Management accounting is also referred as managerial accounting is focused to provide information to the higher authority of a business organisation for decision-making. Management accounting is slightly different from financial accounting as the primary focus of financial accounting is reporting the financial characteristics of a business to external stakeholders such as regulators or investors. I am a senior finance manager at Tower Transit Singapore. I have the working experience to handle a team which is executing multiple characteristics of accounting, financial management, operations and payroll. I also monitor forecasting as well as budgeting related characteristics in the context of financial analysis. I am an active member of the senior management team to provide in-depth knowledge regarding the financial characteristics for improving the decision making process of the business. Critically analysing the recent approaches of management accounting in the context of Tower Transit Singapore is the primary purpose of this study.
Critically analysing different approaches of management accounting
Activity based costing
Activity based costing (ABC) is recognised as a management accounting technique which applies cost allocation within activities rather than traditional cost objectives such as products or departments. As stated by Hilton and Platt (2020), the basic principles of the activity-based costing, do not focus on simply dividing the total costs through the number of products or operational activities. This method is crucial to introduce a wider approach for considering all the major activities included within the operational activities. Tower Transit Singapore is regarded as a contracted bus operating organisation in Singapore. This organisation is currently using the major principles of the activity based costing and the policy developers of this organisation are considering all the required activities involved to run a bus company and it is assigning the cost to those major activities according to the actual resource consumption related characteristics of each element. As stated by Brewer et al. (2022), ABC is crucial to provide the highest possible accuracy to understand the actual cost of each operational element. In this case, the higher authority of the company can identify the actual cost of each service bus route as well as individual trip. This method is helping the higher authority to make better pricing related decisions and apply the most suitable resource allocation related strategies. The integration between the decision making team and the finance experts is helping the company to identify the major opportunities associated with cost saving. The organisation is capable of enhancing the operational efficiency in a structural manner through understanding the activities which are holding the most costs. The company is capable of focusing on streamlining the identified activities and eliminating the major inefficiencies in a strategic manner. This method is effective to ensure improved service quality and the amount of wastage can also be reduced through the application of this strategy. The senior management team of this organisation has a clear picture regarding the actual cost. The bus company is continuously negotiating with the clients and government agencies in a more favourable manner to establish effective contracts. Activity based costing is helping the business organisation to demonstrate the actual value they provide through describing the particular resources as well as activities required for delivering the whole service.
Figure 1: Difference between ABC and traditional costing method
On the other hand, there are multiple challenges associated with the implementation of ABC. As stated by Teisberg et al. (2020), introducing ABC can be categorised as a time consuming as well as complex technique, especially for large and multinational organisations. Tower Transit Singapore is Hari guarded as a large bus company which has multiple cost drivers as well as activities. Tracking the overall resource related requirements of each activity is a complex task to perform. The higher authority of this organisation has introduced automation and artificial intelligence within the tracking process. ABC demands a comparatively higher amount of data to provide the best possible outcomes. This organisation has limited IT related infrastructure and it is affecting the overall capability of ABC in this company. Tower Transit Singapore operates multiple services or roads with multiple cost structures and the implementation of ABC is beneficial for this bus company to track the overall requirements as well as characteristics of each route.
Balanced scorecard
Balanced scorecard is regarded as a strategic management, accounting tool which goes beyond the basic elements of the traditional financial characteristics. According to the view of Balaji et al. (2021), Application of the balanced scorecard method is capable of providing a more in-depth as well as holistic view regarding the performance of a business organisation. It includes four major perspectives such as internal process, customer financial learning as well as growth. The primary purpose of the balanced scorecard method is to ensure balance among these perspectives to track the overall progress of a business organisation to achieve the strategic objectives or goals. According to the internal characteristics of Tower Transit Singapore, it can be understood that the organisation is not utilising the balanced scorecard method within its organisational structure. The senior management team of this organisation can utilise the balanced scorecard method to ensure that all the operational activities are developed according to the strategic goals of the company. The management team can clearly define the strategic goals of the company based on each perspective of the balanced scorecard method. For instance, the finance expert can introduce an objective to enhance profitability of the company by 5% each year and align the goal to customer satisfaction. This organisation can also introduce a goal regarding customer satisfaction to ensure a 95% customer satisfaction rating from all the passengers of the company. According to the opinion of Frederico et al. (2021), it is the responsibility of the business organisations to discover the major performance indicators at the initial stage before implementing the balanced scorecard method. The senior management team can select the specific key performance indicators for measuring the overall progress towards each objective. For instance, the finance expert of the company can introduce a key performance indicator in the context of a financial goal to ensure competitively higher operating margin. The key performance indicator in the context of customer goals can be the amount of passenger complaints. Integrating the financial goals and customer satisfaction related goals can be beneficial for the business organisation to ensure a strategic and sustainable development. it is crucial to mention that the business organisation needs to introduce initiatives for passing the desired outcomes. For instance, the higher authority of the company can introduce a fuel efficiency initiative for improving the overall profitability of the company. The decision maker of the business organisation can introduce an integrated system to collect customer feedback through the online website or application of the company. This method is crucial to address the concerns of the customers and provide the best possible services. Improved customer satisfaction can automatically contribute towards the financial growth of the company (Tsai et al. 2020).
On the other hand, the introduction of a balanced scorecard method can be regarded as a complex as well as time consuming element for the business organisation. As stated by Torgautov et al. (2022), introduction of the balanced scorecard method demands careful planning and proper alignment with the strategy and goals of the business organisation. The senior management team of the business organisation needs to provide proper attention to ensure continuous monitoring as well as evaluation of the new initiatives. Application of the balanced scorecard method is dependent on accurate data and the data collection and management related infrastructure of Tower Transit Singapore is not sufficient in the current stage. The company needs to improve its IT capabilities and data infrastructure to ensure the sustainable integration of a balanced scorecard within its operational sector.
Sustainability accounting
Sustainability accounting is gaining huge popularity in the recent time period as it integrates social, environmental as well as governance related factors within the traditional financial reporting sector and decision-making activities. It has been highlighted by Tiwari and Khan (2020), sustainability accounting has the potential to create new opportunities as well as address the critical challenges for the business entity. Based on the recent operational characteristics of Tower Transit Singapore it can be stated that the organisation is not utilising the principles of sustainability accounting in the recent time period financial reporting on environmental social as well as governance factors. Bus organisations can demonstrate their commitment towards sustainability. It is beneficial for business organisations to generate comparatively higher transparency for the major stakeholders such as passengers, local communities and investors. As stated by Laine et al. (2021), the basic elements of sustainability accounting can generate more trust as well as engagement within the stakeholders of a business organisation. The senior leadership team of this organisation can analyse the operation operations as well as valuation of the company for identifying the major social governance as well as environmental factors which might have impact on the long-term sustainability of the company. It might include noise as well as air pollution, waste management, energy consumption, inclusion and diversity practices, stakeholder engagement and employee engagement. The senior leadership team can introduce measurable targets as well as goals to improve the performance of the company in each social environmental as well as governance sector. For instance, it might include reducing emissions by a specific percentage and increasing the utilisation of renewable energy resources within the operating activities. As stated by Zyznarska-Dworczak (2020), business organisations generally introduce annual reports to ensure financial transparency between the business and its stakeholders. Publishing sustainability reports along with the annual reports of the company can be effective for this organisation to ensure the integrity of the sustainability accounting practices. It is crucial to mention that business organisations need to follow multiple theories such as triple bottom line theory to integrate financial aspects and sustainability related characteristics at the same place.
On the other hand, implementation of sustainability accounting can be a complex element due to the absence of a standardised matrix in the sector and lack of data availability. Tower Transit Singapore needs to invest a comparatively higher amount within the data collection as well as analysis systems to ensure complete integrity. Current data analytics related characteristics of this organisation is not sufficient to support the integration of sustainability accounting. The higher authority of the organisation needs to make huge financial investments in the IT integration sector.
Big data and analytics
Big data analytics in the financial aspect is regarded as the most anticipated element in the corporate sector. As stated by Bhimani (2020), big data analytics can provide real time insights as well as visibility to the business organisations. Tower Transit Singapore is considered as one of the most prominent s in the contracted bus operating industry in Singapore. This organisation has multiple sources such as ticketing systems, GPS tracking as well as weather sensors for collecting immediate insights regarding passenger flows, traffic patterns as well as service performance. It is helping the company to introduce dynamic adjustments in the context of resource allocation to enhance the responsiveness as well as efficiency of the company. Based on the findings of He et al. (2020), analysing passenger demand related data is crucial for business organisations to make more informed decisions. The senior leadership team of Tower Transit Singapore is continuously utilising passenger data for its marketing campaigns to fulfil individual preferences as well as requirements. On the other hand, the current IT infrastructure of this organisation is not regarded as the best in this industry. The company needs to improve its IT infrastructure to collect more holistic data regarding customer expectations and customer satisfaction. Integrating customer expectations related data within its strategic decision making process can provide more effective outcomes.
Conclusion
The overall discussion helps to understand that strategic cost, management tools as well as techniques are crucial for Tower Transit Singapore to make more informed decisions. Big data analytics is helping the business organisation to enhance the overall performance of the company and improve its corporate value. However, the company has multiple opportunities to utilise the basic principles of balanced scorecard and sustainability accounting related characteristics. The company needs to strengthen its IT infrastructure to collect and monitor customer satisfaction related characteristics in an effective manner. Integrating financial aspects and service quality related aspects at the same place might be helpful for the company to ensure long-term growth.
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