Management Accounting Practices of (UK) Small-Medium-Sized Enterprises (SMEs)

Key conclusions • The emphasis on management accounting in SMEs tends to be on control information rather than aiding decision-making; there is a tendency to make decisions without adequate, or indeed any, financial information or analysis; • In smaller enterprises, the management accounting is often undertaken by the owner-manager/entrepreneur, resulting in significant opportunity costs. Where more structured use of management accounting techniques could add value, it might be appropriate to employ a management accountant 'business partner' to address this problem; • There is considerable variation in the amount and type of management accounting undertaken, seemingly conditioned by a number of factors: i. size (larger organisations do more management accounting than smaller ones); ii. financial constraint in terms of profitability, cash flow and credit availability (severely constrained organisations do more management accounting than less constrained ones); iii. external stakeholder requirements; iv. background and experience of senior management team (senior managers with non-financial backgrounds being less likely to employ management accounting); v. nature of the operations and the environment in which the enterprise is operating. Abstract This paper reports on the findings of a CIMA sponsored study of the management accounting practices of SMEs. Contributors to the management accounting literature (e.g. Nandan, 2010) have suggested that failure or underperformance of SMEs is often due to their failure to utilise appropriate management accounting tools. Given its mission, this issue is clearly of concern to CIMA. The findings of our exploratory study suggest that, while the situation is not as bad as some commentators had feared, there is significant scope for improvement through better dissemination of the accountant as 'business partner' concept and improved understanding/awareness of management accounting decision-support tools. There is also a need to ensure awareness among small enterprises that, while not using certain management accounting tools may be appropriate for small organisations, it will not be appropriate when the organisation grows in size and complexity; education in the use of such tools may therefore be desirable for SMEs hoping to grow in future.