Roles and Practices in Management Accounting Today: Results from the 2003 IMA-E&Y Survey. (Cost Management)

By Garg, Ashish; Ghosh, Debashis et al. | Strategic Finance, July 2003 | Go to article overview

Roles and Practices in Management Accounting Today: Results from the 2003 IMA-E&Y Survey. (Cost Management)


Garg, Ashish, Ghosh, Debashis, Hudick, James, Nowacki, Chuen, Strategic Finance


Management accounting is at a critical juncture. Increased competition and uncertain business conditions have put significant pressure on corporate management to make informed business decisions and maximize their company's financial performance. In response, a range of management accounting tools and techniques has emerged.

Given this abundance of solutions, what decision-support tools and cost analytics methodologies are finance professionals employing? And what are the frontier issues in cost management? Surprisingly, there have been few contemporary broad-based surveys that illuminate and identify cutting-edge issues in cost management today. That's why the Institute of Management Accountants (IMA) and Ernst & Young (E&Y) undertook a survey to understand the evolving role of management accountants, the goals of the organizations they serve, and the tools they use to meet those goals. We believe this survey is the first of its kind in the last several years.

During January and February of this year, nearly 2,000 survey responses from IMA members poured in. The response rate of 9%, which is at par with commensurate surveys, reflects strong interest on the part of IMA members to share best-practices information and benchmark themselves against their peers. What's more, more than 200 members indicated that they would like to participate in detailed interviews about industry-wide best practices in management accounting.

KEY FINDINGS

The survey revealed six major findings:

1. Cost management is a key input to strategic decision makers.

2. Decision makers and decision enablers alike identify "actionable" cost information as their topmost priority. (For purposes of this analysis, we presumed that decision makers run the finance or accounting department and decision enablers include all other management accountants.)

3. Several factors impair cost visibility.

4. Adopting new cost management tools isn't a priority in the current economic environment.

5. Traditional management accounting tools are still widely used.

6. Management buy-in, adequate technology, and inhouse expertise in addition to a clear, quantifiable value proposition are important triggers for the adoption of best practices.

Now let's take a closer look at our major findings.

1. Cost management is a key input to strategic decision makers.

Cost management plays a significant role at companies; 81% of all respondents reported that cost management was important to their organization's overall strategic goals. There may be several reasons for this. First, 75% of all respondents indicated the current economic slowdown has generated greater demand for cost management and cost transparency, pushing companies to seek better ways of managing costs and financial bottom lines. Second, the role of management accountants has changed, and they're being increasingly perceived as business partners who focus on key strategic issues well beyond the boundaries of traditional finance. This was evidenced by the result that nearly 56% of respondents agreed that contributing to core strategic issues was a high priority for management accountants.

2. Decision makers and enablers alike identify "actionable" cost information to be the topmost priority.

There was remarkable alignment between decision makers and decision enablers on top priorities facing management accountants. Both believe that the top two priorities for cost managers are to: (1) generate "actionable" cost information and (2) reduce costs and drive efficiency.

The necessity to generate key, timely, and accurate costing information as an aid to strategic decision making was characterized as a high priority for management accountants by nearly 82% of the respondents across both groups. They agreed that generating this information as efficiently as possible was of utmost importance and felt that the information should ultimately be used to accomplish at least one of the following: improve the corporation, change employee behavior, or manage costs more efficiently. …

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