To better understand the role of managerial accounting in business, students should go through two sides of a mountain. On one side, business students should learn the underlying knowledge and theories in classes and courses. On the other side, they should also learn from real experience in real business circumstances. This article will examine managerial accounting practice in the company I used to work for based on my experience.
Role of Managerial Accounting in a Large Fast-moving Consumer Goods Company
I used to work for a fast-moving consumer goods company based in Indonesia. It was one of the world’s largest fast-moving consumer goods companies with various products, including ice cream products which my division was responsible for the product line. More specifically, my division’s job was to ensure the sales and delivery of ice cream products to all retailers across the large Indonesian archipelago. It was a challenging task that required comprehensive managerial accounting in almost all the activities of the organization.
Garrison et al. (2017) stated that the role of managerial accounting is to assist managers to perform three key activities: planning, controlling, and decision-making. This was the case when the company was facing the complex logistic problem of the ice cream delivery to hundreds of Indonesian islands. The company had to create a solid integrated plan, control the execution of the plan, and decide the best course of action for every issue involved.
The job was not only to deliver the items but also to forecast the need of each item for each retailer, to seek the most cost-effective refrigerated delivery transportation based on regions and products, to continuously communicate with the production team, to handle the stock turn over of the warehouse, to tackle all hindrances in the operation, etc. All of it was to ensure that the ice cream products are delivered to the retailers in the best form.
Managerial accounting was used in the planning activities, such as in forecasting sales, and costs, and creating the budget. These processes are vital activities that can not be performed without proper supporting information, mainly historical financial data. Managerial accounting provided the data needed to support those processes. The company recorded every valuable operational financial data and organize it in a way so the employees would be able to easily extract valuable information.
The company also recorded data that was relevant to the execution of the operation, such as a detailed delivery cost, warehousing cost, dynamic price for renting a refrigerated warehouse, truck, or container, etc. These data would be crucial in deciding the most cost-effective delivery method for every order from the customers, as well as helping in operational decision-making. It was a complex process considering the geographical difficulties of the Indonesian archipelago. Surely, the operation was to handle the fast and continuously changing environment of the Indonesian logistics landscape related to frozen food.
Much of the information that is required by managers to make thoughtful decisions are based on cost data (Whitecotton et al., 2019). The company was well-established in collecting and organizing the relevant cost data, as well as summarizing it into valuable information. The decision made by managers in the company should be based on this information. This is one of the reasons why the company is now the biggest fast-moving consumer goods company in Indonesia.
I only worked there for a short period of time. However, it was a great experience. Now, I am establishing my own small company. Being an entrepreneur, the role of managerial accounting is the more important. It is relevant in almost all sides of my thought process related to the organization. Unfortunately, the company is still struggling in collecting and organizing important data required to create better decision-making. A proper managerial accounting course can provide the knowledge and skill for me to be applied in my company.
References Garrison, R., Noreen, E., & Brewer, P. (2017). Managerial Accounting (16th ed.). McGraw-Hill Education. Whitecotton, S., Libby, R., & Phillips, F. (2019). Managerial Accounting (4th ed.). McGraw-Hill Education.