Planning, control, and decision making are important aspects of the management process. These are essential activities of the manager that should enable the workers fulfilling the objective of the organization. Planning is defined as the ability of the manager to formulate activities aimed at achieving organizational goals. It requires clear objectives and identification of methods to achieving such goals. Controlling, on the other hand, is the managerial activity involved in monitoring and the implementation of the organizational plan and takes corrective measures where applicable (Bhattacharyya, 2011). This stage involves ensuring that organizations plan is implemented to the fullest. Lastly, decision making is a managerial role that involves choosing the best solution among many alternatives. It is worth understanding that this administrative role is collaboration between planning and controlling. Managers must ensure that the quality of decisions made is top notch to enable improving efficiency and productivity of the organization.
Importance of planning
Planning is an essential managerial role in the growth and sustainability of an organization. It helps the organization in defining its objectives and the course of action aimed at realizing the organizational goals. The process requires the manager understand the current position of the organization and identify areas of improvement for better future of the organization (Chapman, Hopwood & Shields, 2007). The most important aspect of planning is creating a competitive advantage for the organization. Through reviewing the current strengths and weaknesses in an organization, the managers can determine the industry position about the competitors. The management of an organization should analyze competitors’ weaknesses and craft marketing strategies that take advantage of such weaknesses.
Management accounting will be significant since it provides data on the past performance of the organization. This data will be critical in planning the model for future performance. It is also imperative to note that the managerial accounting helps in establishing the budgets essential in the planning process. The process ensures that there is coordination between the short-term and long-term plans of the organization aimed at successful operations of the organization. The management process also involves harmonizing various plans into one general plan that guides the overall performance of the organization (Chapman, Hopwood & Shields, 2007). The approval of the planning process will require accounting information to make essential plans regarding sales, marketing and the overall spending plan for the organization.
Importance of controlling
Controlling is another critical component of managerial accounting. The process involves the comparison between achieved and planned performance in an organization. Management of organizations should be able to detect deviations from the plan and take appropriate corrective measures for the betterment of the organizational growth (Bhattacharyya, 2011). Management must have relevant control parameters and designing efficient finance processes to determining the controlling methods, systems and instruments.
Management accounting is useful in the control process since it draws up performance reports that compare the actually budgeted revenue for each responsibility center. The control parameters are relevant since they warn the managers against some activities that are not according to the plan (Chapman, Hopwood & Shields, 2007). Identification of such events will be critical in ensuring that the goals and objectives of the organizations are achieved as scheduled. Accounting management also assists the control function of management by providing immediate action measures and problem identification.
Importance of decision-making
Managers are always required to make decisions regarding the daily processes in an organization. The process involves deciding the best solution from a set of different alternatives. The decisions made by the organizational management mean a lot to the planning and controlling process in the organization. Correct decision making requires a collection of right information and gathering the information in time (Bhattacharyya, 2011). Most of the valuable information is achieved through the company’s accounting processes that give an insight to the managers on the quality of decisions to make.
Management accounting is necessary for the organization to determine what should be sold and how the sales will be made. Relevant cost analysis is important in making the sales decisions. Sales decisions require the organization to understand the production costs and sales and decide on the one with maximum benefits. It also helps to determine where an organization should focus the marketing efforts of an organization. Relevant cost analysis can also be essential in making decisions regarding the addition of product lines or discontinuation in some operations within the organization (Chapman, Hopwood & Shields, 2007).
Managerial accounting will also be necessary in making decisions regarding what products to sell. The organization is expected to make vital decisions concerning the choice of persons whom to sell their products. Such essential decisions are reached at through activity-based costing techniques. This process enables the management in determining the optimum activities required for effective production and determining the product line that best fits the organization. This process will help managers decide on promotional and advertisement modes that will lead to maximum profits for the organization.
Application in manufacturing firm
Managerial accounting can be easily integrated into the management process in a manufacturing firm. For instance, a manufacturing firm will have to make decisions that will make maximum profits for the organization. The management is required to make a choice regarding the best product to manufacture that will ensure guaranteed profits for the firm. After deciding on the product to manufacturing, the management must also make decisions regarding the prices to charge for the products that will make the organization realize a competitive advantage over its competitors (Chapman, Hopwood & Shields, 2007). Price determination will be greatly influenced by the manufacturing costs and prices of raw material that will make cost accounting very critical. Managerial accountants will be required to perform a cost analysis for certain products and divisions. Varied and fixed costs incurred in the manufacturing process will be essential in price and product determination in the manufacturing process. Critical information from the managerial accountants is essential in planning, controlling and decision-making functions in a manufacturing organization.
Bhattacharyya, D. (2011). Management accounting. Noida, India: Pearson.
Chapman, C., Hopwood, A., & Shields, M. (2007). Handbook of management accounting research. Amsterdam: Elsevier
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