Managerial Accounting Principles May Help You Make Critical Business Decisions
By Lyon Wealth Management on March 1, 2018
Managerial Accounting Principles are a combination of clear standards, robust processes, and well-managed performance metrics. They create effective management accounting functions that support strategic decision-making systems and yield efficient operations. Some of the critical questions underlying these successful principles are:
Does the process add value?
Is it necessary?
Can it be eliminated?
Should it be automated?
Who is using the output?
How often is the output used and for what purpose?
Are there routine “fire drills” created by a specific process?
If so, how are they caused and how frequently do they occur?
What roles and responsibilities does the decision process require?
Are they clearly defined?
Discovering Opportunities for Improvement
The key is to challenge every step, every piece of paper, every input and output for effectiveness. A very powerful way to discover opportunities for improvement are as follows:
Conduct Process Walk-Throughs: Meet with all the people involved in the process to gain an understanding of how their work gets done.
Use Best Practices: Implement industry best practices to improve accuracy, response time, data quality, employee performance and compliance with Federal, state and local laws.
Create Process Metrics: Develop and analyze “Key Performance Indicators (KPI)” to measure your productivity, efficiency, and effectiveness against industry standards.
Reward Success: Have milestones along the way to acknowledge people who have performed well especially if their contributions have improved the decision-making process. Although financial rewards are appreciated, recognition can sometimes be a more potent way of inspiring accomplishments.
Implementing Internal Controls
The most important practices that must be implemented right away are proper internal controls. In today’s fast-moving, global economy, security is more important now than ever. We recommend you test your internal controls by having them reviewed frequently by a financial professional.
Copyright 2019 by Randy Stemmer. All rights reserved. No portion of this article may be copied or disseminated without the written permission of Randy Stemmer.
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