The Disadvantages of Strategic Management Accounting

Written by jennifer vanbaren
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The Disadvantages of Strategic Management Accounting
There are disadvantages to strategic management accounting. (Young business man at office image by dimis from Fotolia.com)

Strategic accounting is a form of accounting that uses internal and external information in making decisions for a business. Strategic accountants are managers for a business that are not involved in calculating financial information of a business, but instead they analyse the information and make future plans for the business.

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Lack of Standardization

Financial accountants follow accounting procedures and principles outlined by generally accepted accounting principles (GAAP). Management accountants, including strategic managers, do not have a set of policies and procedures to follow. Because there are no standards to follow, inconsistencies often appear among such things as benchmarks and evaluations. Strategic accountants form their own standards and therefore information cannot be compared from company to company, because every company does this type of accounting their own way. Every accountant's methods vary and thus companies cannot compare strategic accounting methods as apples for apples.

Focus on Quantitative Information

Quantitative information is information measured in hard numbers, such as dollars and cents. Strategic accountants focus a lot of attention on quantitative information. Information researched by these accountants is very rational. The disadvantage with this is that by only looking at rational information, other pertinent information is ignored. These accountants may determine a new factory should be built in a specific location because wages and taxes are lower; however they fail to take other information into consideration. It is often hard for them to look at the whole picture even though they are supposed to.

Biasness

Strategic accountants create methods for measuring performance and are given a lot of room for subjectivity and bias. This causes a disadvantage to businesses because strategic accountants add their own personal beliefs and feelings into making decisions. An accountant of this sort may place their focus on the wrong factors and may lack vision of the whole picture. Strategic accounting is a very difficult procedure to perform and to do it free of bias requires individuals that can focus on the entire job at hand and take all factors into consideration.

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