Strategy – a set of policies, procedures and approaches to - Management Control – the evaluation of

business that produce long-term success. mid-level managers by the upper-level

manager.
Strategic Management – involves the development of a
4. Reportorial and Compliance to Legal Requirements
sustainable competitive advantage spells continued success.
- Requires management to comply with the
Strategic Cost Management – involves the development of financial reporting requirements to
cost management information to facilitate the principal regulatory agencies.
management function which is strategic management.
Management Accountant do the following tasks:
Cost Management – practice of accounting in which the
 Scorekeeping or data accumulation
accountant develops and uses cost management information.
 Interpreting and reporting of information (recurring)
Cost management can also rely on non financial accounting.
(recurring means repeatedly happening)
Non Financial Accounting:  Problem solving or quantification of the relative
merits of possible courses of action or
 Productivity recommendation (non recurring)
 Product Quality
Three important guidelines helps management accountant
Cost Management Information - the information that the provide the most value when scorekeeping:
manager needs to effectively manage the firm, profit oriented
as well as not for profit organization.  Employ a cost benefit approach (expected benefit
exceed expected cost)
Management Accounting - involves the application of  Recognize behavioral as well as technical
appropriate techniques and concepts to economic data so as considerations.
to assist management in establishing plans for reasonable  Use appropriate cost concepts for different purpose.
economic objectives.
Management Accountant – provides a system which allows
Product Life Cycle – the time from the introduction of a new management to receive necessary information used in
product to its removal from the market. performing its administrative functions of
Users of Cost Management Information  Planning – involves setting goals for the firm,
 Business Firms evaluating the various ways to meet the goals and
Service, Merchandising, Manufacturing picking out what appears to be the best way to meet
 Governmental units the goals.
Local water district, free check up for citizens,  Controlling – involves evaluation whether actual
scholarship for students performance conforms with plan goals.
 Not-for-profit organization  Decision-making – involves of determination of
Church predictive information for making important business
decision. (recurring and non recurring) (long-term is
Uses of Cost Management Information recurring while short-term is non recurring)

1. Strategic Management Basic Cost Management Perspectives:

- Identifying and implementing goals and
action plans. Strategic Management Perspective
- Emphasis requires an integrative approach  The key to company’s is creating value for the
which combine skills. customers while differentiating itself for its
- Cost management has moved from a competitors.
traditional roles of product costing.  A strategy is a game plan.
2. Planning and Decision-making  Customers value propositions the focal point of a
- Cost management is needed to support company’s should be its target customer
recurring decision.  Customers value premises tend to fall into three
- It involves budgeting and profit planning. broad categories namely:
3. Management and Operational Control - Customer intimacy strategy
- Operational Control – takes place when - Operational excellence
mid-level managers monitors the activities - Product leadership
of the operating-level managers and
employers.
A simplified framework for an Enterprise-wide Risk Controls to Reduce Business Risks
Management Process
1.Develop a formal and rigorous new product testing
program.
Risk Management Top Management's
System Involvement 2. Develop contingency plans for overcoming weather-related
disruptions.
Oversight activities
3. Implement a rigorous budget review process.
Establish goals and Set management policy,
Social Responsibility Perspective
objectives, roles and establish context, set limits
responsibilities, and tolerance. Corporate social responsibility (CSR) – is a concept where
common language, and business organizations consider the needs of all stakeholders
oversight structure. when making decisions. They are responsible not only for
creating strategies that produce financial results that satisfy
 Ensure that process
Risk Management shareholders but also to serve other stakeholders such as
captures all business
Process customers, suppliers, communities and environmental and
risks human rights advocate- whose interests are tied to the
Step 1: Assess risks,  Ensure that all company's performance.
identify source, available tools and
measure methodologies are Process Management Perspective
used Business process – is a series of steps that are followed in
Step 2: Develop/Design
 Review effectiveness order to carry out some tasks in a business. These steps often
action plans
of plans and check span departmental boundaries, thereby requiring managers
Step 3: Implement capabilities to cooperated across functional departments.
Action Plans  Review and evaluate Value chain – is consists of the major business functions that
regular reports on add value to a company's products and services.
Step 4: Monitor and
performance
Report risk Business Functions Making Up the Value Chain
 Evaluate
management
recommendations for Research and Development
performance
improvement.
 Product Design
Step 5: Continuously
 Manufacturing
improve risk  Distribution
management  Customer Service
capabilities
Lean production – is a management approach that organizes
resources such as people and machines around the flow of
business processes and that only produces units in response
to customer orders.
Enterprise Risk Management Perspective
Leadership Perspective
Enterprise Risk Management – is a process used by an entity
To achieve success, organizational leaders must be able to
to identify those risks and develop responses to them that
unite the behaviours of the fellow employee who have
enable it to be assured of meeting its goals.
diverse needs, beliefs and goals to the workplace.
Business Risks
Leaders need to understand how:
1. Products harming customers.
(a) internal motivation,
2. Poor weather conditions shutting down operations:
(b) external incentives, and
3. Inaccurate budget estimates causing excessive or
(c) cognitive bias, influence human behaviour.
insufficient production.
Ethics Perspective 2. Control
Without ethics, the economy would operate much less
efficiently, less product would be available to consumers,
quality would be lower and most likely, process would be 3. Reporting
higher. So, professional management accountants have
developed and implemented a set of Ethical Standards for
4. Accounting
Management Accountants. 5. Other primary responsibilities
Line authority – is the authority to command action or Treasurership – is concerned with the acquisition,
give orders to subordinates. financing and management of assets of a business
Line managers – are directly responsible for attaining concern to maximize the wealth of the firms for its
the objectives of the business firm as efficiently as owners.
possible Staff authority is the authority to advise but not Treasurer – has the custody of cash and funds invested
to command others; it is exercised laterally or upward. in various marketable securities.
Staff managers – give support, advice and service to line In most firms, the treasurer has the following
departments. responsibilities:
Chief Financial Officer (CFO) – also called as the finance 1. Funds procurement
director- is the executive responsible for overseeing the
financial operations of an organization. 2. Banking and custody of funds

Controller – also called as the chief accounting officer- 3. Investment of funds

is the financial executive responsible for management
4. Operating responsibilities related to
accounting and financial accounting.
 Credit and collection
 Inventory management
 Corporate pension and retirement fund

Investor relations

 Insurance
 Compliance with legal and regulatory provisions
relating to funds procurement, use and
distribution as well as coordination of finance
function with accounting function

Institute of Management Accountants (IMA) – is the

principal organization of management accountants in
the United States, has instituted a program to provide
certifications for management accountants and financial
managers. It has developed a very useful ethical code
called the Standards of Ethical Conduct for Practitioners
Controllership – is the practice of established science of of Management Accounting and Financial
control which is the process by which the management Management.
assures itself that the resources are procured and
Philippine Association of Management Accountants
utilized according to plans in order to achieve the
(PAMA) – was established in 1972 as the National
company's objectives.
Associations (NAA) Philippine Chapter, Inc. It is affiliated
Basic Functions of controllership with NAA in New York. It was founded primarily to
provide its members with educational and professional
1. Planning
activities that supplement in the knowledge of
management accounting practices and methods.

Advances in Information Technologies, the Internet

Standards of Ethical Conduct for Practitioners of and E-commerce – this new economy is manifested in
Management Accounting and Financial Management the rapid growth of Internet based firms (the dot-com's
such as Amazon, eBay and E-trade) and the increase use
1. Competence
of the internet for business data processing,
2. Confidentiality communication and sales.

3. Integrity A greater focus on customers - A key change in

increased customer demand for product functionality
4. Objectivity and quality.
5. Resolution of Ethical Conduct two general strategies:
International Certifications a) Cost leadership
1. Certificate of Management Accounting (CMA) b) Superior product through differentiation
2. Certified Public Accountant (CPA) New Forms of Management Organization –
3. Certified Internal Auditor (CIA) management organization has changed in response to
the changes in marketing and manufacturing.
Changes in the Contemporary Business Environment
Changes in the Social, Political and Cultural
1. An increase in global competition Environment of Business – the new business
2. Advances in manufacturing technologies environment requires forms to be flexible and adaptable
and to place greater responsibility in the hands of a
3. Advances in information technologies, the Internet more highly skied workforce.
and e-commerce
Strategic Focus of Cost Management – guided by
4. A greater focus on the customer strategic or long-term thinking, the management
accountant focuses that make the company successful
6. Changes in social, political and cultural environment
rather than just focusing on cost control and other
5. New forms of management organization financial measure.

Global Business Environment – the growth of Phases of Development of Cost Management Systems
international markets and trade are the key
Stage 1: Cost management systems are basic transaction
development that drive the extensive changes in the
reporting se
contemporary business environment The growing
number of alliance among large multinational, the Stage 2: As they develop into the second stage, cost
increasing rade agreements among countries indicate management systems focus on the external financial
clearly that opportunities for growth and profitability lie reporting. The objective is reliable financial reports;
in global markets. accordingly, the usefulness for cost management is
limited.
Advances in Manufacturing Technologies - many firms
adopt the methods applied in some Japanese Stage 3: Cost management systems track key operating
manufacturing firms that produced significant cost and data and develop more accurate and relevant cost
quality improvements sing quality teams and statistical information for decision making; cost management is
quality control. developed.
Speed-to-market - A key competitive edge that med is Stage 4: Strategically relevant cost management
the ability to deliver the product or service faster than information is an integral part of the system.
the competition.
Stage 1 &2: Management Accountant's measurement Third, an accounting system should not be changed
and reporting role. without concurrent, consistent changes in the way
decision rights are partitioned as well as in the
performance rev systems. All three parts of the
Stage 3: Shifts to operational control organization's architecture must be internally consistent
and coordinated.
Stage 4: Management becomes a full business partner,
with the skills of identifying, summarizing and reporting
critical factor's necessary for the firm's success.

Critical Success Factors (CSFs) – are measures of those

aspects of the firm’s performance essential to its
competitive advantage and therefore to its success.

This figure shows the integrative framework for

understanding how the accounting system is used in the
firm's organizational architecture. Starting at the top,
two external factors (technological innovation and
market conditions) affect the firm's business strategy.
The business strategy then interacts with the firm's
organizational architecture to provide incentives for
managers and employees.

Three significant managerial implications are derived

from these observations.

First, before implementing an accounting or other

organizational change important to understand what is
driving the change.

Second, an accounting system should not be adopted

merely because other firms are doing so; they maybe
reacting to a different set of external shocks.