Management Accounting: Evolution and Balanced Scorecard Technique

This article discusses the evolution of management accounting and the balanced scorecard technique. It also highlights the critical success factors of Qantas. The article provides insights into the impact of external factors, internal operations, and organizational structures on management accounting. It also explains the seven key benefits of the balanced scorecard technique. The article is relevant for students studying management accounting, business strategy, and airline management. Course code, course name, and college/university are not mentioned.

By student name
Management
Accounting
Assignment

1
Professor
University
Date: 23rd Sep 2018.
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Contents
Part A...........................................................................................................................................................4
Part B...........................................................................................................................................................5
References.................................................................................................................................................10
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Part A:
Management accounting is a process in which data pertaining to both past and future estimate
are analysed in a manner to provide the management with decision making capabilities based on the
results of the analysis. By the help of this tools, the management would be able to formulate better
policies and procedure and plan their path accordingly (Andiola, et al., 2018). However, its application
has seen an overhaul in terms of the way it must be implemented as the dynamics of the businesses
have changed immensely over several decades. From being an analyst of numbers, management
consultants have now transformed into business consultants for the companies.
There are many factors that have contributed to the development an evolution of a new form of
management accounting. We will discuss them as follows:
 External Factors: There has been an enormous rise in competition as the number of players in
industries risen over several decades. This has impacted the behavioral aspects of consumers
which in turn has altered the way in which the businesses needed to measure their knowledge
about consumers preferences to reduce the levels of customer return cases or potential loss in
sales due to dissatisfaction. Globalization made the world as one giant market. AS the barriers
were lifted, the methods and practices of doing business also expanded if it became successful
in one part of the world. This meant that a greater level of uniformity was required for a better
accounting and management practice system (Bumgarner & Vasarhelyi, 2018). As a greater
level of uniformity was required on the statutory front of a financial accounting, changes had to
be made to give room for those adjustments in the management accounting aspect as well.
 Internal Operations of the entities: Many principles of management accounting are deeply
embedded in the internal peculiarities and dynamics of the company. The technical
competencies, core business areas and revenue cycle are key to the tools to be implemented
for planning trough management accounting. A change in the production process driven by the
implementation towards by a new technological change will change the way the product
costing takes is done. Also shift from manpower driven processes to more automated processes
will alter the cost cycle of the products or services delivered or made. Also, entities such as e-
commerce which did not exist a few decades back will have a whole new approach towards
management accounting. As the organizations become more customer centric, methods Total
Quality Management (TQM) will gain more focus in the field of management accounting.
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 Alterations to Organizational Structures: Changes in structure of the organization will directly
impact the way management accounting is being taken up. Events like decentralization,
mergers and acquisitions, restructuring will have impact on the techniques and will eventually
the change the way in which management accountants go about their work.
Hence it ca be seen that today’s management accountants must consider an array of factors such
customer inclinations, employee attributes, Global standards and evolutionary practices and these will
act as a broader base of information in using management accounting techniques (Fukukawa & Mock,
2011).
Balanced Scorecard: This is technique used in modern day management accounting whose aim
is to identify and improve upon several internal business functions which are basically sub-categorized
for a better understanding. The improvement in the functions is then compared to the business
outcomes. This technique was first conceived by Dr. Robert Kaplan and Dr. David Norton in a journal
published in 1992. We can enlist seven key usefulness of balanced scorecard has under:
1) Improved Strategic planning: This tool provides a healthy framework for building a strategy
as well as communicating it. The whole business is treated as a strategy map and then the
cause and effect relationships are analyzed with regarding to different business objectives.
The creation of strategic maps highlights that the fact there is consensus on objectives that
are inter-related. This ensures early identification of factors that will affect future
outcomes.
2) Alignment of various initiatives and projects: The method basically aligns the initiatives as
well as projects with the long term strategic objectives of the enterprise. This in turn
ensures that those objectives always remain in focus.
3) Improved communication and execution levels related to strategy: If the company has at its
disposal a wholesome picture of the entire strategy map, it would be less cumbersome and
easy to interpret and communicate the strategy both internally as well as externally. AS the
saying goes that a picture is worth a thousand words, similarly a concise and
comprehensive single page document will speed up delivery, communication and review of
the strategy at each level of employees and stakeholders. Clear understanding is a fulcrum
in effectively and efficiently communicating strategy (Garon, 2018).
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4) Better information for the management: This approach of balanced scorecard facilitates in
designing certain performance indicators that have different strategic objectives. This
results in elimination of those measurements which don’t have much significance. This
method equips the management to make quality informed decisions based on high quality
data.
5) Better Alignment of processes: A balance scorecard that has been implemented in a very
efficient and effective manner will integrate various other function for he entity such as risk
management or budgeting with the strategic objectives of the company. This will
eventually increase the levels of focus towards strategic objectives.
6) Better reporting of performance: The tool of balanced scorecard can be utilized to design
performance dashboards and reports. In this way, the most important issues are considered
by the management and it ensure enhanced levels of monitoring by them (Kangarluie &
Aalizadeh, 2017).
7) Better organization wide alignment: Balanced scorecard if well implemented, will integrate,
align any synchronize the structure of the organization with the objectives of the business.
If all units of a business and all those functions that support it work in a way that is well
planned, then all the activities will be channelized towards a common cause of achieving
same goals. To link the operation to the strategies, it becomes imperative to cascade this
tool to individual business units and functions aiding it in its operations.
Part B:
1) The critical success factors of Qantas are enumerated as under:
a) Committed Management: The company maintains a strong control on how its management
functions. Since customer satisfaction is their primary concern, they have equipped their
people to deliver that in an efficient way (Mock, et al., 2018).
b) A workforce that is competent: This the second most critical factor. The staff which is
present on board the flights are highly skilled in their communication skills and prompt
reaction to customer enquiries and redressal of any issues. This wins the customers for the
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company. In the event of any abnormal or unpleasant circumstances, they can be seen
taking responsibility and showing leadership skills in tackling the situation. The training
courses offered by the company to its employees are focused towards customer satisfaction
(Mubako & O'Donnell, 2018).
c) Non-stop Flights: Flight travel time is one thing that the flyers are very particular about.
Qantas has the maximum number of flights that are non-stop. From the year 2006, the
company has aggressively started its long-haul operations from the Australian coast to
South east and Asia and Central Asian destinations like Tokyo (Lessambo, 2018).
d) Route System: This is a critical factor not just restricted to Qantas Airlines but to the civil
aviation industry. This is basically a decision of what routes to fly on and what should be the
frequency of those flights. This decision has a far-reaching impact on the overall profitability.
Qantas covers 186 destinations spanning across 40 different countries.
e) Promotional tactics and on-board services: The promotional events or tactics are constantly
employed to target returning customers. Various other ancillary services provided such as
option to choose seats, meals, easy booking gateways makes Qantas flying experience
easier and more comfortable for the flyers (Kim, et al., 2017).
The Strategy map would be as under
Target Area Target Metric Time deadline Progress up to report
date
Performance of
segment
ROIC>10% FY18-FY20 FY18 ROIC > 10% for all
operation segments
Customer Contiguous
improvement in NPS
FY18-FY20 To hold NPS premium
against competitors
People To improve employee
engagement
FY18-FY20 80% in FY18
Transformation $400 million p.a. gross
benefits
FY18-FY20 $ 463 million in FY18
Innovation Identify new products
and develop them,
inculcate new
FY18-FY20 Qantas distribution
program, Launch of
Premier Everyday
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processes to boost
efficiency
Credit card, New route
from Perth to London
Balanced Scorecard:
Strategic
Category/Objective
Measuring scale Scorecard Target
(Outcome Range)
Actual Result
Profitability of the
group
PBT 50 %
(0-100%)
Above Target
Achievement
Profit margin of the
Domestic market
Cumulative Qantas
Domestic and JETSTAR
domestic profit margin:
EBIT
10%
(0-15%)
Above Target
Achievement
Operational Safety and
Safety of People
People Safety
Measures.
Assessment of the
board related to
operational safety
15%
(0-22.5%)
Partial Achievement of
Targets
Complete achievement
of target
Customer Net Promoter Share,
Punctuality and
advantage related to
domestic network
coverage
15%
(0-22.5%)
Partial Achievement of
Target
Growth,
Transformation and
Projects
Transformation
benefits, JETSTAR
Japan underlying PBT
and Qantas 786 project
milestone
10%
(0-15%)
Above Target
Achievement
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References
Andiola, L., Lambert, T. & Lynch, E., 2018. Sprandel, Inc.: Electronic Workpapers, Audit Documentation,
and Closing Review Notes in the Audit of Accounts Receivable. Issues in Accounting Education, 33(2), pp.
43-55.
Bumgarner, N. & Vasarhelyi, M., 2018. Continuous auditing—a new view.. Continuous Auditing: Theory
and Application, 20(1), pp. 7-51.
Fukukawa, H. & Mock, T., 2011. Audit risk assessments using belief versus probability. Auditing: A
Journal of Practice & Theory, 30(1), pp. 75-99.
Garon, J., 2018. Ownership of University Intellectual Property. Cardozo Arts & Ent. LJ, 36(1), p. 635.
Kangarluie, S. & Aalizadeh, A., 2017. 'The expectation gap in auditing. Accounting, 3(1), pp. 19-22.
Kim, M., Schmidgall, R. & Damitio, J., 2017. Key Managerial Accounting Skills for Lodging Industry
Managers: The Third Phase of a Repeated Cross-Sectional Study. International Journal of Hospitality &
Tourism Administration, , 18(1), pp. 23-40.
Lessambo, F., 2018. Audit Risks: Identification and Procedures. Auditing, Assurance Services, and
Forensics, 3(1), pp. 183-202.
Mock, T. J., Ragothaman, S. C. & Srivastava, R. P., 2018. Using Evidential Reasoning Technology to
Enhance the Audit Quality Assurance Inspection Process. Journal of Emerging Technologies in
Accounting, 15(1), pp. 29-43.
Mubako, G. & O'Donnell, E., 2018. Effect of fraud risk assessments on auditor skepticism: Unintended
consequences on evidence evaluation. International Journal of Auditing, 22(1), pp. 55-64.
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