Strategic Management Accounting Analysis

Strategic Management Accounting Analysis


Kanymoon University (KU) is one of the largest higher education institutions of learning in Singland. The institution’s primary source of revenues and financing is the government of Singland under the education ministry via government contracts for academic research, and the fees payment per head for teaching the students (Martinello, 2006. p349). Due to the economic recession that happened last year, the government announced its decision to cut down funding for all universities in the country. The universities of the country, therefore, should adjust their cost utilization and develop effective strategies suiting the current amount of revenue for the universities(Martinello, 2006. p359). To raise cost-effectiveness, the chancellor of KU, who chairs the board requested the chief administrator of the university to undertake a benchmarking program on the university’s administration department against those of AU and BU. This research paper provides a management report prepared in the completion of the benchmarking process and the preparatory proposals realized from the exercise made to assist the cost management department of the University in efficient resource allocation.

KU Benchmarking

Benchmarking is a strategic management accounting technique that is very useful in decision making and therefore assists an educational institution to compare its primary managerial policies with the related university’s systems of control (Ajelabi and Tang, 2010. p4). The benchmarking exercise of Kanymoon University against AU and BU main agenda is gathering the necessary information useful in the addressing of cost management challenges of the three universities since they are faced with the problem of insufficient funding in the running of their day to day operations. In particular, benchmarking offers the relevant information to the management accounting department for the formulation of useful strategies which are significant in the allocation of resources to various departments in the university.  In the other two universities, an extract of their cost allocations on different departments are provided against that of Kanymoon University, as shown and analyzed below:

Research  Department

KU                  AU                  BU

Research                                             $000                $000                $000

Contract management                        14430              14574              14719

Laboratory management                    41810              42897              42646

Facilities management                       26993              27263              26723

Total research costs                            83233              84734              84088

The analysis of total and individual resource costs during the benchmarking exercise shows that BU university spends a lot in the research sector, this may have a positive effect on the formulation of effective cost management strategies (Parker, 2012. p54). KU’s research costs are lowest as compared to the other two universities, therefore, for KU to formulate sound decisions, they should raise research costs on management and reduce costs which are relatively higher as compared to the two universities as shown below with proposals after that:

KU                              AU                        BU

Type of costs                                                  $000                            $000                        $000

Accounting                                                     1614                            1571                        1611

IT management                                              6471                            6187                        6013

In the analysis of the above, KU management department realized that it spends a lot of accounting and IT management as compared to AU and BU. Given that KU has the lower population numbers of 28394, as compared to 29061 students for BU, and yet it spends more than the University of BU, this cost should be cut down to maintain cost efficiency.

The key cost and revenue drivers are assumed to be research contracts costs, the number of students in the respective universities, as well as the total number of staff that can contain teaching the students (Cheslock and Gianneschi, 2008. p229). The benchmarked KU position provided an opportunity to analyze the cost it incurs as compared to AU and BU and thus the management of KU identified the key areas where it spends unnecessary. The cost management decisions are thus developed strategies

of cutting down cost as it strives to contain all its activities in the set budget for the year. An example of the proposals is shown in the table below:


Type of Cost                                       Actual ($000)             Standard ($000)

Student Services                                 2002                            1502

Tutors Services                                   4005                            2980

General Serrvices                               17049                          13050

Total Services Cost                            23056                          17532

For the government of Singland announced withdrawing some percentage of the funds it supports the university activities with, the respective institutions management should revert by doing the same (Cheslock and Gianneschi, 2008. p229). That is, cutting down some of their costs as proposed above. The benchmarking of Kanymoon University against cost accounting policies of AU and BU brings more light on the expenditures incurred by the University in nonbasic activities of the University (Parker, 2012. p56). Costs on such projects should be cut down, and that is what the management accounting departing of KU has to do as proposed in the example diagram above.The above table illustrates variance analysis for KU when funded by both the government and school fees against when the government withdraws its financing activities to a certain level.

Benchmarking against the other institutions of higher learning offers an institution with an opportunity to gather significant information that helps the administration in the identification, understanding, and adoption of viable alternative measures from other world class institutions (Ajelabi and Tang, 2010. p1). With the challenge of finances and sources of revenue to KU, it is necessary to benchmark against AU and BU in hunger for formulating effective cost management standards, practices, and policies.

Strategic Management Accounting

Strategic management accounting (SMA) refers to a form of management accounting that places emphasize on the analysis of information relating to factors external to the firm, as well as non-financial information and internally generated information (Cadez and Guilding, 2008. p838). SMA involves the provision of financial information on the company’s goods and services offered to the market and competitors costs and cost structure as well as monitoring the businesses strategies and those of its close competitors in the market for a given period (Cadez and Guilding, 2008. p838). The process involves the provision of accounting data about the entity to the management accounting department to create efficient decision-making basis mainly relating to the rates and trends in real costs and prices, market share, cash flow and production of total resources for the university.

Academic Literature

Strategic management accounting literature has undergone several different and diverse directions. SMA literature has been divided into two main research categories namely, the research that uses label SMA to carry out a study on management accounting strategies that are strategically focussed, and the research examining the interrelationships between policies and management control systems(Cadez and Guilding, 2008. p838). SMA makes a significant contribution in cost management processes in that a cost accountant can allocate resources efficiently and therefore attainment of institutional goals efficiently.

In the recent development of the strategic management accounting, reviews based on academic literature relating to the subject have arisen and content different opinions on strategic management. The literature that has appeared include:

  • The Porters frameworks to strategic management accounting, which add an advantage to the research hypothesis, and focusses more on the cost management required to aid in the support of moderate price competitive strategies than on research development, design, creativity, and innovation needed to return a viable premium through product differentiation (Parker, 2012. p70). KU should focus on the appropriate cost management strategies by lowering expenditures directed towards individual projects which are not very basic to the university. This assures the institution of a sustainable position and competitiveness in the outcome registered by the University against other universities in the country.
  • Another literature is based on the attribute costing techniques, as argued by Bromwich, where the main aim of quality costing is to cost the benefits that services offered by an institution like Kanymoon University to the students and other key stakeholders, as opposed to the reasoning that underlies activity based costing rationale. The cost of operations is believed to be the key driver expenses of the products. SMA goes beyond the just mere collection of data on businesses and their competitors, as to how those benefits contribute to building and ensuring a competitive edge (Cadez and Guilding, 2008. p863). KU should operate by this literature so that the management accounting department may be able to formulate the best cost resources allocation criteria and efficiently monitor their returns to the institution.

Strategic Management Accounting Technique

It has been postulated that strategic management accounting is still one of the newest management accounting techniques with an actively based costing and balanced scorecards which have been under the development process mostly conducted by managers within their organizations (Parker, 2012. p660. Researchers have always played the role of formulating reporting techniques through numerous case analysis of creative and innovative practices by smoothening these practices to a generalized mode of use.

Balanced Scorecards

The financial data and information of KU should be integrated with those for both AU and BU; this will assist in the creation of proper strategic plans that can transform the direction of the educational sector in Singland.  The universities administration and entire management will be able to create value for the students and staff jointly for sustainability of the respective institutional academic and research objectives (Agostino and Arnaboldi, 2012. p327). The well-established use of relevant performance measures in the three universities, KU, AU, and BU, through comparative analysis joined with the necessity to promote customer and strategic focus, has resulted to experimentation with balanced scorecards.

Balanced scorecards remain to be one of the key strategic management accounting tools. KU should use this technique in the identification of profitable projects to be undertaken for the benefit of all stakeholders of the University (Kaplan, 2010. p115).  The technique works excellently when applied effectively in management accounting departments of any institution, and this feature makes balanced scorecards remain to be a widely disseminated approach adopted by many university administrations in the country of Singland.

Research shows that the earliest application of this technique was initiated and developed at Massey University. Given that Kanymoon University has allocated a lot of money in the research department, the institution’s students in liaison with the administration should also carry out research on the best strategies for effective cost management using relevant examples as in the model found in Shadbolt and Martin (2005). The results of Balanced scorecards in an educational institution should always be published by the system for the interest of its stakeholders.

The setting of-of effective strategies and continuous measuring of every institution’s department performance offers a manual for the utilization of balanced scorecards.  KU as an institution should always reflect on the nature of its financial, natural resources, and learning and growth(Agostino and Arnaboldi, 2012. p327). The management accounting department that makes decisions on what projects the university should undertake must concentrate on the targets and measures relating to the production core rather than other nonbasic elements of the balanced scorecards, and thus reducing the potential of learning through the entire business. The balanced scorecards are used by managers to provide an ongoing learning opportunity for the institution as this eases the deliberations about the university’s vision, goals, strategies, and crucial factors that result to the success of schools(Kaplan, 2010. p115). In particular, specific key measures need to be undertaken to upgrade the institutions cost management.


The government of a country remains to be one of the primary sources of educational institution’s revenue and funding. Withdrawal of public support in this critical matter needs to be addressed adequately by the respective institutions through management accounting department. Strategic management accounting techniques should be adopted by KU to efficiently manage the available funds 9Martinello, 2006. p350). The most widely adopted tools are balanced scorecards, value chain analysis, Porters value chain model, and benchmarking which are very useful in the provision of significant information for decision making (Ajelabi and Tang, 2010. p120). Developments in SMA  offer the university well-established policies for adequate cost accounting of the available resources. Therefore, Kanymoon University should develop the use of SMA techniques in conjunction with accounting data relevant to the institution. This assures the university’s management of a competitive advantage against the other universities in the country especially AU and BU. Kanymoon university should create the most appropriate policies in the cost management department in that resource allocation is efficient and done as per the levels of significance and the returns which it gives back to the university.


  • Agostino, D. and Arnaboldi, M., 2012. Design issues in Balanced Scorecards: The “what” and “how” of control. European Management Journal,30(4), pp.327-339.
  • Ajelabi, I. and Tang, Y., 2010. The adoption of benchmarking principles for project management performance improvement. International Journal of Managing Public Sector Information and Communication Techniques1(2), pp.1-8.
  • Cadez, S. and Guilding, C., 2008. An exploratory investigation of an integrated contingency model of strategic management accounting.Accounting, organizations and society33(7), pp.836-863.
  • Cheslock, J.J. and Gianneschi, M., 2008. Replacing state appropriations with alternative revenue sources: The case of voluntary support. The Journal of Higher Education, pp.208-229. Retrieved from:
  • Kaplan, R.S., Norton, D.P. and Rugelsjoen, B., 2010. Managing alliances with the balanced scorecard. Harvard Business Review88(1), pp.114-120. Retrieved from:
  • Martinello, F., 2006. University Revenues and Faculty Salaries in Ontario: 1970/71-2003/04. Canadian Public Policy32(4), pp.349-371.
  • Parker, L.D., 2012. Qualitative management accounting research: Assessing deliverables and relevance. Critical Perspectives on Accounting23(1), pp.54-70. Retrieved from: