Relevance re-focused ‐ a preliminary exploration of management accounting in 'new' business models

This paper begins to explore how management accounting has evolved over recent years, with a particular focus on business models centred around web-based business. A commonly referred online-business model is Web 2.0, which briefly here means that user participation with web pages and Internet sites is more prevalent. For example, in recent years the web has developed to include social media, rich user interaction and businesses without ‘bricks and mortar’ and ‘high street shops’. In this context, this paper explores how management accounting techniques and/or practices are used to provide key decision-making information to businesses operating within this environment. Johnson and Kaplan (1987) are often credited with sparking off an academic debate on the relevance of management accounting techniques to business. In essence, they argued that a dominant influence of financial accounting was one of the major reasons why management accounting had remained fairly static up to the 1980’s. Since the publication of Johnson and Kaplan’s work, some ‘newer’ and perhaps ‘more relevant’ techniques have been reported within the management accounting literature e.g. target and Kaizen costing (Monden and Hamada, 1991), throughput accounting (theory of constraints; Dugdale and Jones, 1998), or strategic management accounting (including the Balanced Scorecard; Kaplan and Norton, 1992). However, within the past ten years or so, the pace of technological change has changed how we lead our lives and how business is done. It might be surmised that such change may also have caused changes to how businesses make decisions, and in turn, change in management accounting techniques and practices. But, based on current evidence, both traditional and new management accounting tools do not seem to have lost their relevance (CIMA, 2009). The research here is based on an exploratory case study, which we call WebAccounting (WA). Using some constructs on general organisational change put forward by Dawson (2003), we attempt to interpret the process of change in the business and resulting changes in management accounting. WA offer accounting software to small business through an online platform. Our preliminary results show that, at least in this case organisation, there has been a shift in focus from decision-relevant costs - which were primarily fixed - to decision-relevant revenues. We also observed that key performance indicators are mainly non-financial, and are based on and driven by the increased focus on revenues rather than costs. Additionally, WA inadvertently used some traditional management accounting techniques, albeit in a re-focused manner. For example, cost-volume-profit analysis was applied, as well as the bare bones of a scorecard without any labelling as such by the company. Our research is limited by the fact that it is, at this stage, exploratory and generalisability of results cannot be claimed. However, given the somewhat novel nature of our findings and the lack of research to date on new business models and management accounting practices, we hope to encourage further research.