The role of international management accounting in global organizations intensifies with rising levels of uncertainty, and competition, and the alarming speed of change. The need for data-backed insights to arrive at optimal decisions becomes increasingly critical for top management loading up the hands and desks of international management accountants. Some of the biggest trends international management accountants must watch out for are:
1. Wider analytical scope – products, channels, and customer profitability
A problem arises when one shared, indirect expense “pool” becomes the allocator of expenses basis one cost factor, putting aside the principle of causality. Due to this, under- and over-costing are common in service and product lines, due to the issue of zero-sum errors in allocations. The method of activity-based costing (ABC) looks at expenses and connects them to costs, mapping them with activity and resource drivers. This unearths costs often hidden by traditional methods, and is most certainly a better method.
Given the narrow differentiation between products from competing suppliers, their service standards and offerings become significant differentiators for customers. Better services often translate into stronger competitive advantage. Marketing and sales must target this, along with profitable sales growth, with the latter requiring expenses below the product gross profit margin line to be tracked and managed.
Cue for international management accountants: Sales and marketing require inputs from management accounting. This will help the company to know which customers it needs to focus on.
2. EPM and management accounting – working together
EPM combines more than one method to help execute corporate strategies with better control and higher profits. Management accounting will work more closely to provide the best inputs for the EPM system.
Cue for international management accountants: An EPM system has more than one component, all of which must work in sync to get the desired output.
3. Predictive accounting gains ground
Often, employees and managers seek inputs different from what management accountants put out. The need increasingly is for cost projections and the underlying reasons, not so much a look to the past. Management accountants can make their value higher by moving from financial accounting to cost reporting to decision support with cost planning. This ultimately brings the spotlight on economic analysis, and compels an analysis of required changes in expenses and associated service mixes.
Cue for international management accountants: Managerial economics will gain in importance, with management accountants providing more future-focused inputs.
4. EMP with business analytics
The rising volatility of the business world makes the case for business analytics even stronger. Good analytics can endow a firm with great and sustainable competitive advantage, more so than older metrics such as lower costs or better features. It can also lead the firm down new thinking paths and prepare it better for the future.
The fourth trend: Analytics with accounting offers a strong competitive edge.
5. Combine different methods of management accounting
Lean accounting or ABC – what’s better? The debate rages on, but a good choice might be to combine more than one method, to suit differing purposes of different teams.
Cue for international management accountants: Choose an accounting method or combination suiting differing needs within the organization.
6. Treat IT and shared services as a business
Increasingly, organizations are looking to use management accounting for internal chargebacks – for example, invoicing for services provided internally to internal users. Invoices for line-item IT services create a service provider market for pricing, which helps to establish transfer prices basis cost consumption rates for service level agreements (SLAs).
Cue for international management accountants: Management accounting must help to treat internal IT and shared services as a business.
7. Behavioral cost management requires better skills
Advocates of progressive management accounting practices often face roadblocks on the path to implementing their ideas. They need better capabilities and skills in behavioral change management. The barrier is no longer technical or data-based but behavioral, with a resistance to change or accountability often coming in the way.
Cue for international management accountants: Progressive management accountants need to demonstrate and convince coworkers of the merits of their methods.