Management Accounting at Skanska

MANAGEMENT ACCOUNTING

INTRODUCTION

Management accounting is the procedure for preparing the business reports that benefits the managers in making short-term as well as long-term decisions. It also benefits the business to capture the goals by analysing and communicating information to managers (Donev, 2020). In this report, the emphasis will be on the concept of management accounting, its techniques, planning tools and reports so the competitive edge is gained and has chances for organisational efficiencies. This report will, therefore, demonstrate the board of directors at Skanska so the organisational success and development are attained by implementing the tactics and tools for management of accounting.

COMPANY OVERVIEW

Skanska is the multinational construction company as well as Development Company that is based in Sweden. This company was found in 1887 and the present CEO is Andres Danielson (Skanska, 2020). The yearly revenue is of SEK 172.846 billion and presently there is 33,225 number of employees working in this organisation. It is also the number 1 green builder in the U.S. and is ranked on 3^rd position as the green contractor of U.S.

Figure 1 Skanska Logo

Source (Skanska, 2020)

LO1 MANAGEMENT ACCOUNTING SYSTEM UNDERSTANDING

MANAGEMENT ACCOUNTING

Agarwal (2020), stated that management accounting is the procedure for preparing the business reports that benefits the managers in making short-term as well as long-term decisions. It also benefits the business to capture the goals by analysing and communicating information to managers. According to Baker et al., (2017) the planning tool that decreases the wastage and makes effective functions that give guidance to the management so that it makes the effective decision for the whole company.

EFFECTIVE PLANNING

From management accounting at Skanska effective planning will be done that will result in the use of resources inefficient manner. Therefore, the management role of accounting in planning is significant due to which different planning tools are utilised so that each one of them will have an effective comprehension with the roles and targets and therefore, success opportunities are higher (Agarwal, 2020).

ROLE OF MANAGEMENT ACCOUNTING

Irrespective of the size of organisation management accounting in enhancing the values in the company as it is linked with organisational development and success. At Skanska, management accounting is significant due to which the large company for managing the functions of management it has significant roles and the operations of the business that are reliant on implementing of management accounting (Atieh et al., 2016).

MANAGEMENT ACCOUNTING LEADS TO GOAL ATTAINMENT

The targets of Skanska’s management accounting has a significant role in making effective comprehension for every staff member and therefore, the target achievement takes place. The direction of work is given by each staff member and therefore the goals can be achieved. The direction for management accounting is given by the manager that works accordingly so that it has different merits and d-merits to the company (Brown et al., 2017).

DIFFERENCE BETWEEN FINANCIAL ACCOUNTING AND MANAGEMENT ACCOUNTING

METHODS USED FOR MANAGEMENT ACCOUNTING SYSTEMS

Donev (2020), stated that for filtering the organisational outcomes and the information the benefit of the management accounting process is done and these methods are of different kinds that are used according to the demands and needs of the company. By utilising the management accounting systems at Skanska it will support in decreasing the price of production due to effective management that takes place from it. Given under are some kind of management accounting systems-

Cost accounting system

The cost accounting system demonstrates the cost that implemented for the company's product and the whole pricing cost is identified in detail with the process. This procedure at Skanska will benefit in identifying the entire cost linked with the products that effectively decrease the extra price so the profit will be increased at Skanska (Jetter et al., 2018).

The final costing of goods is analysed with the help of a cost accounting system that involves the labour price, expenses and materials. This system will result in effective working of the company and it will effectively develop the level of income at Skanska. The utilisation of cost accounting is done for controlling the variable costs so the business will get a positive influence through it. Also, some indirect and direct pricing is controlled with it (Donev, 2020).

Pricing strategy

The company considers various actions due to which it opts an effective strategy for pricing and which also develops the competitive level for the present players in the marketplace. The utilisation of pricing strategy is done in business for creating higher profit margins for attaining effective customer products (Ghasemi et al., 2016).

Price optimisation system

The utilisation of pricing is effective in comprehending the behaviour of customers by having the modifications in pricing. This process of management accounting is significant because it supports the fixations of pricing and increases the profits for business (Kastberg and Siverbo, 2016).

Inventory management system

Management accounting system works on the inventory level which is kept and balanced in the company. On the other hand, the system of inventory management takes some time due to which many of the companies can manually manage it but some of them use the tool for software. With the help of inventory management, it shows a clear vision regarding the stock that is present in the company thus the decisions related to the further stock in the company is easily taken. At Skanska the utilisation of this system in the organisation helps in generating more funds so the functioning of the business is managed and therefore, there won't be any shortage for the present company assets in the company (Brown et al., 2017).

LO2 TECHNIQUES FOR MANAGEMENT ACCOUNTING

The utilisation of two different methods is done and the statement of income will be demonstrated with the benefit of marginal pricing methods and the statement of income with opting the costing methods as under-

Preparation of income statement by using the marginal cost method

For the year ended March 2020

The income statement by using the absorption costing method

For the year ended March 2020

LO3 PLANNING TOOLS IN MANAGEMENT ACCOUNTING

For having the effective control for the expenses and cost it is significant for the operation to opt the planning methods which results and does not fall on pricing control that also makes effective functions and it enhances the profitability. Budget tool is utilised for planning so that strategies and formulated as per the in the company and the target for the business becomes simpler to achievement. Budgeting keeps effective control due to which resources allocation takes places that also works on variance identification to the quantity of the enactment (Atieh et al., 2016).

SALES BUDGET

The budgeting of sales is the method that is opted by the company for forecasting as well as estimating the sales which can be developed in a specific period and that also makes the staff members aware of the job role in the specific direction. By the sales budget at Skanska, the effective resources are used and the profits of the period are enhanced from it (Dasgupta, 2018).

Sales budget benefits

• At Skanska effective resource allocation takes place and the staff members are encouraged so that they won’t get differed and effectively the units that are budgeted are sold in the company (Agarwal, 2020).

• The staff members at Skanska will also work incorrect direction and the management will also supervise the performance of staff members so the development and success of the company will be easier and therefore the efficiency will be increased (Donev, 2020).

Sales budget d-merits

• The staff members of Skanska are not involved while working on the budget of sales thus it will have many opportunities for losing its staff member’s level of motivation.

• The investment and time which is needed on research is an enhancement that is more and thus each company does not work on the budget of sales (Erokhin et al., 2019).

PRODUCTION BUDGET

Production budget at Skanska is significant as due to which the organisation has the scale and size of the company that is large and thus, it also becomes significant for taking the right decisions. While working on the budget of production at Skanska effective decision as well as effective forecasting is done and the use of previous performances and the reports are also done (Langfield-Smith et al., 2018).

Benefits of production budget

• The extra costing is decreased by working in the budget of production at Skanska and thus, in manufacturing unit it also has an enduring role (Jetter et al., 2018).

• With the budgeting for production, the effectiveness is enhanced and thus it has lesser opportunities for extra production thus, it is said that this method saves lots of funds and the resources (Ghasemi et al., 2016).

D-merits of production budget

• The budget for production needs the detailed planning and lack for planning that comes up with the negative outcomes thus, it needs a specialised individual also works on it (Brown et al., 2017).

• Many of the efforts are required if compared with other tools of budgeting in the case for inappropriate efforts as the tools of planning is also failed (Agarwal, 2020).

CASH FLOW BUDGET

This tool is significant due to which the flow of cash is done and the funding sources are also analysed because of it. The inflow as well as the outflow of the funding benefits in making the advance decision from the tools of budgeting and also limits the staff members and the administration from the extra expenses (Atieh et al., 2016).

Benefits for the budget of cash flow

The company's short term liquidity position is also balanced from it and therefore it is also the most efficient method that is required for the daily business functioning. The functioning of the business is also effective and no additional funds are utilised in business (Langfield-Smith et al., 2018).

D-merits of cash flow budgets

• It also restricts the management as well as employees for extra spending thus, many of the staff members also sense d-motivation (Donev, 2020).

• There are different statements which are associated with the budget of cash flow and thus, each statement is influenced from it in the error case as the outcomes are seen in the income statement and balance sheet (Kastberg and Siverbo, 2016).

BUDGET IMPORTANCE AND ITS DIFFERENT IMPORTANCE

For making effective forecasting the budget that is done in the organisation and can also work on different kinds of budgeting methods for efficient application for planning. There are also some other benefits for every planning methods that are identified for proper comprehension and the d-merits are also analysed. Both are significant as the right actions at right time will decrease the opportunities for nonconformities and therefore effective performance is developed (Dasgupta, 2018).

The method of budgeting is significant for effective planning that takes place from it and therefore in the end the organisational outcomes are equated. The measurement for the performance is very significant as it provides the clear scenario regarding actual performances and the estimated performance, therefore, the predicted performance in case of deviation has some quick and corrective steps which are taken by Skanska. From the budget variance at Skanska, the next strategy and step are taken for the development in the performance of the organisation (Brown et al., 2017).

LO4

RESOLVING FINANCIAL PROBLEMS WITH DIFFERENT METHODS

In Skanska, whether it is small and large financial difficulties are faced by business and to solve the financial issues for the use of management accounting tool and the system must be done efficiently. The issues of finance at Skanska can be effectively solved by analysing and working on the issues incorrect direction (Hilorme et al., 2019).

The primary issues at Skanska are cash flow due to which there is a requirement to strictly work on the cash flow statement as the planning tool for cash flow. It impacts the entire working of the organisation and thus lack of emphasis on cash flow tool of planning can result for the issues of insufficient cash and therefore the management of functioning is complex (Ghasemi et al., 2016).

When the organisation will work on the effective cash flow budgeting method then the opportunities for overcoming the financial issues are related to cash that are solved at Skanska. Also, it has control over expenditures and thus, it also becomes significant to efficiently utilise the tool at the workplace (Jetter et al., 2018).

The expenses that are not necessary is the issue which results in financial issues and thus control can be done by working on inventory and the cost accounting systems at Skanska. By utilising the KPI approach effectively over the expenditures can be made and therefore, monitoring will also benefit in managing the problems of business and decreasing the financial issues that are faced by Skanska (Donev, 2020). At Skanska, the KPI approach is utilised by the organisation as it benefits in overcoming the financial issues. Also, this method is not utilised by Skanska thus, the financial issues are not solved and the organisation faces the fund shortage. The company ratio is calculated by utilising the KPI and therefore the decision-making is developed and the influence is for the effective financial status of the organisation thus, Skanska it is significant for using the KPI (Kastberg and Siverbo, 2016).

The use of management accounting tool and the system can also be done like cost accounting and management of inventory as it develops the efficiency and gives some positive outcomes in terms of financial sustainability. Also, it will decrease the excess stock and therefore, the inventory management system is significant for resolving the financial issues. The utilisation for balanced scorecard is very essential for resolving the finance-related issues for the timely measurement of performance and the control that takes place in the company. It is the method that must be used in Skanska so the organisation can overcome with present issues which are faced in the company (Langfield-Smith et al., 2018).

COMPARING THE ORGANISATIONAL PERFORMANCE

At Skanska, the company has to reach the final goals that use different kinds of concepts for management accounting as well as the planning tool. The utilisation of KPI is the maintained scorecard that is done by the company and the methods successfully benefit in resolving the financial issues and therefore, the achievement of goals is easier. With the help of KPI at Skanska overall supervision as well as functioning takes place and also develops the rate of profit. But due to the issues for decreasing rate of profits the organisation utilised the KPI indicator and that benefited in development of profits thus, it is said the financial issues are resolved (Nasution et al., 2020).

Also, with the stock increment the financial issues are faced and for overcoming it with the effective tool of planning is utilised and therefore it also supports in coming with the effective tool of budgeting. At Skanska, the utilisation of the maintained scorecard is done that benefits in balancing the effective control over the different things and therefore, the influence for the enhanced financial performance of the organisation (Atieh et al., 2016).

On the other hand, the utilisation of management accounting system at Skanska will lead in overcoming with the financial issues and therefore, the achievement can take place. The utilisation of management accounting system in Skanska will lead in overcoming the financial issues and therefore, the development for achievement will take place. Therefore, in Skanska, the financial issues are efficiently utilised balanced scorecard, KPI and the system of management accounting (Baker et al., 2017).

METHODS DUE TO WHICH THE MANAGEMENT ACCOUNTING IS IMPLEMENTED

From the above discussion, it is said that Skanska can utilise management accounting by implementing various software in the workplace. Also, with manual monitoring and control, management accounting can opt-in the organisation. Therefore, effective decisions are taken and overall the finance-related issues will be resolved with it. Also with the accounting of management with the effective decision is taken and the effective proposal is sorted and therefore, the decision is taken and the effective proposal is sorted and therefore, it influences the effective financial health of the organisation (Brown et al., 2017).

CONCLUSION

It is decreased that to attain the competitive edge and effective working in the company utilise of management accounting is most significant and the success is taken out from it by utilising the resources at it is effective. The report is covered detailed concept and tool for management accounting as it shows the significance of its applicability in the company. In this report the emphasis on the concept of management accounting, its techniques, planning tools and reports so the competitive edge is gained and has chances for organisational efficiencies. This report, therefore, demonstrates the board of directors at Skanska so the organisational success and development are attained by implementing the tactics and tools for management of accounting.

REFERENCES

Agarwal, A. (2020). Investigating design targets for effective performance management system: an application of balanced scorecard using QFD. Journal of Advances in Management Research.

Atieh, A. M., Kaylani, H., Al-abdallat, Y., Qaderi, A., Ghoul, L., Jaradat, L., and Hdairis, I. (2016). Performance improvement of inventory management system processes by an automated warehouse management system. Procedia Cirp, 41, 568-572.

Baker, T., Collier, D. and Jayaraman, V., 2017. A new pricing strategy evaluation model. International Journal of Operational Research, 29(3), pp.295-316.

Brown, J. L., Fisher, J. G., Peffer, S. A., and Sprinkle, G. B. (2017). The effect of budget framing and budget-setting process on managerial reporting. Journal of Management Accounting Research, 29(1), 31-44.

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Ghasemi, R., Mohamad, N. A., Karami, M., Bajuri, N. H., and Asgharizade, E. (2016). The mediating effect of management accounting system on the relationship between competition and managerial performance. International Journal of Accounting and Information Management.

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Nasution, F., Puspitasari, W., and Saputra, M. (2020, June) Automation Financial Processing in Account Receivable for Integrated Hospital System using ERP and Quickstart Approach. In Proceedings of the 2020 the 6th International Conference on Frontiers of Educational Technologies (pp. 204-211).

Skanska, (2020). About US. Online available at (https://www.skanska.com/) Last accessed November 2020.

APPENDIX

LO2 QUESTION-