Business Strategy and Management Accounting

Business Strategy and Management AccountingChapter 1CompetencyRelate the significance of strategic planning to the success of business and stakeholdersManagerial accountingprovides financial and nonfinancial informationfor managers of anorganization and otherdecision makers.

Financial accountingprovides generalpurpose financialinformation to thosewho are outsidethe organization.

Managerial Accounting BasicsC 1Managerial accounting is an activity that provides financial and nonfinancial information to an organizations managers and other internal decision makers. The main purpose of the financial accounting system is to prepare general purpose financial statements. The purpose of both managerial and financial accounting is providing useful information to decision makers. Both areas of accounting report monetary information, although managerial accounting includes the practice of reporting nonmonetary information. Nature of Managerial AccountingC 1

Here we see a detailed comparison of financial accounting and managerial accounting. In addition to the focus on internal decisions, note particularly that managerial accounting information may follow a flexible format, involves frequent, timely reports, and may contain more estimates and projections than financial accounting.Purpose of Managerial AccountingC 1

Planning is the process of setting goals and making plans to achieve them. Strategic plans usually set a firms long-term direction by developing a road map based on opportunities such as new products, new markets, and capital investments. Medium- and short-term plans are more operational in nature. They translate the strategic plans into actions. A short-term plan often covers a one-year period that, when translated into monetary terms is known as a budget.Control is the process of monitoring planning decisions and evaluating an organizations activities and employees. It includes the measurement and evaluation of actions, processes, and outcomes. Feedback provided by the control system allows managers to revise their plans and take corrective actions to avoid undesirable outcomes.What is Business?An economic entity that aims to create wealth for its owners by using financial, human, and physical capital to deliver products or services that the market demands.Types of CapitalFinancialHumanPhysicalStakeholders in a BusinessIn groups:Define the stakeholder.Answer-Why does this stakeholder care if the business succeeds?Report to class in 5 minutesStakeholdersCustomersSuppliersEmployeesOwnersLendersRegulatorsCommunity

Business StrategyDefinition-An action oriented master plan that guides the business to profitability by successfully accomplishing its mission and achieving its goals.=Profitability=SuccessBalanced ScorecardFinancial ResultsCustomer SatisfactionBusiness ProcessesLearning and GrowthC & F Balanced ScorecardTake a minute and read page 3 of the text on C & F.In small groups, Discuss how C & F would measure a balanced scorecard. What would a balanced scorecard mean for C & F?Report back in 5 minutesStrategic PlanningWhere is the company now?What do senior managers want the business to look like in the next one, five, or ten years?What are the companys goals for the future?How will the company move toward this vision?Answering these questions is the basis for the Business PlanBusiness PlanAnalyzing the BusinessStatement of Mission and GoalsStatement of Action PlanResource RequirementsFinancial ProjectionsAnalyzing the BusinessCurrent Business OperationsHave new markets developed?Does the competition have any weaknesses?Are consumers calling for new products and services?Does the local community provide any new opportunities?Are there any new laws or regulations that might favor the company?Internal opportunities-existing structure, processes, information, revenue/cost structure.Critical success factorsSWOTStrengthsWeaknessesOpportunitiesThreatsC & F SWOT AnalysisIn groups, conduct a SWOT analysis for C & F.Report back in 5 minutes.Analyzing the Business-Looking at the FutureFuture Business OperationsRole of Economic Data (Marketing Research) in Strategic PlanningHow fast can the company grow?Cost increasesSize of companys market? Penetration?What consumer trends will affect the companys current products?What business trends will affect the companys products?Who lives in my companys market? Is it growing or shrinking?

Statement of Mission and GoalsMission StatementServes as a guide for decisionsSimple, clear, conciseDefines the business the company wishes to pursueDifferentiates the business from competitorsBroad objectives for long termRelevant to interests of all stakeholdersMission Statement Activity-7 groupsGoalsSpecificTime-based with target datesMeasurable with numeric targetsApplicable to all areas of the company

Statement of Action PlanDivide into ProjectsPurposeScopeContributionResource RequirementsMix of people, machines, and technology required Physical space necessaryNecessary educational backgrounds and skills expected of employees

Financial ProjectionsPro forma Financial Statements (Projections)Balance SheetIncome StatementStatement of Cash FlowsSuccessful Strategic Planning-BarriersFailure to identify critical success factorsFailure to allocate sufficient timeIgnoring what is happening outside the companyFailure to develop achievable goalsFailure of all stakeholders to buy inKISSHomeworkChapter 1 Packet