Evolving Role of Management Accountants in British Petroleum

The assignment content discusses the trends and developments in management accounting, specifically for British Petroleum (BP). It highlights three possible future developments: the use of technology to record data, the expanding role of management accounting in enterprise performance management, and shifting towards predictive accounting. The report emphasizes the importance of management accounting in collecting, recording, and analyzing business performance, as well as the role of senior financial officials in utilizing management accounting effectively. It also highlights the need for BP to improve its cost management and reduce unnecessary expenditures.

Accounting
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EXECUTIVE SUMMARY
It has been witnessed that the problems that have been arisen in management control
system may significantly lead to financial losses, declining reputation even it can lead to
organisational failure. The role of management accountants is seen crucial for the organization as
well as business partners. However, using management accounting budgetary control and capital
tool helps British Petroleum in easily reducing the expenditure related to both operating and
capital expenditures. Once the expenditures are minimized, managers have the opportunity to
reduce the price of products and services that leads to generate higher profits. Furthermore,
through the improved versions of management accounting, British Petroleum can easily enhance
the efficiency of overall functioning. Looking at the present level of competition that British
Petroleum is facing, they should emphasis on two new priorities, either improving the quality of
products and services or re-engineering the finance structure. By the means of this, British
Petroleum has started giving emphasis on managing costs of finance so that unnecessary
expenditures can be minimized or mitigated.
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Table of Contents
INTRODUCTION...........................................................................................................................4
MAIN BODY ..................................................................................................................................4
Changing role and image of management accountants over the last three decades....................4
Important behavioural, ethical and social responsibility issues associated with the management
accounting control systems..........................................................................................................5
Management Accounting in supporting decision making, control and performance
management in British Petroleum................................................................................................7
Effectiveness of 'traditional 'management accounting controls with an appraise to possible
future developments in management accounting.........................................................................8
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................11
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INTRODUCTION
Management Accounting is referred as the part of accounting that avails financial and
statistical information to the top level managers that helps in taking effective decisions with
regard to organizational planning, controlling and organizing. In a complex accounting term,
management accounting can be seen as a unit that is used for preparing management accounts
that are required by the internal stakeholders of company (Adler, 2013). The present report is
going to find out and evaluate the most crucial behavioural as well as ethical and social
responsibility issues that are specifically linked to associate with the management accounting
control systems. The report is based on a leading oil and gas manufacturing company namely
“British Petroleum”. Further, the effectiveness of 'traditional' management accounting controls is
assessed along with appraising the possible future developments that are made in management
accounting. With regard to British Petroleum, this report is going to discuss about the way in
which management accounting supports decision making, control and performance management
of the organization and the challenges that can be faced while implementing new management
accounting practices and models.
MAIN BODY
Changing role and image of management accountants over the last three decades
The role of management control system is seen to be crucial for the organization in
managing and controlling operations on the basis of financial and statistical information that can
play a supportive role for decision making (Adler, 2013). It has been witnessed that the problems
that have been raised in the management control system can significantly lead to financial losses
and declining reputation and thus, it can lead to organizational failure. The role of management
accountants is important for the organization as well as for the business partners. In the previous
era, management accountants were responsible for aligning the financial and strategic
information. However, in the present corporate context, it has been witnessed that the role of
management accounts is far more than aligning information (Mistry, Sharma and Low, 2014).
Their role can be seen in decision making of the organization as well as these accountants are
responsible for performing a series of tasks to ensure their company's financial security and for
managing all the financial matters. It can be said that the role of management accountants is
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helpful in driving overall business management and strategic development. Over the last three
decades, the role of management accountants has been evident for collecting, recording and
reporting the financial information so as to observe and analyse the budget and for suggesting
profitable ways of fund allocation (Annual report, 2014). In today's business scenario, the role of
management accountants in British petroleum can be seen for estimating the cost of raw
material, workforce, production, selling and advertising as well as the overall internal cost.
Within the organization, there are major three task that are based on the information of
management accounting such as planning, decision making and control. In respect with British
petroleum, the company requires the information of available internal sources of finance and
availability of finance so that investment decision can be taken. The management accountants
are responsible for providing the information making effective assessment of business
transactions. On the basis of such information, the company can plan out future sales volumes
and can predict the sales. The role of management accountants can be said in supporting tactical
and strategical planning (Boyns and Edwards, 2013). The management accountant working at
British petroleum and the information provided by then is helpful in control over the input
resources such as labour, money, materials, equipment and so on. The report and the specific
information is helpful in making an informed and corrective decision. The management
accountants of mentioned entity are responsible for coordinating with the concerned departments
so that an effective assessment of company's functioning capital and availability of funds can be
done. This information is to be passed to the senior management so that fruitful financial
decisions can be made. In this regard, the role of management accountants is seen in decision
making as well as their role is important in conducting cost accounting, financial planning and
resolving management issues.
Important behavioural, ethical and social responsibility issues associated with the management
accounting control systems
British petroleum is committed to increase the value of internal and external stakeholders.
Therefore, company arranges strategies practices to increase the value of stakeholders. However,
the application of accounting and financial management is important to create, protect, preserve
and increase the value of stakeholders but it involves some behavioural, ethical and social
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responsibility issues that are important to manage the practices of company. The organization is
involved in the oil and gas sector that put a negative impact on environment and it is the social
responsibility of company to conduct proper assessment of impacts of business practices to the
environment and society. Behavioural issue faced by the firm involves behaviours of
management accountants in the assessment of financial and strategic information (Halabi and
Carroll, 2015). The management accounts should be skilled and educated enough so that each
and every transaction and business affairs can be significantly assessed and fruitful decisions can
be made. It has been witnessed that the negative impacts of business practices of BP significantly
put a financial cost to the business (Sustainability Review. 2012). Hence, it is important to assess
the issues that are associated with the environmental practices so that proper cost and benefit
analysis can be done to BP's management accounting control system. The management
accounting of British petroleum assists company in making short term management decisions
that are pertaining to cash inflow and outflow, revenue generation, evaluating resources etc.
Furthermore, it has identified that the environment is affected by the corporate activities of
mentioned entity that is also to be measured for making effective decisions (Steffan, 2008). The
corporate social responsibility practices that are conducted by BP are also to be assessed at the
time by using management accounting tools so that proper and effective report can be prepared
along with using budgeting and forecasting tools. According to the sustainability report by
British petroleum, it has been evident that company would be capable of enduring group through
renewing assets as well as producing and delivering better products and services so that the
needs of society can be fulfilled (Sustainability Review. 2012). However, the changing needs of
people from oil and gas industry can be seen as an issue that affects the effective management of
business affairs and creates complication in decision making. The importance of behavioural,
ethical and social responsibility issues that are associated with the management accounting
control systems are to be considered by the management accountant of company so that and
effective reports can be prepared and the scale of BP’s operations can be managed while
concerning specific sustainability issues (Annual report, 2014). The consideration of ethical and
environmental issues will be helpful in conducting the most applicable reporting. The issues are
to be given the highest level of importance for providing better treatment to stakeholders and to
deliver effective corporate strategy.
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Management Accounting in supporting decision making, control and performance management
in British Petroleum
British Petroleum is one of the leading oil manufacturing and supplying company that
offers its products to different nations. However, operating at such a large level it is essential for
the firm to carry out its each aspect of the functioning in suitable manner (Soobaroyen and
Poorundersing, 2008). Management accounting is one of the aspects that managers have to
execute in the best possible manner. The main purpose of management accounting is to provide
data driven input to the managers so that they can take smart and effective decisions as well as
improve the overall decision making process for the long term. By the means of this, managers
of British Petroleum can understand the actual financial position of business and accordingly
make decision to generate desired results (Kerby and Romine, 2014). In this regard, management
accounting supports decision making by determining what should be sold and how to sell it.
However, at the time of marketing new products of British Petroleum, marketing manager can
take the help of accounting manager who can easily examine the costs of different marketing
alternatives for the product and help marketing manager in selecting the best possible method in
terms of customer reach as well as cost benefits (Kumar, 2011).
In case of performance management, it is also useful and it is becoming more precious
tool for the top level management in order to maintain competitive edge and generating desired
profits. However, using management accounting budgetary control and capital tool helps British
Petroleum in easily reducing the expenditure related to both operating and capital expenditures
(Cokins, 2013). Once the expenditures are minimized, managers have the opportunity to reduce
the price of products and services that leads to generate higher profits. Furthermore, through the
improved versions of management accounting, British Petroleum can easily enhance the
efficiency of overall functioning. However, modifications in management accounting control
system has led the finance managers to simplify the financial statement so that different
stakeholders associated with the British Petroleum can easily evaluate the performance of
business enterprise and accordingly make smart and effective judgement regarding future
contingency (Smith and Jacobs, 2011).
The main aim of management accounting is to provide wide range of quality of
information to the managers and other stakeholders of business so that they can make smart and
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effective decisions. In British Petroleum, controlling can be defined as the comparison between
achieved and planned performance so that variances between actual and estimated can be easily
identified and according manager can take decisions regarding potential measures (Loo,
Verstegen and Swagerman, 2011). Furthermore, it useful for the control process of British
Petroleum because it helps in drawing up performance reports that assist in comparing actual and
budgeted revenue for the each responsibility centre. Along with this, through the help of
management accounting managers of the cited firm can be warned regarding all those activities
which are not according to the plan. Along with this, principles of management accounting assist
the control function providing immediate action measures and identifying problems (Järvinen,
2009).
These are some of the major areas in which management accounting supports the
management of British Petroleum. However, operating in such a competitive environment it is
important for the top level management to make optimum utilisation of management accounting
tools and techniques in order to collect and record financial information so that stakeholders
associated with the firm can easily evaluate entire course of functioning during the reporting
period and make suitable and smart decisions for the future contingency (Mistry, Sharma and
Low, 2014).
Effectiveness of 'traditional 'management accounting controls with an appraise to possible future
developments in management accounting
Management accounting control system is one of the most significant aspects of business
enterprise not from today but from long ago. Entrepreneurs are making valiant efforts to follow
the practices developed by accounting authorities around the globes so that they can carry out the
functioning in effective and efficient manner (Holtzman, 2013). However, there are several
benefits that traditional management accounting control provide to British Petroleum such as it is
highly focused on making future decisions correctly by the means of past financial records or
information. However, traditional management accounting control system also mainly focuses on
looking forwards and was progressive in nature. Along with this, it is mainly for the internal
users such as senior officials and top level management which gives it a free space for not made
by following strict guidelines which in case of financial accounting is necessary (Adler, 2013).
On of the major effectiveness of traditional management accounting is that it provide suitable
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and reliable platform to the accountants or finance managers to record collected information in
accurate or correct manner so that other stakeholders can get suitable information regarding the
position of business and its future growth prospectus so that externally associated people can
make the best possible decisions (Steffan, 2008).
However, traditionally management accountants have focused on the tasks of counting,
comparing, recording and reporting financial information. But looking at the present conditions
of corporate market it is important for management accountants working British Petroleum to
develop more breadth within their accounting approach. In this context, there are several trends
that are possible future developments in management accounting (Boyns and Edwards, 2013).
Firstly, use of technology in recording data has helped the entire course of management
accountants as well as minimized the chances of mistakes. However, with suitable and specific
software of accounting for British Petroleum has helped managers and accountants to record the
information with ease and generate desired results and outcomes. Secondly, the major trend is
that management accounting's expanding role with enterprise performance management.
However, which encourages managers to undertake various strategies such as balanced
scorecards, performance measures and drives based budgeting (Diana, 2013). Thirdly, shifting
towards predictive accounting can be identified through the gap between management
accountant reports and what managers and employees of the company requires. However, that
doesn't make information generated by management accountant is of less value. But still,
accountants in last few decades have constantly indulged valiant efforts in improving the overall
utility and accuracy of the costs they calculate for example with the help of Activity based
costing method (Young, 2008).
Looking at the present level of competition that British Petroleum is facing, they should
emphasis on two new priorities, either improving the quality of products and services or re-
engineering the finance structure. By the means of this, British Petroleum has started giving
emphasis on managing costs of finance so that unnecessary expenditures can be minimized or
mitigated.
CONCLUSION
In conclusion to the above report it has been analysed that, accounting is one of the vital
part of business enterprise and it is the duty of senior financial officials to make suitable
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utilisation of management accounting in collecting, recording and analysing the performance of
business. The role of management accountants is seen crucial for the organization as well as
business partners. Furthermore, researcher evaluated that, management accounting control
system helps in comparing the actual outcomes with estimated or budgeted information as it
provides the clear image of variances as well as helps in identifying the gaps so that potential
measures can be undertaken and desired results can be achieved. In traditional accounting,
management accountants were responsible for aligning the financial and strategical information
but in present corporate world, it has been witnessed that the role of management accounts is far
more than aligning information.
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REFERENCES
Journals and Books
Adler, R., 2013. Management Accounting. Routledge.
Baldvinsdottir, G. and et.al., 2010. "Professional accounting media: accountants handing over
control to the system. Qualitative Research in Accounting & Management. 7(3).
pp.395–414.
Boyns, T. and Edwards, R. J., 2013. A History of Management Accounting: The British
Experience. Routledge.
Halabi, K. A. and Carroll, B., 2015. "Increasing the usefulness of farm financial information and
management: A qualitative study from the accountant’s perspective". Qualitative
Research in Organizations and Management: An International Journal. 10(3). pp.227–
242.
Holtzman, P. M., 2013. Managerial Accounting For Dummies. John Wiley & Sons.
Järvinen, J., 2009. "Shifting NPM agendas and management accountants' occupational
identities". Accounting, Auditing & Accountability Journal. 22(8). pp.1187–1210.
Loo, D. I., Verstegen, B. and Swagerman, D., 2011. "Understanding the roles of management
accountants". European Business Review. 23(3). pp.287–313.
Mistry, V., Sharma, U. and Low, M., 2014. "Management accountants' perception of their role in
accounting for sustainable development: An exploratory study". Pacific Accounting
Review. 26(1/2). pp.112–133.
Pandey, M. I., 2009. Management Accounting, 3E. Vikas Publishing House Pvt Ltd.
Smith, D. and Jacobs, K., 2011. “Breaking up the sky”: The characterisation of accounting and
accountants in popular music. Accounting, Auditing & Accountability Journal. 24(7)
pp.904-931.
Soobaroyen, T. and Poorundersing, B., 2008. The effectiveness of management accounting
systems: Evidence from functional managers in a developing country. Managerial
Auditing Journal. 23(2). pp.187 – 219.
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Steffan, B., 2008. Essential Management Accounting: How to Maximise Profit and Boost
Financial Performance. Kogan Page Publishers.
Young, W. D., 2008. Management Accounting in Health Care Organizations. John Wiley &
Sons.
Online
Annual report, 2014. British petroleum. [pdf]. Available through:
<http://www.bp.com/content/dam/bp/pdf/investors/bp-annual-report-and-form-20f-
2014.pdf>. [Accessed on 3nd November 2015].
Cokins, G., 2013. Top 7 trends in management accounting. [Pdf]. Available through:
<http://www.imanet.org/docs/default-source/sf/12_2013_cokins-pdf.pdf?sfvrsn=0>.
[Accessed on 3rd November 2015].
Diana, I. B., 2013. THE ROLE OF MANAGERIAL ACCOUNTING IN THE MANAGEMENT
PROCESS. [Pdf]. Available through:
<http://fse.tibiscus.ro/anale/lucrari2013/lucrari_vol_xix_2013_011.pdf>. [Accessed on
3rd November 2015].
Kerby, D. and Romine, J., 2014. What's Ahead for management accounting. [Online]. Available
through: <http://www.newaccountantusa.com/newsfeat/ip/ip_whatsahead.html>.
[Accessed on 3rd November 2015].
Kumar, V., 2011. Advantages of management accounting. [Online]. Available through:
<http://www.svtuition.org/2011/03/advantages-of-management-accounting.html>.
[Accessed on 3rd November 2015].
Sustainability Review. 2012. [pdf]. Available through:
<http://www.bp.com/content/dam/bp/pdf/sustainability/group-reports/
BP_Sustainability_Review_2012.pdf>. [Accessed on 3nd November 2015].
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