What is the Role of Management Accounting in Strategic Planning?
How do you make the best possible business decisions, when you have incomplete data guiding you? Because in the business landscape, change is rapid. And it’s often a case of evolve or die. Your business must remain flexible, adapting and taking new forms to thrive in the face of consistent change.
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Where strategic planning and management accounting meet
Strategic planning is a two-step process, with defining your company’s vision, mission, and goals as the first step. Ask yourself, what percentage of the market do you want to have captured in the next five years? Are you looking to start business operations in a new country with a ready market?
For effective strategic planning, you need to clearly outline your future objectives. Doing this requires a deep understanding of the external environment, market trends, and internal capabilities. With this knowledge, you must pre-determine company objectives, ensuring each is SMART — specific, measurable, achievable, relevant to the company vision, and time-bound.
Analyzing costs and allocating resources
You probably have a personal budget that you try as much as possible to stick to. It’s the same way your strategic planning efforts require a budget, but the major difference is that budgetary requirements for strategic planning are more extensive. You must allocate resources efficiently to achieve organizational goals. Additionally, you must stick to preset budgetary requirements.
You determine what part of financial resources go where and when. Similarly, you must identify the best use case for available financial resources.
Creating budgets and predicting future trends
A road trip isn’t worth it if you suddenly have to stop halfway without reaching your destination. In the same way, you must guarantee the availability of resources to complete a strategic plan with an accura