Balanced Scorecard ‘s Use in Managerial Accounting

On any organization, managerial accounting has always been present. But then again, many have criticized managerial accounting methods over the past years due to the fact that very little has been changed from the traditional practices, despite radical changes in technology and a lot of process improvements have been introduced in the business arena. But then again, it is a good thing that managerial accounting is accepting process innovations, such as the introduction of balanced scorecard to the corporate world.

As a traditional practice, management accountants have been thought to generate performance reports through variance analysis. Variance analysis is a systematic approach to compare data from actual to the budgeted costs and revenues during the production phase of any given project. Though there may be some firms that still use variance analysis at this day and age, many have changed their pace and resorted to using balanced scorecards to generate performance reports.

Balanced scorecard in managerial accounting has been used primarily for financial measures. It also sets operational measures on customer value, process improvement activities and other internal processes that lead to business growth and development. Dr. Robert Kaplan and Dr. David Norton also see the balanced scorecard as a potentially good system in applying strategic management to identify the factors that should be measured to properly align business objectives within the organization. Kaplan and Norton were the pioneers of the balanced scorecard and it is because of their efforts that has paved the way in promoting changes to the traditional managerial accounting system. Balanced scorecard is just the right ingredient to improve managerial accounting practices.