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The controller of a small startup company in the San Francisco Bay area "ordered" the manufacturing function to ship four systems in the last month of the fiscal year. The average production time for each system was 90 days. The manufacturing staff thought the request was ludicrous and proceeded to ignore it. Unfortunately, the revenue expectations for the year included these four systems. The controller had committed to a revenue plan that did not match the manufacturing build plan. To further complicate matters, the controller did not communicate this revenue plan to the manufacturing staff. The result was that management could not fulfill its commitments to the board and, more important, to the institutional investors.
This controller did not understand the business he was supposed to support. He was far from being a business partner. His experience illustrates the fact that the traditional role of accountants must change to meet the demands of the current and future business environment. Accountants need to participate actively in strategy formulation and implementation, to be involved in the decision-making process, and to take a "forward thinking" aproach in business. Gone are the days of nothing but debits and credits.
THE CHANGING ROLE
Al Pipkin, vice president of finance at Coors Brewing Company, has proposed the concept of strategic accounting as the next major step for accounting in business and industry. What differentiates strategic accountants from their more traditional counterparts?
Strategic accountants are an integral part of the decision-making process. They have automated the more mundane accounting tasks so they can focus on providing information as a strategic weapon for the organization. They have transformed the core accounting system into a "strategic intelligence center" by adding internal and external data (about customers, markets, distribution channels, and competitors) to the financial systems. As Pipkin states, "Accountants must take what they have and build it into something more valuable."(1)
The strategic accountant concept is based on a close working relationship with nonaccounting personnel so that accountants are included in the business decisions. This type of relationship can be defined as a business partnership. Accountants cannot expect to play a strategic role in the organization if they have not nurtured a strong partner relationship with all the functions of the business.
In a...