Managerial accounting is concerned with the use of
economic and financial information to plan and control many activities
of an entity and to support the management decision course. Management
accountants play important roles more specifically in planning
& coordination with production, marketing and financial
functions. A subset of the managerial accounting profession is cost
accounting which relates to the determination and accumulation of
products, processes, or service costs. Management and cost accountants
are focused on the internal aspects of a business to keep it
efficiently running and profitable.
Managerial and cost accountants use a lot of the
same data used by financial accountants. The difference lies in the
fact that the data used for managerial accounting is more likely to be
used for a future orientated purpose whereas the financial accounting
process is showing what has already taken place. Examples of future
orientated planning are budgets, benchmarking, and profit projecting.
This also means that managerial accountants can take a more proactive
approach when it comes to tackling business and economic troubles that
can and due arise for many companies.
Planning is a key part of the management process
and although there are many descriptions of that process, a generally
accepted definition would include reference to the process of planning,
organizing and controlling businesses' activities so that the
organization can achieve its desired outcomes. Being able to anticipate
what revenues will be and forecasting the expenses that will be
incurred to achieve those revenues are critical activities in the
budgeting process. That ability is crucial to many aspects of a company
and allows employees' to make more educated business decisions.
The internal orientation that management
accountants have to their companies differs from the predominantly
external orientation of financial accounting. Financial accounting is
more externally important to such people as investors and shareholders.
Management accountants work hand and hand with other internal
departments such as merchandising, accounting, marketing, web and more.
An example of this would be a managerial accountant working with a
merchandiser to figure out how many units of a garment they can
purchase in the next year and still have a good profit margin.
The benefit of management accounting is that it is
not constrained by generally accepted accounting principles, which
means that approximate results can be generated quickly for
decision-making activities. Which means while accuracy is valued in the
data, relevance is more important for managerial accounting reporting.
This is also helpful because it allows the managerial accountant to
adapt to different economic climates, business strategies and
departments changing needs.
In order to become a managerial accounting
professional a bachelor's degree with a major in accounting is usually
a requirement. A management accountant should possess great analytic
and people skills since they will be dealing with many different people
and departments in a professional role. A management accountant may
also become a Certified Management Accountant (CMA) by passing a
respective board four-part test. The CMA examination is given in a
computer-based format using objective questions only. In addition to
the status that comes along with this professional designation, CMAs
are often given greater professional responsibilities and higher
compensation than those who do not have a CMA title.
There are many helpful resources that are
available to managerial accountants acquire valuable information that
pertains to their professions. An example of a helpful resource is The
Institute of Management Accountants (IMA) that is dedicated to
advancing the role of the management accountant and financial manager
within the business organization, and provides relevant professional
certification. Becoming a member of the IMA would be helpful to anyone
in a business role that involves making decisions based on financial
information.
The American Institute of Certified Public
Accountants (AICPA) states that management accounting as practice
extends to three areas: strategic management, performance management
and risk management. Strategic Management is advancing the role of the
management accountant as a strategic partner in the organization.
Performance Management is developing the practice of business
decision-making and managing the performance of the organization. Risk
management is contributing to frameworks and practices for identifying,
measuring, managing and reporting risks to the achievement of the
objectives of the organization.
The future possibilities for managerial
accountants are endless. Since they are used so much in planning
financial aspects of business they will always play a crucial role in a
wide range of companies. The career path of a managerial accountant is
a safe one because it is timeless and able to adapt to ever changing
analytics and technologies that can aid in the planning process.
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Michelle Moran | 