Walmart Management Accounting Systems

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SUCCESS OF THE MANAGEMENT ACCOUNTING SYSTEMS

Strategic plan of the Walmart focusing on reaching the company objective which is being the lowest cost retail leader in each market they enter. The strategy of Walmart drives the managers to address stakeholder perspective also how to prepare tactics and operational plans. Agility, flexibility and being ahead of the rivals can only be achieved by correct usage of correct management tools such as supply chain and value chain to standardize the procedures, requirements and keeping the costs of businesses as low as possible.

Keeping these extra business costs and controlling them allow the Walmart to keep the industry leadership. With the usage of the correct and successful management accounting systems organization makes the effective decisions by the provided information. Managers of Walmart use the management accounting info to make decision regarding almost everything such as searching new markets (like health care), to select products and vendors, to develop and implement supply chain progress, to set pricing and arrange the marketing of the products. Management accounting can provide the managers the financial objective data and based on that information managers can evaluate the company performance and the key performance indicators. Within these tools of management accounting organization uses budgets to set the daily operational goals, to provide certain targets to evaluate the performance of each branch.

Successful implementation strategic management accounting system by Walmart allows organization to achieve the quality goals with acquiring the information on of the measurement and reporting the resource used in defective points, lost sales due to poor quality, investment need due to quality etc. These kind of information help the managers to make their cost management in certain period, oversee the consumed resources per activity, analysing the sources and drives of these costs and to get an analyse of the profitability. The current management accounting system successfully let managers of Walmart to make their time management by measurement and reporting of profit and sales loss on delay, cost of delivery delays from supplier, analysing sales in between old and new products and response timing in shipping products.

To make an effective and a correct decision an organization needs different approaches and processes in terms of budgeting and costing. Walmart implements a strong budgeting process that improve the effectivity in reaching their objectives. The process of budgeting helps the organization to motivate and improve the effectivity of the employees, on the other hand it helps to prepare long term objectives for the company.

Company uses MAS to have cost effective products and vendors’ selections and to manage the accounting information to improve the effectivity of the manager decisions. For total cost reduction in the products and to keep the competitive advantage organization uses appropriated costing procedures. With the usage of their costing methods such as LIFO-FIFO and ABC Walmart takes effective decisions in their inventory controlling and pricing structure. In general activity based costing approach exhibits actual work handled in the production in most accurate and useful ways for the management accounting systems. Activity based costing system is used to collect a full cost view successfully. Walmart is able to reduce the overhead costs by minimization of the cost drivers amount (Leitner, 2004).

It is obvious that managerial accounting systems of Walmart is very effective but some small points create a contrast to their effectivity of the processes. For example, in the budgeting system of the Walmart, prediction for the managers is very difficult since organization believes on various estimates to see the financial expectations. In addition to that the process can depend on a number of variable that effect each other. It is complicated to prepare such a report and it is hard to understand by other employees inside of the company (Axson, 2010).

Besides budgeting, the costing system of Walmart has some drawbacks as well. The ABC system that organization is using possibly can create more costs than the profits. On the other hand, there is a data input requirement from several other departments that may create more risks of data input failure. The system management cost is another drawback since it has high cost pool volume. For example, for a big organization like Walmart, cost account information is hard to separate because of the presence of a number of product line and various machinery setup in vast production environment (Drury, 2012).

RECOMMENDATIONS FOR IMPROVEMENT

As per Kee and Schmidt (2000), the traditional accounting approaches has been largely replaced by alternates of them. The aim of management accounting is not only to report the profit but also to seek the ways to improve the profit by using several methods and theoretic approaches to improve the process. Managers should begin to understand the usefulness of the variety of the new alternatives to the traditional accounting approaches that can have practical advantages to the organization (DugDale and Jones, 1998).

The management accounting system that Walmart employs is already a powerful and systematic technique that allows the organization to reach their mission and strategies. Although there is some improvement need to be done to enhance their current position. This report provides three methods of practical application to fix a number of common issues which can be responsible for inventory build-up in the firm that causes profit decline. Key techniques for management accounting that can be recommended are ‘’Just in Time Management (JIT)’’, ‘’Inventory Management’’ and ‘’Economic Order Quantity (EOQ)’’.

Hutchins (1999) define just in time (JIT) as, ‘’term used to indicate that a process is capable of instant response to demand without the need for any overstocking, either in expectation of the demand being forthcoming or as a result of inefficiencies in the process. Adopting the JIT reduces the production time and the major costs, invests in the material waste management and result in high grade products. Money won’t be delivered to the inventory so that it may be used to reach the objectives and goals of the business planning.

Just in time system will drive Walmart accurate cost allocation to the products and define cost of waste and ineffective operations. By using JIT system Walmart will require to renew their inventory and pay for the inventory only when they sell the products so that it will minimize the resource delivered

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