Benefits and Drawbacks of Balanced Scorecard in Management Accounting

Running head: MANAGEMENT ACCOUNTING
Management Accounting
5/14/2019

MANAGEMENT ACCOUNTING 1
Executive Summary
The purpose of this paper is to discuss about balanced scorecard, which is a performance
metric that is utilized in the strategic management and convince the management team of
ABC Company to incorporate balanced scorecard into the business operations. From the
analysis, it has been identified that balanced scorecard is the most operative tools that could
align financial and non-financial perspective of the company with strategic objectives.
However, there are some drawbacks of the tool like an expensive, time consuming, and lack
of external focus which could grab the attention of stakeholders and results in influencing
their decision for adopting the system. But, in conclusion, it has been highlighted that there
drawbacks are manageable and ABC Company can adopt balanced scorecard into its
operations.

MANAGEMENT ACCOUNTING 2
Table of Contents
Executive Summary...................................................................................................................1
Introduction................................................................................................................................3
Overview of Balanced Scorecard...........................................................................................3
The learning and Growth Perspective................................................................................4
The perspective of the Business Process............................................................................4
The Customer Perspective..................................................................................................4
The Financial Perspective..................................................................................................5
Advantages of Balanced Scorecard....................................................................................5
Disadvantages of Balanced Scorecard...............................................................................7
Conclusion..................................................................................................................................9
References................................................................................................................................10

MANAGEMENT ACCOUNTING 3
Introduction
Management accounting is the procedure of classifying, analysing, recording and
representing the financial data or information for the support of internal management such
that they can take proper decisions in the business for future growth (Holtzman, 2013). The
management of the business analyse the data and use it for the formation of business
strategies. Dissimilar to financial accounting, there are not prearranged standards and
principles that are used by the business in their managerial accounting (Nørreklit, 2017). The
purpose of this report is to discuss the importance of management accounting and analyse the
notion of the balanced scorecard, one of the effective tool of management accounting. In
addition to this, the paper is a suggestive report to the ABC Manufacturing firm planning to
adopt balanced scorecard in its operations. Hence, the paper is highlighting the different
advantages and disadvantages of the balanced scorecard for the ABC Company.
Overview of Balanced Scorecard
A balanced scorecard is the performances metric that is employed in the strategic
management to categorize and enhance a number of internal operations of the business and
their succeeding external results. This tool is utilized to evaluate and offer response to the
company. Data collection is critical for the quantitative results because the information
collected is construed by the company’s executive team, and utilized to make better business
decisions (Niven, 2011). The phrase ‘balanced scorecard’ is mainly denoted as the report for
performance management that is utilized by the company’s management team, because this
team is attentive on handling the execution of the strategy or operational activities. According
to the recent survey around 62% of the participants stated that they make use of Balanced
Scorecard for the execution of the approach, whereas 48% the participants said that they use
it for the operational management (Pramudita, 2016). The balanced scorecard was presented