar)et6
. business may ac,ie!e better financial "erformance because of larer selection rane
for its customers in t,e mar)et6 and
. business may ensure its lon&term sustainability and financial strent, wit,in t,e
mar)et-
.ccordin to Drury *2$$8+ limitin factor analysis is concern wit, maximi@in
contribution for an orani@ation, by allocatin a scarce resource t,at exits to "roducin
oods or ser!ices t,at earn t,e ,i,est contribution "er unit of scarce resource a!ailable-
So, it is clear t,at t,ere may ,a!e some costs and income for limitin factor analysis in a
business- 2or instance, a business may need to "re"are most rele!ant and a""ro"riate
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financial "lannin and financial budet to allocate resources and in t,is case t,e business
may re1uire some costs suc, as "ayin ex"erts, conductin internal and external analysis
etc-
W,ile, limitin factor analysis can ,el" an orani@ation to identify most a!ailable
resources at t,e business and t,us to ensure t,eir o"timal and sustainable uses at t,e
business to ensure better financial "erformance as well as better strateic manaement
accountin decision at t,e business-
T,us, it is clear t,at t,ere are some costs and income for "roduct mix and limitin factor
analysis and t,us to ma)e strateic manaement accountin decision at t,e business-
)ele"ant costs an! income for making or buying !ecisions to enable SMA to reac
!ecision
. business may need to ta)e decision on ma)in or buyin "roduct in relation to remain
com"etiti!e and sustainable as well as to ensure its better financial "erformance at t,e
business- /n t,is case, t,ere may ,a!e some costs and income for ma)in or buyin
decisions at t,e business-
Some of t,e most common rele!ant costs for ma)in or buyin decisions at a business
include:
. business may re1uire finance w,et,er to ma)e or buy "roducts or oods at t,e
business6
. business may need to "urc,ase raw materials for ma)in "roducts or may "urc,ase
"roduce oods from su""liers and in bot, cases t,ere may need s"end money by t,e
business6 and
. business may need to o t,rou, some strateic analysis by t,e ex"ert "ersonnel as
well as may need to conduct mar)etin researc, t,at may cost for t,e business-
Some of t,e most common rele!ant incomes for ma)in or buyin decisions at a business:
. business may ac,ie!e economies of scale in "roduction or ot,er feature at t,e
business eit,er by ma)in or buyin "roducts at t,e business6
. business may offer wide rane of "roducts t,rou, ma)in or buyin for its
customers and t,us can increase mar)et "osition as well as ,i,er sales of "roducts in
t,e mar)et6 and
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. business may im"ro!e and en,ance its o!erall strateic and financial "erformance
t,rou, ma)in or buyin "roducts at t,e business-
.lt,ou,, t,ere are some costs for ma)in or buyin, a business may be able to underta)e
some most effecti!e and a""ro"riate decisions on strateic manaement accountin and
t,us to ensure better financial "erformance at t,e business-
-ist of references
.t)inson, .- .- *2$$7+- Management accounting. <
t,
edition- Aew Del,i, /ndia: Dorlin
3indersley */ndia+ #!t- (td-
Bender, B- *2$'%+- Corporate financial strategy. 5
t,
edition- Cxon, D3: Boutlede-
Bloc,er, et al- *2$$<+- Cost management: a strategic emphasis. Aew Del,i, /ndia: Tata
McEraw&=ill Fducation #ri!ate (imited-
Drury, C- *2$$8+- Management and cost accounting. Mason, DS.: Sout,&Western Cenae
(earnin-
3,an, M- :- and 4ain, #- 3- *2$$5+- Financial management: text, problems and cases. 5
t,
edition- Aew Del,i, /ndia: Tata McEraw&=ill #ublis,in Com"any #ri!ate (imited-
(amb, C-, =air, 4- and McDaniel, C- *2$'2+- Essentials of marketing. 7
t,
edition- Mason,
DS.: Sout,&Western Cenae (earnin-
(onnec)er, 4-, #etty, 4-, #alic,, (- and =oy, 2- *2$'%+- Small business management:
launching and growing entrepreneurial entures. '7
t,
edition- Connecticut, DS.: Cenae
(earnin-
Saner, 4- *2$'$+- Essentials of working capital management. Aew 4ersey, DS.: 4o,n
Wiley G Sons, /nc-
Tale)ar, S- D- *2$$<+- Management of working capital. Aew Del,i, /ndia: Disco!ery
#ublis,in =ouse-
Ward, 3- *2$'2+- Strategic management accounting. Cxon, D3: Boutlede-