The Advantages of Strategic Management Accounting

Written by jennifer vanbaren
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The Advantages of Strategic Management Accounting
Strategic management accounting offers many advantages for businesses. (Asian business people image by huaxiadragon from Fotolia.com)

Strategic management accounting is a form of accounting using financial information to make decisions and strategies for a business. These accountants use internal and external data to obtain a better picture of the company and industry as a whole. Companies who employ strategic accountants have many advantages with this type of accounting.

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Big Picture

By studying and investigating internal and external information regarding the company, strategic accountants see a bigger picture of the business. Financial information from the company is considered internal information. External information includes information regarding the industry and trends and styles expected in the future. Some things strategic accountants look for are threats of new products entering the market. If they find this out, they work on a strategy to counteract it and determine if this new product is something their company should investigate and possibly manufacture.

Cost Analysis

Strategic management accountants take all of the company's financial information and analyse it. By doing this, they are able to find effective ways of reducing costs for the company. They also have bargaining power with suppliers to find strategies of reducing the costs of raw materials purchased by the suppliers.

After all information is investigated, strategic accountants determine the best strategy needed for the company to improve profitability. If there are places for improvements in the company's budget, strategies are developed. Another part of their job is finding ways to increase overall sales year after year. Companies hiring these types of accountants have a huge advantage over companies not employing strategic management accounting practices, as these strategies give them a better chance of succeeding in their industry.

Consumer Needs

A large part of strategic management is finding out what consumers want. Part of this includes looking into future trends and studying the industry to find out and interpret what products consumers will want in the future. Strategic accountants constantly try predicting future needs of the business and consumers. By determining future needs, these accountants plan their strategies for the business. If their strategies are correct, the company stands to profit substantially.

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