Strategic management accounting is about supporting businesses internally and help them improve their performance. SMEs are mostly owner managed and most of them employ a bookkeeper for data processing requirements and an external Accountant to prepare and file statutory accounts and tax returns. In recent times many accounting software products increased their capabilities to give the managers a set of key figures to give a snap shot of the business at a point in time.
Strategic Management accounting is vital part of performance evaluation and analysis and pay an important role in planning and decision support.
To drive efficiency and to be competitively positioned in the market SMEs should take actions to get the right skills in place to capitalise on opportunities. The economic and market conditions are tough for some time now and many expect this trends to continue in the near future. Care should be taken when implementing cost cutting strategies to maintain or improve profitability of the business. Understanding the type of costs and their nature is critical when implementing cost cutting strategies.
Develop and adopt a dashboard reporting system of for the KPIs for cost cutting strategy you choose to implement and build a cost awareness culture. Sales variance analysis involve comparing the actual sales of a period to that of another or the actual sales to budgeted (planned) sales. There are two reasons actual sales can vary from previous period sales: either the sales were at a different price from what was in the previous period (sales price variance), or the volume sold varied from previous period (sales volume variance). The sales price variance reveals the difference in total revenue caused by charging a different selling price from one period to another.
The sales price variance reveals the difference in total revenue caused by changes in the quantities sold in different periods.
Using the variance analysis report, businesses can evaluate the financial risk to the company should those trends continue. A follow up to both of those steps may be to create new targets for performance improvement.

Even highly profitable businesses fail to succeed in long run because they fail to manage and monitor their cash flow properly as part of their financial management process.
Every business requires cash to pay their suppliers of goods and services, it’s employees and to meet the financial liabilities like loan repayments and interest charges from financial institutions. Failing to meet the payments due timely for suppliers, lenders and others on time will affect the performance of a business. Cash flow forecasting is a periodic plan that shows when a business receives and pays cash. A simple operating cash flow forecasting begins with the the cash balance in the bank at point in time. Net cash flow is the amount of cash business able to generate or loose during a period carrying on a business activity. Cash flow projections will help a business to know the cash flow situations in advance and manage it’s activities accordingly.
Monitoring the forecasted net cash flow position at the end of each period is an essential part of the financial management of the business. The most effective way to find this direction is through KPIs or key performance indicators. In larger organisations with diverse finance functions dedicated management accounting function plays a significant role in analysing and generating management information to help decision makers to manage the performance and risk management aspects of the business.
Both these disciplines does not provide the SMEs owners the forward-looking information to help them measure their businesses performance. However they don’t cater for helping business owner to make decision in a specific business cases. Engage a management accountants or demand for these services from your external accountants, it’s key to your success and sustainability.
Cutting corners to gain short term performance will have long term affects on the business and could well damage the corporate infrastructure and culture. A proper financial & non financial analysis of the costs will help businesses identify and understand their inefficiencies and focus areas for cost cutting.

Marketing, selling and distribution costs (Marketing, selling, after sales, advertising, freight costs etc.).
Bench marking techniques will also help implementing this strategy and employ best practices with in the business.
Another is to address the reasons behind the significant variances identified in the variance analysis report. Cash flow management is a key aspect of financial management of a business planning its future cash requirements to avoid crisis of liquidity. If a business fail to pay it’s suppliers on time it will affect replacing their stocks on time and therefore the business will loose some potential sales.
The next step is to predict the cash inflows, which are the cash receipts from customers and other receipts like interest received on deposits, receipt of dividends etc.
It will help the business to negotiate with it customers and suppliers and invest its positive cash flows to generate more profits to business or distribute dividends to it’s shareholders. And in many cases of functionalities of the software is not known to the user or turned on to help the decision maker. Many high performing SMEs are demanding for better management information and focusing on changing their internal reporting.
And they are responding to these conditions with cost cutting measures to maintain profit margin and to survive in the market place. The cash out flows are the payments made to staff, suppliers of goods and services and repayment of loan and interest charges to financial institutions.

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Comments to Business management and accounting careers


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