Use with Business Accounting and Finance Second Edition by Catherine Gowthorpe ISBN © 2005 Thomson Learning

Use with Business Accounting and Finance Second Edition by Catherine Gowthorpe ISBN © 2005 Thomson Learning Limitations of financial accounting information Lack of timeliness Orientation to past events High levels of aggregation

Use with Business Accounting and Finance Second Edition by Catherine Gowthorpe ISBN © 2005 Thomson Learning Cost and management accounting Refers to the provision of information resources that managers can use to help run the business

Use with Business Accounting and Finance Second Edition by Catherine Gowthorpe ISBN © 2005 Thomson Learning Lack of regulation Orientation towards both past and future Timely production Frequent reporting

Use with Business Accounting and Finance Second Edition by Catherine Gowthorpe ISBN © 2005 Thomson Learning Management accounting: describes the process of collecting, collating and reporting information that is of use to the managers of a business for making decisions, monitoring past performance and for making the most efficient use of resources

Use with Business Accounting and Finance Second Edition by Catherine Gowthorpe ISBN © 2005 Thomson Learning Cost accounting: describes the process of identifying and accumulating the costs of business operations in a way that is is helpful in valuing stock and in identifying the costs and profitability of different departments or divisions of an organisation

Use with Business Accounting and Finance Second Edition by Catherine Gowthorpe ISBN © 2005 Thomson Learning Calder Calloway Cards Limited Family business that has sold some shares to two private investors Paco is the principal active director but the company is now too big for him to manage alone. He appoints two new directors

Use with Business Accounting and Finance Second Edition by Catherine Gowthorpe ISBN © 2005 Thomson Learning Calder Calloway Cards Limited New ideas: Tracey (sales) Introduce commission scheme Concentrate on more profitable products Karim (production) Invest in new equipment Employ in-house design team

Use with Business Accounting and Finance Second Edition by Catherine Gowthorpe ISBN © 2005 Thomson Learning Calder Calloway Cards Limited Problems: No sales budget (so cannot set targets for sales team) No information about profitability of different products No monitoring of costs

Use with Business Accounting and Finance Second Edition by Catherine Gowthorpe ISBN © 2005 Thomson Learning Need for management information 1 Commission scheme must: Not cost more than additional profit that can be generated Be fair Set achievable targets

Use with Business Accounting and Finance Second Edition by Catherine Gowthorpe ISBN © 2005 Thomson Learning Need for management information 2 Concentration of sales efforts on more profitable ranges: Need to know which ranges are more profitable Need to be able to plan and make realistic decisions for the future

Use with Business Accounting and Finance Second Edition by Catherine Gowthorpe ISBN © 2005 Thomson Learning Need for management information 3 Invest in new printing equipment: Information needed on all possible courses of action, e.g.: –Costs of running existing production facility –Extent and cost of current wastage –Projected cost of alternative facilities Without this information no decision can be made.

Use with Business Accounting and Finance Second Edition by Catherine Gowthorpe ISBN © 2005 Thomson Learning Need for management information 4 Employ in-house design team: Compare costs of in-house team with costs of buying in work from freelance designers Consider non-financial factors

Use with Business Accounting and Finance Second Edition by Catherine Gowthorpe ISBN © 2005 Thomson Learning Need to consider strategic objectives Action should not be taken without considering the long-term strategy of the business. –What are the objectives of the business? –What are its priorities mid- to long-term? These issues need to be decided at board level

Use with Business Accounting and Finance Second Edition by Catherine Gowthorpe ISBN © 2005 Thomson Learning Profitability is an important objective but there are others. Examples of objectives: GUS plc: ‘GUS is committed to creating long-term shareholder value by focusing on businesses with above average growth potential and establishing leadership positions in its chosen markets’

Use with Business Accounting and Finance Second Edition by Catherine Gowthorpe ISBN © 2005 Thomson Learning Examples of objectives: GlaxoSmithKline plc: ‘Our global quest is to improve the quality of human life by enabling people to do more, feel better and live longer’. Pearons plc: ‘In all we do, we aim to be brave, imaginative and decent’.

Use with Business Accounting and Finance Second Edition by Catherine Gowthorpe ISBN © 2005 Thomson Learning Examples: Positioning in market Sourcing of goods Moving into international markets

Use with Business Accounting and Finance Second Edition by Catherine Gowthorpe ISBN © 2005 Thomson Learning Management needs information in order to: Set business objectives Assess alternatives, make decisions and plans Monitor outcomes Control and redefine objectives and plans