The wake of the 21st century brings with it more challenges than the long awaited relief amidst the corporate world. Even with the improvement and introduction of cutting edge technology, management issues still remain a hassle even with the best tools and the best brains in the trade. Problems and issues pertaining to management are very sensitive especially when it comes to managing a company's finances. The waxing and waning of the world economy makes this process even harder as more and more companies are forced to hire the services of skilled analysts at high cost all the while speculating the outcomes of the economy. However, with the right tools information and skills, a company is guaranteed to stay afloat in a world where businesses keep dropping out of the corporate world. How companies manage their finances and workforce dictates whether the company is bound to open its doors come the next financial year.
One of the major concerns in management is the management of accounts which is usually handled a company's accountants in conjunction with the management of the company. Management accounting specifically deals with generating information pertaining to a given company and basically relates on how to minimize costs while improving sales and boosting profits within the available company's resources. In short this is information that helps the management to make crucial decisions. Financial accounting on the other hand deals with generating information based on information relayed by external users and mainly deals with control of cash inflow and outflow in the company.
[...] Monitoring costs and more so variable costs, enables the management to make ‘active' decisions based on real time data and information. This is so vital that if ignored can lead to massive losses overnight. Take for example if a manager overlooked the sales price variance as depicted by the operating statement, the aftermath would be a substantial margin in the gross profits. This can lead to irrelevant data concerning the sales of the product and the final expenditure costs and variance (More Business 12). [...]
[...] A flaw in any of the above costs can reduce a multimillion company to nothing in a matter of hours, and it is specifically for this reason that companies are willing to spend heavily on outsourcing skilled professionals to run their management and board rooms as well as finances. Take for example the Virgin group of companies. The brand constitutes myriad other companies which do not necessarily deal in airlines but all the same are reputable commercial brands such the Virgin Radio and Virgin festivals. Such a huge brand requires diverse management with numerous managers to manage and control the different sub-brands which are fully- fledged brands on their own. [...]
[...] This means if a company was to spend $100 to produce a phone they are guaranteed of a $200 return after deducting all costs and expenses. However, this is not usually the case as sometimes the market would flood with a certain product dropping the price of that product significantly. Hence, companies have evolved with time to develop measures and countermeasures to stay afloat by offering a variety of products and services within the same niche. To maximize profit, companies are seen to take stringent steps to significantly cut down on unnecessary costs and costs deemed superfluous. [...]
[...] Caplan, Dennis. “Management Accounting Concepts and Techniques.” Management Accounting Print. Fundamental Finance. Variable Costs and Fixed Costs. Retrieved at; http://economics.fundamentalfinance.com/micro_costs.php. More Business. Build the Business of Your Dreams: Fixed and Variable Cost Control: Effective Cost Cutting Strategies. Retrieved at; http://www.morebusiness.com/running_your_business/profitability/Control ling-Costs.brc. [...]
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