Strategy Planning Essay

1824 WordsSep 11, 20138 Pages
LINKING STRATEGY-BASED COSTING AND INNOVATION-BASED BUDGETING Financial professionals must lead the way for it to succeed. By Michael F. Latimer, CMA, CPA If you’ve ever taken part in a strategy development effort, you’ve undoubtedly witnessed an anomaly that occurs when the best-laid strategic plans enter the realm of reality. When top management hands off its strategic imperatives to line management, momentum is often forfeited as high-level goals and objectives are slowly and painstakingly translated into detailed action plans and budgets. When one level of management controls the strategic assumptions and decisions, and another has to interpret and execute them, incongruities inevitably develop. The most common miscue involves finances. New strategies cost money—more than most planners ever anticipate. They invariably call for increased spending on new marketing and advertising campaigns, technologies to support customer relationships, new business ventures, and other strategic programs. Without early intervention from the accounting and finance professionals, these economic oversights in the formulation stage can prove insurmountable in the implementation stage. Before management sets out to change the speed and direction of a company, it needs to consider whether the existing cost structure can support its new set of objectives. Without recalibrating the cost structure, strategies that enter the implementation phase often culminate in budgets that introduce more cost than the company can afford. When the strategic vision eventually collides with quarterly profit expectations, delays and breakdowns in implementation abound. As the principal players responsible for assessing the magnitude of broad-scale organizational initiatives, management accountants and financial managers can help avert these breakdowns and emerge as one of top management’s principal

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