Critical Analysis of Diverse Information Needs Of the Managers

Question: Explain Critical Analysis Of Diverse Information Needs Of The Managers? Answer: Introduction This report has emphasised on management accounting and information related to this field of study for providing facts and applications in practice. The report has described the major processes and techniques of the management accounting system, which are used in practice by the managers internally for gathering information of the organisation. The report has explained the application of management accounting system to use the organisational resources effectively and efficiently. Further, this report has presented a critical analysis of diverse information needs for decision-making of the managers in the firms. The report has described the application of management accounting to enhance the customers and shareholders' value. The report has provided a real life example by evaluating the same of BHP Billiton. Description of major processes and techniques used in management accounting system Management accounting is applied as an accounting system for delivering specialised information to drive the resource of the business appropriately (Macintosh Quattrone, 2010). The author has defined that management accounting system is capable of capturing internal organisational information for the managerial decision-making activities. In this regard, Drury (2013) has argued that there are several tools and techniques are used by the managers to gather information accurately. Further, the author has observed that management accounting system allows the managers functioning properly by communicating with meaningful economic and financial information. The tools of management accounting system are as follows: Financial planning Financial planning is an important tool for resource utilisation and progressive results in future. The significance of this tool is high as finance has a role to play in the decision-making of the managers (Fleischman et al. 2010). This is a process of projecting the financial outcome in advance by the managers for balancing the fund flows of the operation. Statistical analysis According to Agbejule (2011), accounting data can be large enough for a company. Hence, the managers need to arrange this information in a systematic and logical order for drawing reliable and valid conclusions for a population of data. Such analysis helps the manager to make the decision easily confronting each difficulty of the operation. Cost accounting Cost accounting of a company provides all the cost classification and analysis of the same (Malmi Granlund, 2009). The author has stated that this system helps the manager to control and reduce the cost of the optimum profit margin of the business. Standard costing Management accounting of a company can control the operation through standard costing technique where major activities can be operated within the estimated cost. Cinquini and Tenucci (2010) has argued that standard costing technique provides a target cost of the departments where the managers have to check the variance of the actual cost with the projected cost of important activities of the business. Marginal costing The process of marginal costing helps the manager to determine the unit cost of the production and other important activities. Such technique helps to control the variable cost of the operation for determining the price of the products (Etemadi et al. 2009). Budgetary control This control refers to control the major activities of the business (Hopper et al. 2009). The author has stated that budget is prepared in advance for every major activity of the business so that managers can obtain a fresh target for the future. Fund flow analysis The fund flow analysis of the business can deliver the changes in financial analysis of the business from time to time. The information of fund flow shows the deficiency of financial control of a business. Management reporting Management reporting of a business helps the decision-makers with controlling the financial system (Ajibolade et al. 2010). The author has stated that management accountant can communicate through the management reporting to all the stakeholders. Analysis of financial system The financial statement analysis provides the advantage of evaluating the actual performance of the business. Further, financial statement analysis provides the accumulated information regarding the business from the basic sources. There are many financial statement analyses such as ratio, common size, comparative financial statement, trend analysis and fund flow statement (Li et al. 2012). Application of management accounting information system to use organisational resources The management accounting system has the access to all the information of the business operation. Therefore, such access helps the management to create a managerial accounting information system in practice for controlling and utilising the resources efficiently (Woods, 2009). The author has observed that majority of the companies have developed enterprise resource planning for maximum application and utilisation of such resources. The objective of such enterprise resource system is to efficiently use all the resources in the company (Ward, 2012). According to the author, the management accounting helps the managers to design the enterprise information system as well as helps the managers in decision-making activities effectively. The management accounting provides information on resources, costing and the financial details of the managers. Therefore, this accounting system feeds an enterprise resource system with all types of business information such as the cost of the resources, q uality of decision-making and controlling the inventories of the operation (Sori, 2009). The management accounting helps the managers to contribute with information such as the cost of the raw materials, activities of the operation and others. In such way, a manager can decide on resource planning by controlling the inventories. According to Horngren (2009), the managerial accounting system contributes to reducing the time of ordering new inventories. Thus, a company can order unlimited numbers of orders about a raw material within a period of operation. Moreover, such accounting information helps to reduce the cash utilisation due to over ordering of the inventories. In such way, the management accounting system helps to reduce the working capital cost of the business (Chapman Kihn, 2009). Further, this accounting information system provides the opportunity of utilising the inventories in an efficient way so that optimum outcome of the resources can be obtained in production. Critical analysis of diverse information needs of the managers The information can be classified by three different constructs classification by characteristics, by application and by management hierarchy. The managers need all of this information for decision-making in different levels. The classification of information can be segregated into three categories again strategic, tactical and operational information. Hall (2010) has argued that the characteristics of information provide strategic information to the top management of the business whereas tactical information helps the middle-level managers to control the operation. The strategic information helps the managers to make a decision regarding policy making for a long duration. However, Grabski (2011) has stated that tactical information is necessary for the business as such data provides deep insights to the target of the business from time to time, budgeting, quality control, controlling inventory and production. Another characteristic of information is operational information, which is used for implementing all types of plan to meet the business objectives and goals. Ward (2012) has found that classification by application is necessary for the managers for decision-making in business activities. These are planning, controlling, knowledge, organisational, functional and database information. Planning information is required for the managers in a different level of activities such as strategic, tactical and operational planning. The controlling information is necessary for the attainment and utilisation of important process of a system. Malmi Granlund (2009) has argued that knowledge is information that helps the companies to build the new leaders as well as evaluate the trend of the business. However, the author has said that the management can use the organisational level information for enhancing the knowledge of the managers for internal evaluations. Functional information helps to make a decision on daily activities of a business (Woods, 2009). Li et al. (2012) has found that different types of information help the managers from different hierarchies for making decision about the business. Therefore, the managerial accounting information system acquires all these types of information of a business for the internal managers. According to Hopper et al. (2009), management accounting system can capture and present the diversified information regarding strategic, tactical and operations of a business to all the hierarchies of the management. Therefore, the managers of every level can make a useful decision in business activities to meet the objectives of the firm. The accounting system is connected with the resource management as well as other activities of the business. Therefore, an accounting system delivers the diverse information to the managers for planning and executing properly (Horngren, 2009). The managers obtain information related to production, supply chain, inventory control, costing of materials, operational cost, capital expenditure and working efficiency of different departments in this information system. The author has argued that management information system contains diverse information for integrating activities of different departments of a firm. Description on enhanced customer and shareholder value The managerial decisions are based on three activities investment, business and financing decisions. According to Shih et al. (2010), investment decision and financing decisions are based on value drivers, which have no direct impact on operational activities. However, the author has observed that business decisions are based on the value drivers of sales, profit, pricing, cost management, inventory management and operational efficiency. The value drivers of investment decisions are working capital, capital investment, expansion and others whereas the same for financing decisions are capital structure, dividend policy, tax rate and interest rate. Hence, a company must seek for all these information to maximise the shareholders value. As opined by Anandarajan et al. (2012), information regarding all of these value drivers is present in management accounting system as this system allows the manager to obtain strategic, tactical and operational data. Therefore, management information s ystem helps the managers to take the right decision at different points of business both for long and short-term. The operational and investment decisions influence the cash flow of the business whereas financing decisions guide the cost of capital. Mara et al. (2010) have observed that accounting information system can track and indicate important aspects to the managers for enhancing the impact on cash flow and cost of capital. Thus, change in the impact on the cost of capital and cash flow change the shareholders value at the end. The customer value is created by adding values to the products or the service. The author has expressed that management must look after the desires of the customers as meeting these desires are the main offer in the customers value. Therefore, the goal of the management accountant becomes to enhance the quality of the product for adding values for the customers. further, the management must consider changing the design of products and services for creating customers' values. The management accountant must provide the details in the financial report regarding the impact of the innovations on the business (Simons, 2013). Moreover, this accounting system can monitor the enhanced values to the customers by applying the tool, quality function deployment on daily basis. Improvement of customer value and shareholders value of BHP Billiton BHP Billiton is an Australian mining company that is creating values for the shareholders and customers consistently. The annual report of the company presents the operational, financial and financing values created for the shareholders throughout the year. The financial statements of the company are presented in a comparative manner with details analysis of the top management so that investors can understand the current situation as well as the future condition of the firm. Additionally, the performance summary of the business indicates the safety issues by measuring the recordable injuries in operational fields. The report also provides the current capital structure and business decision by disclosing the dividends, revenue and profit loss of the periods ("BHP Billiton | Downloads", 2017). The company is in the business of mining iron ore, coal, gold and other minerals. Therefore, the quality of these minerals and natural elements are creating essential infrastructure, energy suppl ies and other factors for contributing towards higher living standards of many people in all over the world. Further, the management has strong supply chain network globally for supplying these natural ores to the customers on time. Accuracy in the supply chain is creating values for the customers in the B2B business model. Conclusion The report concludes that management accounting system is important for decision-making of the managers. The managers have to apply some of the techniques and tools for gathering all the information related to the business. Further, this report has explained the application of management accounting system for resource allocation and inventory controlling effectively. The critical analysis of diverse information of a company has provided brief understanding on types of information is required for a manager for decision-making in different levels of the business. The accounting information system is helpful in creating values to the shareholders and customers of a business by reporting the accurate information in the annual report. References Agbejule, A. (2011). Organizational culture and performance: the role of management accounting system. Journal of Applied Accounting Research, 12(1), 74-89. Ajibolade, S. O., Arowomole, S. S. A., Ojikutu, R. K. (2010). MANAGEMENT ACCOUNTING SYSTEMS, PERCEIVED ENVIRONMENTAL UNCERTAINTY AND COMPANIES'PERFORMANCE IN NIGERIA. International Journal of Academic Research, 2(1). Anandarajan, M., Anandarajan, A., Srinivasan, C. A. (Eds.). (2012). 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