Tactical Decision Making in Accounting

by Dennis Hartman

Financial accounting provides data on businesses that investors need to make informed decisions. However, not all accounting information reflects the same degree of transparency and accuracy. Even though accounting professionals are guided by Generally Accepted Accounting Principles, they are still free to make tactical decisions that improve the accounting process and its results.

Accounting Management

Decision making within an accounting system is known as accounting management. This is different from management accounting, which refers to the portion of accounting activities and products that a company's managers use to make decisions. Accounting management includes changes to the accounting system itself, while management accounting deals with many other types of decisions that rely on financial data. Both fields deal with the intersection of accounting and leadership, and both can affect the performance of a business.

Timing Decisions

Timing is one major aspect of tactical decision-making in accounting management. Deferring transactions alters how much revenue or profit a business reports. In the case of taxes, waiting to sell an asset or make a purchase that qualifies for a tax deduction pushes the tax impact of that action into the next year, preserving or eliminating tax breaks and liabilities for the current year. Accountants use a number of techniques to control the impact of timing in accounting. For example, a small business may elect to use cash accounting or accrual accounting, which will change the schedule it uses for reporting income and expenses.

Communication

The accounting process results in financial statements that deliver information about a company's performance and financial position to people outside the business. However, it also produces documents for internal use. This is how accounting management enables management accounting. Effective communication from an accounting team can give managers the data they need to prepare budgets, manage payroll, make investment decisions and pursue growth opportunities. Accountants must make tactical decisions when they prepare this data based on the specific needs of the recipient and the complexity of the information. The choice of what information to pass along and what to leave out can mean the difference between a useful financial report and a misleading one.

Accuracy and Efficiency

Accounting professionals also make tactical decisions to improve the accounting process as a whole. For example, implementing the latest accounting software will have an immediate financial impact due to its cost, but may save money over time if it eliminates errors that senior accountants would otherwise spend time adjusting manually. Tactical decisions within an accounting system also include how to structure workers within an accounting department and which outside professionals or services to use.

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