The nature of business environment has changed drastically during the past few decades. The reasons were several: increasing international competition, deregulations, environmental issues, development of information technologies and the most importantly – the increasing competitive environment. Therefore, the role of management accountants has changed remarkably.
Throughout the history of accounting, greater attention was always set on the development of the accounting tools and practices rather than to the roles. Academic investigation of the accounting roles has emerged more recently. In the modern era, there is an array of expectations and challenges faced by the whole accounting profession.
Future accounting practices will be more customer-driven, emphasis will be made on the customer satisfaction. Organisations are already concentrating on high quality of the products, low costs, time efficiency and innovation. Product life cycle is shortening ever since the intensive global competition, new technologies are emerging every year and customer needs are more demanding than ever before. It is most likely that management accountants will be required to offer strategic and financial advice.
Organisations need to deliver results in order to survive highly competitive and constantly changing business environment. Accounting is not seen anymore as a ‘bean-counter’ role that is only about helping the business to understand the financial implications of operational decisions. Finance department has to adapt in order to meet the requirements of the evolving business environment. The future role of management accountant will be the ability to appraise the benefits, issues or costs of different supply chains and report appropriately. Collaboration with the other parts of the business is happening through the finance business partnering (Robert Half Management Resources, 2012).
Finance Business Partnering (FBP) helps the business to improve its financial position by understanding the operational decisions. In order to be able to provide such insights, management accountants need to be able to provide critical insights. First of all, in order to achieve this, finance staff should have an influence on business decisions by having close partnership with senior decision makers suggests PWC (2009). KPMG (2009) report about the Mastering Finance Business Partnering goes even further, suggesting some of the FBP roles.
• The role of interpreting, explaining and driving performance within the business.
• To be aware of the competitors and economic context
• To support and influence of strategic decisions
• Advise on key business planning assumptions
• Provide ad-hoc analysis and insights on specific issues
This approach has a major limitation as it is not grounded in primary research, but instead relies upon subjective evidence, a theoretical assumption. In order to be prepared for the future outcomes, fundamental understanding of the subject matter is essential.
Professional accounting body, such as Institute of Chartered Accountants in England and Wales (ICAEW) draws this fundamental perspective. It suggests that the foundation of future management accountant role lies beneath of understanding the business.
How can future Coop’s Management accountant understand the business?
1.Through understanding Co-op’s strategy, its competitive environment, commercial drivers, systems, culture. Broader views are also very relevant, such as political, economic, legal and social realities. For example, MA should have a deep knowledge about the impact of BREXIT on the UK insurance industries; impact in the financial investors space and so on.
2.By talking with internal and external stakeholders, using formal or informal opportunities to build up strong relationships with them. MA should be also capable of prioritising important stakeholders on a matrix of influence and relevance to finance department.
3.By using management tools. For example, Porter’s Five Forces of competitive positioning. It covers broad areas by looking at different aspects of possible future outcomes: new entrants (დაკრძალვის ბიუროს ახალი კონკურენტი რამე), substitute products or services, bargaining power of customers and suppliers, market rivalry. PESTLE or SWOT analysis are another examples.
It must be noted that, accountants have been trying to fit finance business partnering role for many decades already. FBP is not a new trend or something that companies are not aware of. It is already considered to be a traditional approach and many does not see the future development of this role (წყარო რამე). On the contrary, it is anticipated that, due to the impact of artificial intelligence graduate recruitment of auditors and accountants is going to fall. Steve Varley, chairman and managing partner at the Ernst and Young says that EY is investing significant sums of money on technologies in order to make improvements to audit tools. “Technology change happens more slowly than you might think, but when it hits you, it hits you twice as hard.” (https://www.icas.com/ca-today-news/interview-steve-varley-ey-chairman). Technology improvements will enable finance to connect with the business by delivering paperless transactions with embedded controls and auditability (PWC, 2015).
In short, further investment in technology should be prominent for the future benefits. An example of how Co-op could achieve this development is through further investment in Enterprise Resource Planning System (ERPS). Introducing more business-oriented finance tools and techniques may enhance finance’s position. Customer profitability analysis and competitor analysis can both enhance the core understanding of the business operations and demonstrate finance’s ability to be outward looking. ERPS is one of the advanced IT application that had a considerable impact on business information systems. It collects all the information flow within a company. A research by Grabski et al, (2008) about the experience of a number of companies going through the process of ERP systems implementation and operations, found some groundbreaking results about the changing role of management accountants in the ERP systems rollout. Firstly, time spent on data collection and data analysis were reduced significantly. MA’s were more involved in business decision making, there was also a change in focus from historic to forward looking analysis and implementation process resulted in increased job satisfaction. In another words, ERP systems will allow business processes to be improved. This will be achieved through automation and standardising process. As a result, the role of management accountant is going to change.
Sustainability plays an increasing role in todays world as twenty-first century business has changed. It is like a trend, everyone it talking about it and society is demanding that companies focus on being more environmentally friendly. There are growing number of corporate commitments around renewable energy purchases, recycling and more companies are adopting science-based sustainability goals. Critics of sustainability argue that it destroys shareholder values of the company (x). A study by Eccles, et al for the Guardian Professional Network (2012) compared a matched samples of 180 high and low sustainability US companies. It was found that there is a big difference in financial performance of these companies. Study showed that over an 18-year period, high-sustainability companies outperformed in terms of stock market and accounting measures. Nowadays companies are seeing sustainability as a business opportunity rather than risk. They find that being environmentally responsible improves company’s image and enhances their ability to sell their products or services (Drury, 2015).
A study conducted by CIMA, 2011 found that sustainability requires accountants to “monitor and manage non-traditional data to guide strategic decisions” and the management accountants are ideal candidates for this role. The role of the management accountant in emerging new field of sustainability is as yet not well established. It is suggested that the next generation of management accountants should be able to collaborate with top management in order to achieve financial well-being with community, as well as stakeholder well-being.