Accounting and planning strategies
A few accounting growth strategies include:
- Expand through profits.
- Accelerating income.
- Building strategic business relationships.
- Diversifying business operations.
- Streamlining current production operations.
These growth strategies depend on the size and strength of ongoing business operations.
Strategic management accounting is about having an accounting system that checks, accommodates, supports, and controls your strategic management goals.
Strategic Planning and Management
Strategic planning is developing and defining a big-picture strategy for how your business will succeed. Internal and external factors and how all elements will work together are analyzed. Those factors might include your customer base and competition, your business’s culture, and the strengths and weaknesses of your staff, among others.
Strategic planning typically starts with three questions.
- Where is my business now?
- Where do I want it to be?
- How am I going to get there?
Strategic management is about managing your business to carry out the plan you defined in response to “How am I going to get there?”
Strategic Management Accounting Defined
Accounting is, of course, managing and analyzing your company’s finances. Strategic management accounting has about as many definitions as letters in the term. Nevertheless, the bottom line is that strategic management accounting implements an accounting system to examine, accommodate, and command your strategic management goals.
That is not all it does. Strategic management accounting can also help develop your goals. Accounting’s role would be to supply the financial data to management to ensure the “getting there” plan is doable.
A good plan, well-informed management, and a solid management accounting strategy are not static. Entrepreneurs must adapt to changes, such as new regulations affecting their business and new procedures that competitors carry out. Factors such as these may affect how you spend or pile your cash. Consequently, the accounting will play a critical role.
Management Accounting Strategy Examples
Let us say that part of your business strategy is to overtake competitors by selling the same products at a deep discount. To implement this strategy, you must take advantage of wholesale volume discounts by buying large shipments to pass on the refund to your customers.
Accounting’s role in the planning process would be to run the numbers to make sure that the discounts you want to offer your customers are not so deep. Consequently, that makes you lose money. Accounting can then figure out where the funds will need to come from so that you can buy large quantities of products. They would also look at whether the cost of renting a warehouse to store the extra inventory will disprove the profit that this plan could generate.
You get the picture. You may not have labeled this process “strategic management accounting,” but that is what it is. If your goal is long-term growth, it is inseparable from strategic planning and management.
Accounting Strategy Definition and Education
A couple of common reasons that strategic plans fail are that the goals could be more realistic or need more resources to carry out the projects. Strategic management accounting can help prevent this by providing a reality check and ongoing analyses of costs versus revenues. In fact, in any accounting strategy definition, these functions would be at the top of the list.