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Challenges in advanced management accounting
Challenges in advanced management accounting

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1.1 Defining strategic management accounting

Strategic management accounting (SMA) was first discussed in the literature of the late 1980s as a response to concerns about management accounting losing its relevance for business practice (Roslender and Hart, 2003). SMA is still not clearly defined, so writers emphasise different perspectives and techniques or avoid defining it altogether. Examples of different definitions are provided below.

Box 1 Definitions of strategic management accounting

SMA refers to a variable portfolio of mainly financial information geared towards aiding strategic decision making ...

Bhimani and Bromwich (2010, p. 48)

Strategic management accounting (SMA) is usually described in ways which place emphasis on factors external to an organization (Bromwich and Bhimani, 1994). Simmonds (1981) defines the concept as the provision and analysis of management accounting data for use in developing and monitoring business strategy. Consistent with the notion of achieving competitive advantage, he advocates that attention be paid to competitors’ relative levels and trends in such factors as costs, prices, market share, cash flow and financial structure.

Coad (1996, p. 387)

SMA is identified as a generic approach to accounting for strategic positioning, defined by an attempt to integrate insights from management accounting and marketing management within a strategic management framework.

Roslender and Hart (2003, p. 255)

Strategic management accounting is the process of identifying, gathering, choosing and analysing accounting data for helping the management team to make strategic decisions and to assess organisational effectiveness.

Hoque (2003, p. 2)

Strategic management accounting is the form of management accounting in which emphasis is placed on information that relates to factors external to the entity, as well as non-financial information and internally generated information.

CIMA (2005, p. 54)

The definitions emphasise different aspects of SMA. Roslender and Hart (2003) use a marketing perspective which is appropriate for their customer focus. Coad (1996) gives prominence to the external and competitor view, while the other definitions simply combine definitions of accounting with the term strategy. The definition from CIMA (2005) focuses on the type of information that is most likely to be useful. One reason for the variation in definitions is that the form of SMA that evolves in an organisation, like accounting in general, depends on the organisational context. There is not a one-size-fits-all definition. So while the diversity reduces the clarity on the topic of SMA it may also reflect the possibility of appropriately tailoring it to different settings.

Activity 1 Strategy and the overlap between functions in organisations

Timing: Spend about 10 minutes on this activity.

A strategic focus for management accounting results in it overlapping with other functional perspectives within the organisation, not just marketing as highlighted by Roslender and Hart (2003). Think about the situation of new product development to identify the overlaps that may occur with other functional areas.


A strategic focus on delivering value to the customer requires integrated ways of organising around the value chain. The specialist areas of production and product development, corporate management, human resources, procurement, finance, and law need to work together and with accountants to achieve a coherent view of the organisation’s strategy. For example, the development of a new product may be based on marketing’s projections about demand for features, but its design should also be influenced by cost efficiency which will involve consulting with people responsible for procuring raw materials from suppliers and the production team responsible for factory floor operations. Human resources may be involved where the availability of additional skilled workers is an issue or where the working conditions of current employees may be changed. Lawyers will be involved in determining the likelihood that the development can be patented. Corporate management and finance will be involved if the new product represents a change in strategy for the organisation and significant, new capital investment is required. Once again the accountant should have a role in the process of evaluating the capital project. In cooperating it is important that all specialists are able to contribute their perspectives, and are also able to accept and integrate the importance of other views to achieve a coherent view. It is perhaps easier to see the connections needed for a specific project like this. It is more difficult to ensure that cooperation among specialist areas in an organisation is achieved in an ongoing way. It is reflected in the move away from functional specialisation in organisations to a more organic structure around teams.

Another way to refine our understanding of strategic management accounting is to contrast it with the role and techniques that were traditionally associated with the management accounting function – or so-called traditional management accounting.