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Research and Analysis - Memorandum
Question: Select a newspaper / magazine article which raises management accounting problems regarding a specific organization, which require a solution.
Write a memorandum addressed to the board of directors of the organisation chosen.
Sub: Management Accounting Techniques for Management Issues
This memorandum describes accounting issues in a particular firm and the management accounting techniques to curb the issues for improving the performance of that firm. This memorandum will help to understand the importance of the management accounting practices and techniques for resolving the issues come while working a firm in the market.
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The review of the article, published on dated 1st February 2018and prepared by Sue Mitchell, "Wesfarmers' Coles strategy questioned after poor supplier report card" in "AACS ". This article reflects the major fault of management accounting practices in the retail and consumer services sector in Australia. The role of the management accounting practices for improving reputation and financial performance can be well understood with a review of this article (Mitchell, 2018).
Coles Supermarkets Australia Pty Ltd was established in 1914 in Melbourne, Australia and trading in the name of "Coles" which is an Australian supermarket along with retail and consumer services chain (Coles, 2019). The company has several management accounting issues that result in loss of reduction in the EBIT around 18% with a reduction in the reputation and faith among the stakeholders. The company has not followed proper accounting standards for revenue recognition and wrong practice to customer services. It reflects the importance of management accounting techniques for controlling such incidents for improving profitability and reputation (Mitchell, 2018).
Management accounting is important for providing useful information regarding operational strategies and tactical strategies development. This accounting provides relevant and needs information and data to the management for making decisions to handle the operational and tactical issues and activities (Sisaye, 2015). Management accounting is important for making a decision to improve the operational and financial performance of a firm.
Management Accounting Issues
The review of the article provides the following main management accounting issues given below:
Lack of Proper Following of Accounting Standards
The management accounting of the company is failed for proper maintaining the quality of service to the customers. The management accounting has an issue of the poor performance almost across the board on the basis of 45 suppliers survey with the ineffective marketing strategies and low customer-facing metrics. The poor performance of Coles can be compared witha benchmark company in the industry through the given below graph:
The standards of Coles is lower than Woolworths in all sectors including strategies, quality, performance, and services (Mitchell, 2018). The reporting standards of the company are not proper for reporting working standards to a higher level managerial body for controlling unregulated and fraudulent management accounting practices (Ryan, 2018).
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Lack of Strong Internal Control
The company has no effective internal control that results in the loss of following prescribed standards and employees are free to do at their will. The proper code of workings is not implemented in the working environment so that the employees cannot overcome for providing their services to the customers (Sisaye, 2015).
Lack of Proper Reporting Standards and Structure
Reporting standards of the company are not proper because of lacking information availability provision to the higher level managerial bodies along with the other regulatory bodies for the misconduct of the company. Furthermore, the management accounting has an issue of lack of proper control over the activities of the employees because the issues from the product reviews on complaints from the customers are not noticed
Lack of Proper Training and Skills Programs
The company also no proper training and skills improvement programs for proper maintaining records and reports for the purpose of providing the right and accurate information to the users for proper decision-making habits. It also improves knowledge of employees for long term growth with genuine working practices through records and the documentation for the overall performance analysis,
Lack of Effective Coordination Among Staff
The company also has a lack of proper coordination among the different level of management because of no information to the top level management such as gross negligence. It clearly supports the lack of the proper documentation and communication channel for working efficiency improvement with proper coordination of efforts.
Management Accounting Techniques
The management accounting techniques are helpful to control such incidents through establishing a proper channel of reporting standards and communication channels for the purpose. Following the management accounting techniques that can be used by Coles for controlling such incidents resulting in a downward trend in the performance growth:
Planning and Budgeting
The company should work on planning processes that need information and data which results in the appreciation in the reporting standards. The proper planning provides targeted profitability with the legitimate means rather for improving quality and standards of products and services to the customers with the effective marketing strategies. The budgeting is important for the evaluation of the performance of each and every factor used for the business including the human resources (Sisaye, 2015).
This technique is one of the most appropriate techniques in case of the company for removing such incidents because of fear among the employees of wrongdoings in the records of the company. The employees are always aware of the reward for the best performance encouraging goods practices of workings and reporting standards among the staff for the purpose (Adams, 2006).
Effective Internal Control
The company should focus on internal control with the proper set of the workings through the proper channel of communication. Effective internal control is one of the major management tools for setting all standards of working and documentation for the purpose. There is a need to impart proper training to the staff for improving performance (Adams, 2006).
On the basis of a review of the aforesaid article review, it is clearly evident that the management accounting techniques are important for improving the overall performance of the business. The company should adopt planning and budgeting technique for removing such incidents of misbehavior and wrong accounting practices for revenue earnings from services and products and service to the customers. The company should focus on performance measurement of each and every staff members so that the proper practices of accounting and business conduct standards can be maintained at a high level. The company should make proper arrangement for imparting skills and knowledge to improve the working efficiency for improving the performance for long-term growth and survival in the market.
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