Challenges in Management Accounting – A Methodological and Thematic Review

Kalpna Baalwan¹, Kavya P Sarathy¹, V Akarsh¹,Smita Mehendale²

¹MBA Student, Symbiosis Institute of Management Studies, Symbiosis International University, Pune, Maharashtra, India,

²Assistant Professor, Symbiosis Institute of Management Studies, Symbiosis International University, Pune, Maharashtra, India,

*Corresponding Author E-mail: kalpna.baalwan2019@sims.edu, kavya.sarathy2019@sims.edu, v.akarsh2019@sims.edu, smita.m@sims.edusmita12win@gmail.com.

ABSTRACT:

The research focuses on analyzing the challenges in management accounting in present scenario. The study includes non-empirical analysis of the changing trends in accounting process throughout the organizations across the globe. From the effects of globalization to the trend of automation, few attributes of the challenges have been analyzed and composed in this research paper. A thematic approach has been adopted in the research. This included systematic literature review in which 20 papers were identified, followed by methodological review and the three main themes were identified as Globalization, Automation and Evolution of Management Accounting. Analysis began with the study of internal costs involved in an organization and moved on to focus on the cost allocation done in different scenarios. The initial analysis helped us to narrow down on the few major challenges that the accounting has been facing through the years. The outcome of the research suggests the organizations to have a common and uniform approach to the accounting practices and to keep updated with the technological and psychological trends of the society.

KEYWORDS: Challenges in Management Accounting, Bookkeeping Firms, Systematic Literature Review, Thematic Review, Methodological Review

INTRODUCTION:

Management accounting presents information collated through financial accounting by analyzing, interpreting and presenting information. Construction and assembly industries utilize management accounting to designate assembly expense to each product or services offered by it. In a small trade, management accounting faces various challenges and has different responsibilities in an industry.

The main tasks involved in management accounting are compiling, registration and broadcasting financial data from various sectors or divisions. Expense allotment methods require info about direct goods, assembly labor and construction upper limit. Management accountants are accountable for reviewing this instruction for multiple assembly departments, to make sure that only assembly expenses are being designated to products and services. Individual assembly expenses are distorted by non-assembly expenses too.

Nowadays companies face comprehensive contention that compels them to have a differentiating technique in order to become successful in the retail world. Trade always has an aggressive and complicated habitat and is determined by social,technical,economic. and other political factors. To make sure they are able to withstand this complicated trade environment, a firm has to reaffirm the important wisdom and the role of management accounting within the firms. Changes in trade atmosphere lead to rapid changes within the system of management accounting as well. Trade surrounding now has urged permutation and various relevant management accounting usage. Nevertheless, management accounting plays a crucial factor in every managerial, it needs to provide relevant and sensible data to make imperative verdict. This can be defined as strategy based management accounting. The development and the use of strategies “management accounting” and the tactic report to the ambiguity of the environment and its support based strategy based decisions.

SCOPE OF THE REVIEW:

The scope of the review is focused on the challenges faced in management accounting with reference to advances in information technology, manufacturing environment and customer orientation. The advancement here refers to the rapid globalization and urbanization that has taken place over the last few decades.In terms of content our exclusive focus is on understanding how individual factors impact managerial accounting globally. The three variables so found from the review, emphasizes on the growth of supply chain management from a technical point of view. The paper also discusses Inventory management in manufacturing sector and delivery of customer oriented goods, which have been the rising factors or challenges in management accounting.

IDENTIFICATION OF RELEVANT LITERATURE:

In the first phase, we searched for the keywords associated with the theme “Management accounting” on various relevant databases such as Google and Google scholar. These databases were few of the regular search criteria often chosen by the mass for initial segmentation and checking the relevancy of the topic. It provided quality content and relevant search results. The first round of search gave around 400 results emphasizing on the keywords provided. The data which was collected were analyzed and studied with reference to its author, publishing date and the location where the study is conducted. Internal group discussions among the authors were conducted to streamline the central construct.The results of first phase of search led to the second phase, which included addition of relevant filters to the search criteria and channeling to specific databases. The second phase of research was done on “Challenges of management accounting”, which is the central construct discussed over this research paper. These searches were carried out in specific databases like Ebsco, Science direct and Emerald, which gave around 50 results, including abstracts, articles and journals. The abstract papers from these databases helped in streamlining the challenges and narrowing down the central construct of the research to its three main variables as mentioned in the scope of the review. A final number of 20 articles were retained for this review (please refer to table 1 and figure 1 given).

Table 1: Database search criteria in first and second phase

Database	Search criteria	No: of items
Emerald	Scholarly reviewed articles Language : English	50
Ebsco	Research papers, Abstracts Language : English	50
Scopus	Articles Language : English	50
Google Scholar	Journals, research paper andabstracts Language : English	40
Google	Search: Keywords, synonyms, articles Language : English	40
Science Direct	Journals, research paper and abstractsLanguage : English	25

Figure 1: Stepwise identification of relevant literature

METHODOLOGICAL REVIEW:

The methodological approach used by us is a non-empirical, iterative process which focusses on challenges faced in the management accounting sector of an organization. A non-empirical research methodology includes theoretical approach, which does not rely upon any quantitative or qualitative data. To arrive at the research paper, we referred 20 different research articles, which discuss the challenges in management accounting. On the process of referring and shortlisting our conceptual papers, the lot of 50 papers from the selection process, were categorized on the basis of the content discussed. 30 papers were found to have a discussion pattern on the trends and scope in management accounting. The final 20, which discussed about the issues faced in management accounting in current scenario, were chosen as the conceptual papers for non-empirical approach.

Self-administered questions were raised in the team because it being cost effective, whereby variety and diversity can be taken care of and at same time encouraging team to express and share the attributes with respect to management accounting. The questionnaire is divided into two parts where in the first half deals with the technical related and second half of questioner deals with the issues faced by human resources and how this is going to affect the future of management accounting. This study gives us insight about the variables and factors affecting the challenges and difficulties in management accounting.

Figure 2: Factors affecting Management Accounting

Globalization:

Globalization as a challenge to management accounting can be viewed from different perspectives. The need for guidelines to regulate financial reporting arouse due to dissimilarities in the methods of reporting used by different companies, since there are multiple methods of considering a particular item with different degree of acceptance. Thus, there arouse the need for standardization to enable users of financial statement to understand and compare them properly(Olajumoke, 2010).

Business these days encounters a dynamic environment consisting of economic challenges, rapid developments in information technology industries (IT), and the requirements of multiple skillsets. These rapid changes suggest that the work and analysis environment for which graduates are prepared has got modified. The mismatch and imbalance of the reporting practices and lack of proper awareness of these methods are few of the challenges that are being faced in management accounting due to globalization. This issue of multi-lingual, varied economic and multi-cultural is complex in nature anddifficult to manage(Ehab K.A. Mohamed, 2003). Focusing on various faces of reporting practices like systems, processes, information use, accountant’s behavior are few of which can be done in micro and macro levels.(Markus granlund, 1998)

Automation:

We are amidst a major change in outlook, where bookkeeping firms are reinserting themselves into the center of our customers' accounting firms. Advances that streamline work process and mechanize information passage are changing the direction for accounting experts, making a change in perspective that is reviving the traditional administration model and putting control of the exchange level bookkeeping information once again under the control of accounting experts(D Hansen, 2007). Although revival strategies have been exceedingly created and now make use of exceptionally propelled advances, administration bookkeeping frameworks have slacked. Before presenting new cost bookkeeping frameworks, in any case, it is important to have a full proof perspective of training(Choe, 2004). Broad information on costaccounting frameworks were referred and comprehended that mechanical change affects both cost synthesis and cost structure. With regards to the traceability of expenses, there is a move from backhand expenses towards coordinate expenses in organizations with robotized generation(P Scarbrough, 1991). However, it seems that only a limited number of companies are apprehensive about the efficiency of their cost calculation on a long-lasting basis. Additionally, no changes might be identified in the use of cost accounting in judgment making between enterprises with automated manufacture and those with mechanical fabrication.

Evolution of management accounting:

Pressure that arises from employees cost and cost associated with labor, and unavailability of skilled staff has pushed organizations to precisely have a look at their variety of services that they offer, industry combination, and their ranking in their sector compared to other technology or consulting resources. Industries positioning and service sector that generate profit will be under great pressure for enhanced output and results as the competition gets tighter each day. Companies are not going to stop acquiring consulting or advisory firms that go hand in hand with their normal practices to give consolidated solutions to their customers.

Enhancement in career and development in leadership will continue to strive as one of the major requirement for a trained professional employee at the management or business co-partner level shifts its gear into an intense and complex mode. Organizations have no choice but to start making heavy investments in all stages of their firm’s condition, in order to make sure they are competitive and they have succession plan in place. (Frederiksen, 2017) The companies that have seen an elevated advancementvia merging of traditionalcustoms will have to face with great intensity of the issues that are likely to come in mere future. These are likely to lead to more number of mergers of bigger-companies into larger companies. Merging of Companies in an Indian like country will happen at a fast pace and the slightly smaller organizations, like 3I InfoTech or and NR retail, continuing their dominance. More small organizations will get split up due to a lack of partner consensus on succession planning and investing in the future direction of the firm. (Prince, 2015)

LIMITATIONS:

There are few main limitations for this review. The predominant one was the selection of keyword for the search criterion. The keywords selected did give a broad understanding of the topic and efficient literature for review, certain documents have been overlooked. The second limitation is in the approach taken to conduct the review. An empirical approach would have thrown more insight and better results for this study on challenges faced in management accounting.

DIRECTIONS FOR FUTURE RESEARCH:

In 21st century of rapid digitisation we are highly likely to see a scenario where the workforce is cut down in finance departments and automation is going to take over.The advent in technology which on one side makes it easy could lead to problems on other end. Following could be some of the problems:

1) Majority of the manual work force losing jobs.

2) Accuracy of these automations is of great doubt when it comes to complicated accounting.

The future on one side which looks highly bright one side is even cornered with some with great uncertainty and this volatile situation needs some special attention.

Further research on the topic could be done on how automation and manual workforce could go hand in hand without any job cuts which could improve efficiency and at same time not leading to dissatisfaction among people. Research needs to focus on following areas:

1) How to enhance efficiency reduce cost and product offered is maximum.

2) Ensure the Retention of Clients

3) Innovative and Unique strategies towards administration

CONCLUSION:

Progress in restructuring production technology urges a need for appropriate measures to accomplish an efficient management of cost allocations. This necessitates for continuous enhancement of management accounting practices and cost calculation methods. Accounting information as a whole, and management accounting information in specific, has increased significance in the current economic scenario, where the main features are risk and indecision. The future advancements of management accounting and cost calculation are crucial to meet the information needs of management.

REFERENCES:

1. Choe, J. (2004). The relationships among management accounting information, organizational learning and production performance. The Journal of Strategic Information Systems, Elsevier.

2. D Hansen, M. M. (2007). Cost management: accounting and control. googlebooks.

3. Ehab K.A. Mohamed, S. H. (2003). Accounting knowledge and skills and the challenges of a global business. emerald insight.

4. Frederiksen, L. (2017, August 21). Top Challenges For Business Accounting. The Hinge.

5. Markus granlund, k. l. (1998). It's a small world of management accounting practices. Journal of management accounting research, Sarasota.

6. Olajumoke, J. (2010). Effects of globalization on reporting: case study of Zenith bank. SSRN.

7. P Scarbrough, A. N. (1991). Japanese management accounting practices and the effects of assembly and process automation. Management Accounting Research, Elsevier.

8. Prince, R. A. (2015). The Future Of The Accounting.

Received on 21.12.2017 Modified on 13.02.2018

Asian Journal of Management. 2018; 9(1):757-760.

DOI: 10.5958/2321-5763.2018.00118.X