Management Accounting and Decision Making for Small and Medium-Sized Enterprises in the UK

Management Accounting and decision making
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Introduction
The present essay is undertaken to examine the usefulness of gaining significant
knowledge by the small and medium-sized companies of the UK in relation to the management
accounting. The small and medium-sized companies (SME’s) constitutes largely to the economic
growth and development of the UK. In this context, it is very essential for SME’s to develop an
adequate understanding of the different management accounting tools and techniques for better
cost management and improvising their profitability position. As such, the essay presents a
critical view of literature in relation to the growing debate among the management accounting
experts regarding the best practice to be adopted for managing the working capital. The essay
particularly discusses the usefulness of management accounting education for SME’s growth
with regard to application of cost-volume-profit analysis. The overall review of literature has
been carried out in the context of the discussion held within the journal article ‘Management
Accounting Practices of (UK) Small –Medium Sized Enterprises (S.M.E.s)’. The review of
literature will particularly aim at supporting or refuting the views that have been developed in
this context.
Critical Review of findings given in the article “Management Accounting Practices of (UK)
Small-Medium-Sized Enterprises (SMEs)”
Zabri (2016) stated that the small and medium-sized enterprises constitute a major part of
the developed as well as developing economies. In this context, it is becoming highly essential
for them to implement effective business systems and processes that aid them in promoting their
sustainable growth and development. Therefore, it is highly recommended that SME’s need to
adopt the use of contemporary management accounting techniques to assists the business
managers in taking better decisions for planning and control. It has been researched in this
regarded that small businesses are adopting the use of simple techniques for determination of the
product costs. The use of contemporary management accounting systems such as ABC,
sensitivity analysis and other advanced methods is lacking in SME’s (Zabri, 2016).
In this context, the give article developed by Lucas, Prowle and Lowth (2013) has also
discussed the need for SME’s within the UK to implement and adopt the use of management
accounting techniques. SME’s are regarded as a significant part of the UK economy as it is
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estimated that about 99% of the firms within the UK are small and medium-sized. It is highly
important for SME’s to adopt the use of effective accounting systems that helps them to
maximize their financial performance. The use of management accounting systems will provide
significant help to SME’s in better planning, controlling and decision-making. In this regard, it
has also been depicted that only minority of the small firms are integrating the use of accounting
systems. Thus, it is very essential that such firms gain knowledge regarding the impact of the
management accounting systems on the operations and performance of the businesses. The
techniques of management accounting has greater potential for achieving the financial objectives
of SME’s by enabling them to maximize their productivity, efficiency and lastly the profitability
(Lucas, Prowle and Lowth, 2013).
In the article by CIMA it has been articulated that owners of SME’s does not
believe to hire the management accountant to perform the job of management accounting as they
want to have full control and exclusive right to sensitive information. It is the belief of owners in
SMEs that making the managerial judgments by themselves will provide them with greater
insights of what is going on and it short it increases the control of the managerial affairs with the
company. In this relation the concept of business partnering with managerial accountant has
changed perception of the owner’s at SMEs and also helped a lot with ease of management
accounting decisions. It has been supported by Regondola (2016), through conducting the
research on strategic management accounting and control process while making the managerial
decisions. The findings shows that owner’s find it difficult to disclose the sensitive information
to the managerial accountant as looses the control over the entity and also make less aware about
the managerial activities going in the entity. Owners of SMEs believes that if they have control
in the managerial activities and also have decision making power with them allows better control
and also increases the profits (Regondola, 2017).
The article has provided that owner’s or accountant has used individual management
accounting tools that helps to make useful managerial decisions but has not provided relevant
information needed to make decisions such as pricing decisions, budget control and other
decisions that requires analytical tools. Some of the basic management accounting tools used by
accountants at SMEs, are working capital measures, product or service cost measures and
informal cost volume profit analysis. All these management tools do not provide information to
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