Role of Accounting in Decision-Making

Introduction

Organisations are increasingly recognising that accounting information is the primary source of decision-making and therefore consider accounting the basic component of their operations. Both financial and management accounting are important to a firm (Rudancic et al. 2019). While the information provided by financial accounting is public and important for external users such as tax authorities, shareholders, banks, and associates among others, management accounting is internal and focuses on how resources and used and transformed internally to help an organisation attain its business objectives (Park and Jang 2014). Analogously, Ljiljana and Radivoje (2014) assert that financial accounting provides information necessary to regulations for any firm to be aligned to the national and international structures while management accounting is the pillar of decision-making within an organisation. Therefore, both financial and management accounting are indispensable in the running of any organisation. This paper focuses on the usefulness of management accounting information to Caesars Palace Las Vegas following the $75 million renovation.

Types of Decisions that Caesars Palace Las Vegas need to make over the next several years

The management of Caesars Palace Las Vegas should consider management accounting a fundamental support to the businesses because without it the businesses decision-making would be paralysed resulting to low or no return on the investment which is this case is the major renovation. Recently, managerial accounting has been segmented into cost management support sub-systems namely short-term and strategic business decision-making, which obligates hotel businesses to process information related to the quality of their services and relationship to the environment (Kaplan and Atkinson 2015). This means that over the next several years, Caesars Palace Las Vegas should account for all quality-related costs while preserving the environment.

Caesars Palace Las Vegas has to work on the quality costs. Collier (2015) asserts that when the quality of a hotel and its services is publicly announced, which should be based on quality label and the obtained certificates and category, the hotel becomes recognisable to more guests including those that are yet to use the services. Therefore, quality provides an organisation additional competitive advantage thus a strategic element in market competition. According to Jiambalvo (2019), quality management defines quality goals, policy, and responsibilities and these are accomplished through planning, ensuring, monitoring, and improving quality. Caesars Palace Las Vegas has already improved the quality of its rooms following the major renovation, which is an additional competitive advantage. However, to reap the benefits of this major renovation, the management of Caesars Palace Las Vegas should market the Julius Tower and highlight the new features, which will drive sales. This implies that over the next several years, Caesars Palace Las Vegas should focus on marketing the new Julius Tower while offering impeccable customer service so that the already served customers can market the hotel by word-of-mouth.

Cost management is integral to the success of Caesars Palace Las Vegas over the next several years. The case study shows that following the renovation, customers will now have to pay about $149 per night in the new rooms, which in a %25 or 20.2% increase compared to the cost before the renovation. This shows that the room improvements have significantly affected their cost and therefore it will be important for Caesars Palace Las Vegas to consider how the quality of the rooms will be maintained at a minimal cost in order to retain customers and attract more. Safdarian et al. (2014) note that price and demand have an inverted relationship, which means that if the rooms are too expensive, their demand will be low. Thus, Caesars Palace Las Vegas management has to identify cost drivers and mitigate their effect over the next several years if Julius Tower is to attract more customers.

Budgetary accounting will also be very important for the management of Caesars Palace Las Vegas over the next several years. Such budgets should report on the organisation’s internal needs. The organisation should practice complete bookkeeping for well-defined time periods, for example, after very three months, which will help the organisation establish how much it is spending and compare it with how much it is acquiring. This will allow Caesars Palace Las Vegas to determine if the new cost for spending in the Julius Tower room is sustainable or needs to be adjusted. According to Atrill et al. (2014), budgetary accounting considers the cost of a certain action and compares it with the alternatives in order to ensure only the most economical actions are carried out. This means that over the next several years, Caesars Palace Las Vegas should monitor the progress of the rooms in Julius Tower in relation to their demand, which will enable to organisation to determine if the cost should be adjusted or not. If the demand for the rooms will be low, the organisation will have to consider a lower price while maintaining the quality of the rooms, which will probably drive sales. This type of flexible planning and control is essential as it ensures an organisation adjusts operations to meet the needs of the market (Tenhunen 2018).

The management of Caesars Palace Las Vegas should recognise that financial reporting significantly affects the demand for the rooms and therefore should not neglect financial accounting. In preparing and publishing the financial statements, it is advisable that the organisation reports of corporate social responsibility which will play a major role in showing that the business in not only interested in making profits but also is responsible for the environment and the society at large. A sustainability and corporate social responsibility report in this case will be vital in building reputation and corporate image, which according to Wang et al. (2018) enhances an organisation’s competitiveness.

Conclusion

The paper shows that by practising financial accounting, Caesars Palace Las Vegas will show compliance to legal requirements but by practising management accounting, the organisation will be able to make more sustainable decisions. Quality costs will drive sales but this will have to be coined with improving the quality of customer service at the new rooms. Cost management will also be essential to ensure the new price for the rooms shows value for customers’ money thus maintaining demand for the rooms while attracting even more customers. Budgetary accounting is also necessary as it will help the organisation monitor its operations while forecasting future trends. The paper also establishes that in reporting financial statements, the organisation should report on its CSR activities to further build its image.

References

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