Managerial Accounting For Dummies
Book image
Explore Book Buy On Amazon

Following the balanced scorecard, management accountants do much more than predict profits (as part of budgets) or provide information for decisions about pricing products or buying new equipment; they also provide information to help managers and investors assess how closely a company is moving toward meeting a broad range of goals and objectives.

You’re not likely to get anywhere without a plan. You have to know how you’re going to reach your business goal. What’s your strategy? How are you going to exploit emerging possibilities and gain an advantage over the competition?

Don’t confuse strategy with budgeting. A master budget is also a plan, but it simply specifies the details of how much you’re going to make, when, for how much, where the money is going to come from, and how you’re going to spend it so that you end the year with a profit and a sound balance sheet.

Strategy is much bigger than that. It defines how you’re going to get your customers to pay good money for your products.

The balanced scorecard is a report card for your company that indicates not only how profitable you were last year but also how well you’re implementing your strategy in order to stay profitable for many years into the future.

The balanced scorecard concept was developed and introduced by Robert Kaplan and David Norton to help management accountants provide more information about companies’ success in implementing strategies.

Kaplan and Norton argue that a successful strategy must include four perspectives, which I cover in the following sections:

  • Financial: Incorporates traditional measures of performance, such as net income and revenues

  • Customer: Considers customer satisfaction and how well the company stacks up against its competitors

  • Internal business: Considers how well the company develops, makes, delivers, and services products

  • Learning and growth: Evaluates employees’ ability to change and improve

About This Article

This article is from the book:

About the book author:

Mark P. Holtzman, PhD, CPA, is Chair of the Department of Accounting and Taxation at Seton Hall University. He has taught accounting at the college level for 17 years and runs the Accountinator website at, which gives practical accounting advice to entrepreneurs.

This article can be found in the category: