The importance of managerial accounting in the workplace
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.