Management accounting tools for

today and tomorrow

www.cimaglobal.com/ma
Management accounting tools for today and tomorrow

Acknowledgements

CIMA gratefully acknowledges the assistance of Professors David Dugdale and

Falconer Mitchell with the survey design and Rebecca Ryan and Deloitte DMCS
Limited for reviewing the survey instrument. CIMA would also like to thank Ford
of Europe and Dave Mack in particular for agreeing to pilot and to comment on
the earlier version of the survey. In addition CIMA would like to thank all the
respondents who have completed the 2009 survey.

Survey design by Ivan Kovachev; data analysis by Ivan Kovachev and Louise Ross;
report by Louise Ross and Ivan Kovachev.
 Contents

About the survey 4

1 Overview of results 6
1.1 Organisation of the inance function 6
1.2 The inluence of organisation size 6
1.3 The range of tools currently in use 7
1.4 The tools most likely to be introduced soon 7

2 Responses by sector 8

3 Responses by region 9

4 Responses by organisation size 10

5 Operational tools 11
5.1 Costing tools 11
5.2 Pricing tools 13
5.3 Budgeting tools 15
5.4 Proitability analysis tools 17
5.5 Investment decision making 18
5.6 Other operational tools 19

6 Managerial management accounting 20

6.1 Performance measurement tools 20
6.2 Performance management tools 21
6.3 Reward systems 24

7 Strategic tools 25
7.1 Performance reporting tools 25
7.2 Strategic techniques 25

8 Conclusions 28
8.1 Number and variety of tools 28
8.2 Traditional versus new tools 28
8.3 Size and regional variations 28
8.4 Current issues for respondents 29
 About the survey

The CIMa management accounting survey asked

about current and intended usage of more than 100
management accounting and related tools, and was
completed by 439 respondents in July 2009.

The survey covers techniques familiar to other

management disciplines, and includes general
approaches as well as the applied techniques
suggested by the term ‘tools’.

4 MaNageMeNT aCCOuNTINg TOOlS fOR TOday AND TOMORROW

A selection of management accounting tools
The survey covers 11 categories of management accounting tools, split into operational, managerial and
strategic groups. The number of tools in each category varies from ive (reward systems) to 16 (strategic
tools). use of the tools is not mutually exclusive – for example in relation to the operational group’s
‘pricing tools’ category, different segments of the business may use different pricing strategies, or two
or more tools may be used in combination (for example cost-plus pricing and transfer pricing between
business units).

The importance of selection

Management accountants must choose the right tool for the speciic context, a decision based on their
technical knowledge, professional experience and judgement. While an accountant involved in inancial
reporting operates in a standardised environment that allows little choice, a management accountant
must use a wide range of skills to choose the right tool for the job.

A healthy turnover
using the right tool for the right context means that practices change as organisations’ needs change,
and also as new tools are introduced, proven and disseminated throughout regions or industry sectors.
The management accountant should reassure users that such a ‘turnover’ in the use of tools is natural
and beneicial, and does not signify a sudden lack of conidence in a tool, or an admission that its former
application was a mistake.

What the survey tells us

The survey asks respondents both about their current use of tools, and their intentions to drop or adopt
tools. from this we can draw conclusions about the extent to which respondents have settled on their
range of tools, or are searching for better solutions. The information captured by this survey represents
practices and intentions from the surveyed population as at summer 2009, which can be compared to
other relevant surveys, and act as a ‘snapshot’ or baseline benchmark for ongoing CIMa research.

Interested parties
This paper identiies the most popular current management accounting tools in each category.
further data from the survey will be published subsequently, to allow practitioners to identify those
tools which most respondents intend to adopt within the next two years, which might therefore be
worth investigating by non-users; the least popular tools, and those which current users most intend
to drop – results which may indicate that certain tools are becoming outdated, or are a source of
disappointment to users.
Other management disciplines may be interested to learn about the range of tools (or functions) with
which the management accountant is or can be familiar, and also about general developments in the
discipline. This will be of interest too to relevant teaching and research academics. Consultants,
software developers and other solution providers will be interested in the identiication of popular
and unpopular tools, and trends in their usage.

5
 1. Overview of results

The ten most used management accounting tools across the whole survey are shown in igure 1.
Figure 1: Most used tools (percentage of respondents)

Net profit margin

SWOT analysis

Rolling forecast

Overhead allocation

Gross margin

Strategic planning

Variance analysis

Cash forecasting

Profit before tax

Financial year forecasting

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Budgeting tool Performance measurement tool Key P&L reporting line

Costing tool Strategic tool

1.1 Organisation of the finance function

It is interesting to note some of the responses in respect of the organisation of the inance function.
• Just over 50% of respondents advise that their inance function is organised as a shared service
centre which serves all business units.
• 26% of respondents advise that some inance activities have been outsourced.

1.2 The influence of organisation size

for most management accounting tools the size of the organisation is a factor: larger organisations are
more likely to use each tool. This was seen even for simple tools – for instance more of the very large
organisations use payback, an unsophisticated investment decision making tool.
There were some areas where organisation size did not seem to inluence usage – strategic tools and,
to a lesser extent, budgeting tools.

6 MaNageMeNT aCCOuNTINg TOOlS fOR TOday AND TOMORROW

 1.3 The range of tools currently in use
Most organisations use a range of management accounting tools. an average for each category is
given, but further research is needed to determine which types of organisation, or which region or
industry sector, use most tools as this may suggest dissatisfaction with current techniques or a
willingness to experiment.

1.4 The tools most likely to be introduced soon

as an indication of how the management accounting discipline is developing in the short-term it is
particularly interesting to look at those tools which respondents intend to adopt within the next two
years, as follows (igures in brackets are the number of respondents intending to introduce that tool):
1. Balanced scorecard (50) – the tool most likely to be adopted soon, and already very popular.
2. Customer proitability analysis (36).
3. Rolling forecasts (34) – already very heavily used, and apparently to become even more popular.
4. activity based management (aBM) (31).
5. environmental management accounting (29).
6. Product/service proitability analysis (28).
7. activity based costing (aBC) (25) – although evidence from other studies suggests many users do
not achieve full implementation.
8. Post completion audits (25).
9. Business process re-engineering (BPR) (24).
10. CIMa strategic scorecard (22).

7
 2. Responses by sector

Half of the survey’s respondents are employed in the service sector, made up of professional services,
inancial services and other services (see igure 2). almost one third of the responses are from the
manufacturing sector. Note that the sector labelled ‘other’ comprises ‘public and education’ and all ‘other’
responses (from industry sectors such as retail and trade; IT and telecommunications; hospitality etc).
Figure 2: Responses by sector

19% 10%

8% Manufacturing

Services sector
Other
Total services
50%
Financial services
Professional services
32% Other services

31%

figure 3 shows how the responses by sector are split across the ive regions of the survey. This shows
that in the asian and europe (other than uK) regions, more of the responses are from manufacturing in
comparison to other regions.

Figure 3: Responses by sector within region

Rest of World 26% 47% 28% Manufacturing

Services
Africa 30% 47% 23% Other

Asia 44% 44% 13%

Rest of Europe 45% 43% 12%

UK 27% 53% 20%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

8 MaNageMeNT aCCOuNTINg TOOlS fOR TOday AND TOMORROW

3. Responses by region

figure 4 shows that a large proportion (61%) of the respondents is based in the uK. almost all
respondents are CIMa members who have been speciically invited to complete the survey, with a very
small number of other respondents. The regional composition of respondents to the survey therefore
relects global CIMa membership, which is 75% uK based.
Only 12% of the respondents are from those regions which make up the survey category ‘Rest of World’.
This comprises any region with less than 30 respondents rather than an attempt to group regions with
similar economic or cultural contexts. We intend to encourage more respondents from these regions
for future surveys, to explore regional patterns better.

Figure 4: Percentage responses by region

12%
9%
UK
7%
Rest of Europe
6% Asia
Rest of the World

Africa

12% Rest of World

Australasia
2% N America
0% C & S America

61% 3%
Middle East

analysis of the size of organisation from these regional sub-samples shows there is a bias towards
smaller organisations in the africa sub-sample (see igure 5). When any africa results are considered,
therefore, it should be borne in mind that the results are inluenced by organisation size as well
as region.

Figure 5:Regional responses by organisation size

Rest of World 16% 21% 56% 7% Small (<50 employees)

Medium (50–250)
Africa 41% 21% 28% 10% Large (250–10,000)
Very large (>10,000)
Asia 28% 28% 38% 6%

Rest of Europe 20% 27% 43% 10%

UK 26% 23% 37% 15%

0% 20% 40% 60% 80% 100%

9
 4. Responses by organisation size

figure 6 shows that over half of the survey’s respondents are employed by organisations that are either
large (more than 250 employees) or very large (more than 10,000 employees).

Figure 6: Responses by size of organisation

12%
26%

Small (<50 employees)

Medium (50–250)
Large (250–10,000)
Very large (>10,000)

39%
23%

data on the number of business units could only be collected for 110 respondents, but there are no
grounds for supposing this analysis is unrepresentative of the entire sample. The results are shown
in igure 7. although more than a quarter of organisations have only one business unit and about
four-ifths have ive or fewer, the average number of business units within respondents’ organisations
is ive. This average is inluenced by the fact that some very large multinational organisations have
hundreds of business units.

Figure 7: Number of business units within the organisation

More than 5 BU 19%

5 BU 18%

Between 3–5 BU 24%

Between 1–3 BU 11%

One BU 28%

0% 5% 10% 15% 20% 25% 30%

% of respondents who had this number of BU

10 MaNageMeNT aCCOuNTINg TOOlS fOR TOday AND TOMORROW

5. Operational tools

This section is concerned with the traditional operational tasks which the organisation demands of its
management accounting function:
• costing of activities
• pricing of products and services
• analysis of the proitability of revenue generating activities
• effective allocation of resources by means of budgeting and investment appraisal techniques.
Respondents were also asked about a range of other operational management accounting tools, including:
• quality philosophies such as total quality management (TQM) and benchmarking
• approaches which are heavily IT-dependent such as customer relationship management (CRM)
• applied and mathematical techniques such as linear programming.

5.1 Costing tools

figure 8a shows the relative popularity of costing tools. The more traditional tools of variance analysis
and overhead allocation remain the most popular.
Figure 8a: Relative popularity of costing tools

Time driven ABC

Actvity based costing (ABC)

Overhead allocation

Integrated cost and financial accounts

Throughput accounting

Variable or marginal costing

Variance analysis

Standard costing

Kaizen costing

Life cycle costing

Target costing

Quality costing

Full (absorption) costing

Costing for jobs, batches, processes or contracts

0% 10% 20% 30% 40% 50% 60% 70% 80%

The results indicate that respondents use a range of costing tools – on average, an organisation will
use four from the 14 tools surveyed. The larger the organisation, the more likely it is to use any tool and
the more tools it uses. figure 8b shows that the largest organisations are the heaviest users of all tools,
with the exception of quality costing.

11
 Figure 8b: Costing tool use by size of organisation

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%
Small Medium Large Very large

Variance analysis Overhead allocation Standard costing Full (absorption) costing

Job, batch, process Variable or marginal costing Actvity based costing (ABC) Integrated cost and
or contract costing financial accounts

Target costing Life cycle costing Time driven ABC Quality costing

Kaizen costing Throughput accounting

Some tools are very resource intensive, aBC for example, and this may explain the relative reluctance of
smaller organisations to implement certain tools. aBC is used by only 22% of small organisations in the
survey, compared with 46% of very large organisations.
The pattern of larger organisations using more tools may also relect the increased complexity of those
entities, and a consequent need to call on a range of tools for different contexts.
It seems worth noting therefore where results for individual tools or entire categories of tools, buck this
trend, i.e. where smaller organisations appear to use as many tools as larger entities. This is the case
with integrated cost and inancial accounts for instance: 29% of small and only 28% of very large
organisations use these. We see it too with target costing (used by 18% of small and 14% of very large
organisations) and quality costing (used by 9% of medium and 2% of very large organisations).

12 MaNageMeNT aCCOuNTINg TOOlS fOR TOday AND TOMORROW

5.2 Pricing tools
figure 9a shows that pricing tools are also generally used more heavily by larger organisations than
smaller entities. On average, respondents use just over two pricing techniques from the six surveyed.

Figure 9a: Use of pricing tools by organisation size

80%

70%

60%

50%

40%

30%

20%

10%

0%
Cost-plus Market sensitive Segmental Price Penetration Transfer pricing
pricing pricing pricing Skimming Pricing between BU

Overall Small Medium Large Very large

figure 2 showed that 19% of responses are from organisations which are neither manufacturing sector
nor service sector entities, that is they are from the ‘other’ and ‘public and education’ categories.
Presumably, many of these entities have a not-for-proit orientation, particularly in the ‘public and
education’ sector, so in relation to proit oriented issues such as pricing it is useful to focus only on the
results for manufacturing and service sector respondents.
There are two pricing tools whose usage varies signiicantly by sector – cost-plus pricing and transfer
pricing (see igure 9b).

Figure 9b: Use of selected pricing tools by sector

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%
Cost-plus Transfer pricing
pricing between BU

Manufacturing Service

13
 figure 9b shows that both tools are much more commonly used in the manufacturing sector. This is
not unexpected, as it relects the tendency of manufacturing entities to locate production where wages
or tax rates are low, or where raw materials are more readily available. In addition it relects the link
between the two pricing methodologies; the transfer price between business units is generally full cost,
while the price to the end user is often full cost plus a proit margin.
The service sector seems comparatively keener on introducing new pricing tools, showing some interest
in them all (see igure 9c) but especially in market sensitive pricing and segmental pricing.

Figure 9c: Interest in pricing tools by sector

9%

8%
Percentage of non-users proposing to

7%
introduce tool within 2 yrs

6%

5%

4%

3%

2%

1%

0%
Cost-plus Market sensitive Segmental Price Penetration Transfer pricing
pricing pricing pricing Skimming Pricing between BU

Manufacturing Service

This might relect a more lexible approach to pricing in the service sector, as price comparison is much
harder for clients who use services than for customers who buy products. In addition an organisation in
the service sector might tend to prioritise other considerations than short-term proit, such as:
• its relationship with the client (whether gaining a new one, or keeping an important existing client)
• the need to gain experience or proile in a new market
• the need to keep resources deployed
• the need to cross-sell other services.
Thus the service sector might have a greater interest in segmental pricing (different prices for
different markets), penetration pricing (used to enter new markets or deepen market share) and
market sensitive pricing.
looking at organisation size, there were two results of note. 11% of very large organisations who
do not currently use market sensitive pricing propose to introduce it within the next two years
(64% currently use it), and 10% of small organisations propose to introduce segmental pricing
(but only 22% currently use it).

14 MaNageMeNT aCCOuNTINg TOOlS fOR TOday AND TOMORROW

5.3 Budgeting tools
again the results show that organisations use a range of budgeting tools – on average just over four,
from the nine surveyed.

Figure 10a: Use of budgeting tools by size of organisation

Very large

Large

Medium

Small

0% 20% 40% 60% 80% 100%

Beyond budgeting Priority based budgeting Activity based budgeting

Flexible budgeting Zero based budgets Incremental budgeting

Rolling forecasts Cash forecasts Financial year forecasts

figure 10a shows the relative popularity of budgeting tools, from beyond budgeting (the least popular)
to inancial year forecasts (the most popular overall).
The smallest companies make the least use of budgeting tools. This is understandable and expected;
budgeting literature suggests that small entities use less sophisticated budgeting techniques as owners
have greater control and oversight of expenditure. However, this size effect is not as apparent in the use
of the top three budgeting tools as it is in many operational tools – inancial year forecasts, cash
forecasts and rolling forecasts are used by all organisations to a similar extent regardless of size.

15
 We did not observe signiicant regional differences in the use of budgeting tools, with the exception
of rolling forecasts and inancial year forecasts, both of which seem relatively unpopular with
africa respondents.

Figure 10b: Use of rolling forecasts by region

Rest of World 66% 9% 26% Current users

Intend to introduce
Africa 40% 3% 57% w/2 years
Assumed no interest
Asia 68% 3% 29%

Rest of Europe 69% 6% 25%

UK 67% 10% 23%

0% 20% 40% 60% 80% 100%

Figure 10c: Use of financial year forecasts by region

Rest of World 87% 2% 11% Current users

Intend to introduce
Africa 67% 3% 30% w/2 years
Assumed no interest
Asia 79% 21%

Rest of Europe 86% 14%

UK 88% 12%

0% 20% 40% 60% 80% 100%

Note that three budgeting tools – inancial year forecasts, cash forecasts and rolling forecasts, make
it into the top ten most used management accounting tools overall (igure 1). figure 10b however
suggests that rolling forecasts have not yet peaked in popularity, in comparison with inancial year
forecasts which appear to be used by every organisation interested in them (at least in asia, uK and
the rest of europe).

16 MaNageMeNT aCCOuNTINg TOOlS fOR TOday AND TOMORROW

5.4 Profitability analysis tools
Proitability analysis tools are another category where the pattern is observed of increasing use as
organisation size increases (igure 11a).

Figure 11a: Use of profitability analysis tools by size of organisation

70%

60%

50%

40%

30%

20%

10%

0%
Small Medium Large Very large Overall

Product/Service Relevant costing Customer profitability Breakeven (CVP) Economic value

profitability analysis for decisions analysis analysis to customer

Respondents use on average two proitability analysis tools. Notable results are:
• there is high overall level of interest in product/service proitability analysis and customer proitability
analysis (in particular note the spike for medium companies in the use of customer proitability
analysis, igure 11a)
• there is comparatively heavy use of customer proitability analysis in the rest of europe, with 61% of
respondents currently using this tool, compared to 36–47% of respondents in all other regions. There
is also relatively high interest in customer proitability analysis from all regions, with 10–16% of those
not currently using this approach intending to introduce it within the next two years
• that economic value to customer was not used by any asia respondents, although the averages for all
other regions ranged between 4–10%, and peaked for africa where 20% of respondents currently use
this technique.

figure 11b shows in more detail the widespread interest in proitability analysis tools. The most popular
tool is product/service proitability analysis with 17% of uK non-users, 12% of rest of europe non-users,
22% of asian non-users and 13% of african non-users intending to introduce this tool.

Figure 11b: Interest in profitability analysis tools by region

25%
introduce tool within 2 years
% 0f non-users proposing to

20%

15%

10%

5%

0%
UK Rest of Europe Asia Africa Rest of World

Product/Service Customer profitability Economic value Breakeven (CVP) Relevant costing

profitability analysis analysis to customer analysis for decisions

17
 5.5 Investment decision making
On average, respondents use between three and four investment decision making tools of the ten
surveyed. The surprise apparent from igure 12a is the relative popularity of payback, which is the least
sophisticated (one might even say, crudest) appraisal technique.

Figure 12a: Relative popularity of investment decision making tools

Post completion audits

Real options

CAPM (beta analysis)

Sensitivity analysis

Non-financial issues

Net present value

Internal rate of return

Accounting rate of return

Discounted payback

Payback

0% 10% 20% 30% 40% 50% 60% 70%

figure 12b shows that payback retains a strong foothold, even in the very largest organisations, which
presumably have more and larger capital projects and more specialist inance staff, thus might be
expected to use more sophisticated techniques.

Figure 12b: Investment decision making in very large organisations

Post completion audits

Real options

CAPM (beta analysis)

Sensitivity analysis

Non-financial issues

Net present value

Internal rate of return

Accounting rate of return

Discounted payback

Payback

0% 20% 40% 60% 80%

Overall Very large

18 MaNageMeNT aCCOuNTINg TOOlS fOR TOday AND TOMORROW

figure 12b shows that while one in six very large organisations use capital asset pricing model (CaPM) and
one in seven use real options to evaluate investment decisions, they are not as widely used as the other
tools. This seems surprising as both tools are well established, relatively easy to use and widely taught.
another unexpected result is that respondents from small organisations report using investment
appraisal tools (especially CaPM and real options) more than medium entities. 8% of small
organisations use CaPM, compared with 3% of medium organisations, and 4% use real options
compared with 2% of medium organisations.

5.6 Other operational tools

This is an interesting category, as organisation size does not seem to be such a strong inluence on tool
use. On average, respondents use just over two operational tools out of nine surveyed. figure 13 shows
that although all these tools are used more by the largest organisations, this tendency is not as strong
as for other tool categories.

Figure 13: Use of operational tools by size of organisation

70%

60%

50%

40%

30%

20%

10%

0%
Small Medium Large Very large

Theory of constraints Linear programming Learning curves Benchmarking Decision tree analysis

Customer relationship 360 degree reviews Value chain analysis Total quality
management management

Benchmarking is the dominant management accounting tool for organisations of all sizes though it is
less prevalent in the (possibly more secretive) small organisation.
also popular are 360 degree reviews, customer relationship management (CRM) and total quality
management (TQM) – though this last is not as popular in very large organisations as in medium and
large ones. It is possible that very large organisations have bespoke quality initiatives designed for
them, which they do not consider TQM.

19
 6. Managerial management accounting

This section is concerned with how performance is measured, managed and rewarded. The nature of
some of these management accounting tools – with their reference to proit, or capital employed –
suggests it is necessary to adjust for the inluence of industry sector.

6.1 Performance measurement tools

figure 1 showed that proit before tax is the second most widely used management accounting tool
overall. figure 14 shows clearly that when it comes to the use of performance measurement tools by
sector, proit before tax is the most widely used measure. On average organisations use between two
and three performance measurement tools out of the ive surveyed, a relatively high proportion
compared to other categories of tools.

Figure 14: Use of performance measurement tools by sector

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%
Return on capital Cash flow return Residual income Economic value added Profit before tax
employed on investment

Manufacturing Professional Financial Other Public and Other

services services service education

Three of these performance measurement tools are among the most used of the 100+ in the entire
survey – ROCe, CfROI and proit before tax are all in the top 20 most used tools, illustrating the
importance of these measures.

20 MaNageMeNT aCCOuNTINg TOOlS fOR TOday AND TOMORROW

6.2 Performance management tools
The common pattern of increased popularity of tools by successively larger organisations is very notable
for performance management tools (igure 15a). On average organisations use just under two out of eight
performance management tools. large organisations use on average twice as many performance
measurement tools as small or medium ones.

Figure 15a: Use of performance management tools by size of organisation

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%
Small Medium Large Very large

Balanced scorecard Business process Activity based Total performance

re-engineering management scorecard

Value based Six sigma Value mapping Performance prism

management

figure 15a shows the balanced scorecard is the most widely used measure in all organisations. Other
surveys conirm similar results for the balanced scorecard, for example it is used by 60% of fortune 1000
(i.e. very large) companies. Its popularity shows no immediate signs of abating, it being the most likely tool
(of all those in our survey) to be introduced by current non-users of all sizes (see igure 15b).

21
 Figure 15b: Interest in performance management tools by size of organisation

Total performance scorecard

Value based management

Value mapping

Performance prism

Business process re-engineering

Activity based management

Six sigma

Balanced Scorecard

0% 5% 10% 15% 20% 25%

Percentage of non-users proposing to introduce tools within two years

Very large Large Medium Small

22 MaNageMeNT aCCOuNTINg TOOlS fOR TOday AND TOMORROW

as a category, performance management tools are the ones that most respondents intend to introduce
in the next two years; they are approximately three times as likely to be cited as other categories of tool.
This was observable across all industry sectors, and all regions. Of particular interest to respondents are
balanced scorecard, aBM, BPR and total performance scorecard.
Note that igure 15b shows that no very large organisations, which generally use the most management
accounting tools, intend to introduce Six sigma in the near future.
Overall, the proportion of current users of Six sigma was 14%. This is a smaller percentage than that
recorded by another survey1 which found Six sigma was used by 22% of its respondents, but that
population may have been biased since respondents were readers of a publication about quality initiatives.
The indings from this other survey did however conirm the relative popularity of Six sigma in the
manufacturing sector, also commenting on the high proportion of those using Six sigma who seem to
stop after three or four years.
figure 15c shows that (with the exception of aBM and Six sigma) most tools were similarly popular
across all sectors.

Figure 15c: Use of performance management by sector

Total performance scorecard

Value based management

Value mapping

Performance prism

Business process re-engineering

Activity based management

Six sigma

Balanced Scorecard

0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

Percentage respondents using tool

Other Service Manufacturing

1 Quality digest Survey 2870 respondents at www.qualitydigest.com/feb03/articles/01_article.shtml

which included results from dyncorp survey.

23
 6.3 Reward systems
four tools were surveyed, including executive incentive schemes (for senior directors) and management
incentive schemes (for managerial roles). On average, organisations use just under two reward systems.
figure 16a shows the regional analysis, which indicates that proit sharing schemes seem relatively
unpopular in asia, with only 13% of respondents currently using them, and relatively popular in africa,
where 37% of respondents currently use them. Of the other regions, the uK behaves more like africa
(with 27% currently using proit sharing schemes), and rest of europe and the rest of World behave
more like asia (with 16% and 19% of respondents respectively using them).

Figure 16a: Use of reward systems by region

80%
UK
70% Rest of Europe
Asia
60% Africa
Rest of World
50%
Overall
40%

30%

20%

10%

0%
Executive incentive Management incentive Profit sharing Share options
schemes schemes schemes

figure 16b shows that small organisations appear to behave more like large organisations when it
comes to proit sharing schemes (i.e. they both use them much more than medium sized organisations).
This may be explained by the fact that the employees of micro and small companies are typically other
family members and the owners are more likely to be giving them a share of the proit. Medium sized
organisations may tend more to be privately owned, thus owners do not feel obliged to share a
percentage of their proits with the staff. finally large and very large organisations may ind incentive
schemes more effective than ‘command and control’ management to motivate the desired behaviour
amongst a numerous and dispersed workforce.

Figure 16b: Use of reward systems by size of organisation

70%
Small
60% Medium
Large
50%
Very large

40%

30%

20%

10%

0%
Executive incentive Management incentive Profit sharing Share options
schemes schemes schemes

24 MaNageMeNT aCCOuNTINg TOOlS fOR TOday AND TOMORROW

7. Strategic management accounting

This section is concerned irst with how proit and performance are reported to senior management
and (often as key performance indicators or KPIs) to external stakeholders, and second with the use of
strategic management accounting tools to support strategic decision making.

7.1 Performance reporting tools

Respondents used a combination of measures to report performance, on average just under three from
the ive surveyed. gross margin after full cost of sales, net proit margin after allocation of overhead and
contribution after variable costs are the most widely used tools.

Figure 17: Use of performance reporting by region

80%

70%

60%

50%

40%

30%

20%

10%

0%
Value added Contribution after Gross margin after Segmental contribution Net profit margin
reporting variable costs full cost of sales after attributable costs after allocation
of overhead

UK Rest of Europe Asia Africa Rest of World

figure 17 shows how usage is relatively uniform across all regions, with the exception of the relative
underuse of segmental contribution after attributable costs in africa. This is used by only 20% of
respondents in africa, around half of the 38–43% of users in all other regions.

7.2 Strategic tools

This was one of the categories which offered the most tools (15), and on average, respondents used just
over ive strategic tools. figure 18a shows that strategic planning is the most popular tool, used by 72%
of all respondents, followed by SWOT analysis (64%) and risk management (60%).

25
 Figure 18a: Relative popularity of strategic tools

Strategy mapping

Core competencies

CIMA strategic scorecard

Long-range and business planning

Risk management

Environmental impact assesment

Mission statement

Value for money audits

Value chain analysis

Value engineering or value analysis

Competitor analysis

Strategic planning

SWOT analysis

Boston matrix

Environmental management accounting

0% 10% 20% 30% 40% 50% 60% 70% 80%

Figure 18b: Use of strategic tools by size of organisation

80%

70%

60%

50%

40%

30%

20%

10%

0%
Small Medium Large Very large

Strategic planning Risk management Competitor analysis Core competencies

Value chain analysis Value for money audits Value engineering CIMA strategic
or value analysis scorecard

SWOT analysis Mission statement Long range and Environmental

business planning impact assesment

Strategy mapping Boston matrix Environmental management

accounting

26 MaNageMeNT aCCOuNTINg TOOlS fOR TOday AND TOMORROW

This is another category where the usual pattern of ‘larger organisations use tools more’ is not so
marked. figure 18b shows only a slight tendency for larger organisations to use more tools than
smaller organisations.
The difference between usage by the smaller and larger organisations seems concentrated in the six
or so least used tools (those at the far right of each set of blocks). This may suggest a willingness from
larger organisations to experiment with new tools or it may illustrate a need for inance or management
teams to grow above a critical mass to achieve early exposure to strategic tools (via professional
qualiications, MBas, contact with consultants or desk research).
It is notable that large and very large companies are using environmental management accounting
about three times more than small companies. This may be explained by the impact of legislation
requiring large public organisations to declare their carbon footprint, and by the introduction of
emissions trading schemes for large companies. Similar results are noted with respect to environmental
impact assessment.

27
 8. Conclusions

Readers can ind an overview of the results at the front of this report. Some conclusions are suggested:
8.1 Number and variety of tools
Our survey showed that management accountants use a number of tools, on average 33, across a range
of operational, managerial and strategic functions. This demonstrates the wide range of organisational
performance for which the management accountant can provide data.
8.2 Traditional versus new tools
The tools used are a mix of ‘traditional’2 and new tools. This seems a healthy state for any discipline.
It suggests that the discipline has a solid foundation, and principles which endure yet are reined so that
the body of knowledge is continually expanding. However, some traditional tools are still widely used
despite the comments by academics and consultants that they should be discontinued. for example,
many textbooks comment on the unsuitability of payback as a means of investment appraisal. yet it
remains popular, despite there being simple alternatives which give more informative results.
Budgeting is an area where many commentators suggest that traditional practices have become
outdated. dedicated movements have evolved to champion both beyond budgeting, and better
budgeting; and there is a large body of literature which comments generally on the tendency for
budgets to trigger game-playing, budget-padding and other sub-optimal behaviour. However, it
would need a radical re-invention of budgeting and performance management to persuade users
there are alternatives to cash forecasts, and inancial year forecasts (both of which are amongst
the most used tools).
8.3 Size and regional variations
Size is an observable inluence on tool use, as igure 19a shows. The larger the organisation, the
more tools it uses. Where this is not the pattern, suggests that those tools are more appropriate
for smaller organisations.

Figure 19a: Average number of tools used (organisation size)

40

35

30

25

20
Small Medium Large Very large

The manufacturing sector uses the most tools, followed very closely by the inancial services sector.
Results which jump out are the relative popularity of Six sigma, and relative unpopularity of aBM for
the manufacturing sector (see igure 15c).
The public sector tends to use fewer tools overall, but those it uses tend to be strategic tools.
This is probably because the public sector uses less pricing and costing tools, due to the lack of a proit
motive in these organisations.

2 By ‘traditional’ we mean the relatively simple and long-established tools such as mainstream
budgeting practices, standard costing techniques, payback etc.

28 MaNageMeNT aCCOuNTINg TOOlS fOR TOday AND TOMORROW

Figure 19b: Average number of tools used (sector)

36

34

32

30

28

26

24

22

20
Manufacturing Service Professional Financial Public and Other
services services education

8.4 Current issues for respondents

Respondents were asked ‘What are the main issues currently confronting the management accounting
function in your organisation?’ 199 respondents replied (45% of the sample); and the issues which most
concern them are:
• software issues such as outdated, inlexible or poorly integrated systems (requiring manual
reconciliations or other interventions to create reports) or a lack of strategic vision for IT
• aspects affecting the quality of information they provide users – demands for better or more timely
information, or bespoke or more standardised information
• a shortage of resources – both the lack of suitability qualiied inance personnel in inance and other
departments, and a lack of investment in inance
• a lack of understanding about the contribution possible from management accountants, both from
the accountants themselves (admitting to inadequate knowledge of tools) or a lack of co-operation
and appreciation from users.
The survey itself proved to be a helpful tool. Several respondents comment that it was useful to be
reminded of (or in some cases introduced to) all the tools available for particular purposes. When
respondents receive the detailed results, they will be able to benchmark their practices against their
peers; and consider whether they are using the best set of tools for their needs.
further reports on the survey data will focus on regional, size and sector variations; and the future
development of the inance function.

29
References

Quality digest Survey (2003) Six Sigma Survey

www.qualitydigest.com/feb03/articles/01_article.shtml

30 MaNageMeNT aCCOuNTINg TOOlS fOR TOday AND TOMORROW

Notes

31
 ISBN: 978-1-85971-636-6 (Pdf)

November 2009

Chartered Institute of
Management Accountants
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london SW1P 4NP
united Kingdom
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