Management Accounting: Types, Techniques, and Planning Tools

Management Accounting
[Student Name]
[Student University]
[Author Note]

Introduction:
Considering the concerns of business accounting is a crucial term directly related to product
development and profitability. There are two broad categories of accounting and they are
managerial accounting and financial accounting. The financial accounting manages the external
factors for the organizations including the stakeholders and investors while the managerial
accounting deals with the internal factors of the organization. Moreover, managerial accounting
evaluates and identify processes required for the internal system of the organizations. So, the
most important tools for this accounting system include budgets, different performance reports
like ROI, sales analysis etc. In this paper, the organization Unilever is selected to discuss the
managerial accounting systems, cost determination process, planning tools as well as the
responses to the financial problems by the tools. The first section explains different types of
accounting systems while the second section applies management accounting techniques for the
cost analysis of Unilever. Again, the third section explains the planning tools for budgetary
control while the fourth section compares Unilever with Nestle in terms of responses to the
financial problems.
1. Understanding management accounting systems:
Company Background:
According to the annual report of Unilever is one of the most popular consumer goods company
who is dealing with 400 brands in 190 countries. The market statistics confirms that "every day
2.5 billion people" use Unilever products and the major household brands (included) are "
Lipton, Knorr, Dove, Axe, Hellmann's and Omo". Apart from including 13 of the 50 world
leading brands the company also has "13 billion Euro brands". The business portfolio is
specialized to use local brand per consumer preference and geographical locations. As an
example, Pureit and Suave in India and USA have a high grip on the local markets and the
overall market position provides 58% of the annual turnover covering all the emerging markets.
According to the recent reports the company works in four business categories. They are
"personal care, foods, home care, and refreshments". The latest business plan in 2017 has
combined the food and refreshment categories and also intended to expand the business.
Moreover, the global value chain of the company works with 161,000 global population and the

code "policies support" the business standard (Unilever.com, 2017). With 70% local market
leadership teams in 90 countries the company are focused on the consumer relevant innovation.
The organizational structure is changed with the implementation of "change 4 growth"
framework which provides a faster and simpler business structure. The key purpose of the
company is to serve " a sustainable living commonplace" where sustainable living plan (USLP)
has low-cost waste, product and packaging policies.
Management accounting & origin:
The term MA can be defined as the process of making accurate and timely financial and
management reports to help the managerial decision making process (Messner, 2016). It differs
from the financial accounting in terms of audience and report structure. The financial reports are
usually annual reports while MA reports are weekly or daily reports targeting the internal
audience.
MA was first introduced in the 1800s. It was then the essential production report for managers
without considering the debt and shareholders. However, with time accounting requirements
become complex and with government regulation, taxes, credits and the MA reports become
more detail and precise from 1900s.
Different types of management accounting:
Wit time the different types of management accounting have been evolved and the changes, in
this case, were observed since the early 1980s. In this context, it is significant that innovative
accounting techniques like "activity-based management, strategic management accounting
or balanced scorecard" are somehow compatible with the changing technological factors.
These comparatively new accounting types are highly supportive of the modern technologies and
new management processes. As an example, the new business cases today requires quality
management with just-in-time productions where activity-based management can be an
efficient influencer. However, there are arguments that the whole process of management
accounting including planning, control, communication, and decisions has changed with these
new processes into an overall resource based value creation process which is way complicated
than the previous roles of simple cost determination and financial controls. Moreover, all the
accounting techniques have specific requirements and they are given below.

Activity-based management: This is a comparatively new process in an accounting environment
and the cost management process here is based on different organizational activities. In simple
terms, the cost analysis depends on activities like production, quality control, maintenance as
well as data processing. As the key aim of this management accounting type is cost reduction,
therefore, it can help the pricing and differentiation strategies of the companies. It is also used for
the performance improvement strategies.
Strategic management accounting: In this case the “external economic information" is
analyzed to get the strategic structure of the business position. As market information is required
for the competitive strategy of the companies therefore for control and plan changes this
accounting policy is highly required. The companies can make cost leadership strategies, profit
margin analysis via this type of accounting process.
Balanced Scorecard: This is another efficient strategic planning and management accounting
process where company purpose, objectives, KPIs and actions are combined. Therefore, BSC can
“communicate the future plans, align daily jobs with strategy, prioritize the product lines
as well as monitor the progress considering the targets". The aspirations, core values,
strategic focus areas, and operational elements can be combined here to provide reports for the
industry, government as well as internal business stakeholders in this process. There are four key
requirements of business which are covered by BSC. They are a financial performance in terms
of financial resources, customer satisfaction in terms of organizational performance, an
internal process in terms of efficiency and quality as well as organizational capacity in terms of
human capital, culture, technology, and infrastructure.
Apart from the processes, there are different methods used for management accounting reporting
and they are discussed below.
Budget report: This report helps both managers and companies to understand the performance
and requirements of cost control. The budget estimation for a financial period depends on the
historical data (actual expenses) of the previous financial periods. Moreover, the managers use
the same to determine incentives, financial goals for the future and to negotiate terms with
suppliers.
Accounts receivable aging: This is a cash flow management tool in terms of customer credit
extension phases. The customer balances are broken into separate columns per time and
ownership and the analysis determines issues in the resource and other collection processes. It