Managerial accounting, also known as management accounting, is that branch of accountancy in which the person produces reports and documentation to help management of a company make decisions related to managing the company.
A management accountant will produce the information needed to assess if the company, department, project, etc. is on track and meeting goals. Management accounting has to do with the internal processes of a company, while financial accounting focuses on the business as a whole. Managerial accounting assists managers in improving business processes.
For example, a management accountant could be involved in analyzing the profitability of product lines, services, customers, geographical areas, and so forth.
S/he might also work on capital and operational budgeting, as well as the pricing of individual products and services. So why should you consider becoming a managerial accountant? If you’re considering a career in managerial accounting, here’s the lowdown on what it is and why you should become a certified management accountant today.
- Setting goals
Management accountants help management to set goals for the company, department or project in question. Goal setting often involves making changes to ensure profitability and motivate employees towards these goals.
- Facilitating management control
Management accountants are important members of an organization’s team. They produce the information necessary for managers to gain a better sense of control over the ultimate success (or failure) of the entity.
Fortunately, as management accounting reports are only used inside the organization, there is no need to comply with GAAP (Generally Accepted Accounting Principles). This gives much more flexibility, allowing managers to choose their focus for investigation, and to defer other issues to a later time.
Management accountants measure the performance of each business activity and then compare them with the planned one. If problems are detected, management can decide what steps should be taken to regain control.
- Making plans
One of the key roles of a management accountant is planning for the future. They, therefore, produce reports and documents that are detailed and concise, more so than financial accountants have to.
They obtain information through a variety of methods, including budgets, surveys, competitor analysis, and might include information about specific geographical regions, market reach, and details about specific products. All this gives the organization’s managers the ammunition they need to set goals and make detailed plans about how they are going to get there.
- Making decisions
The role of a managerial accountant also involves making sure that decisions taken are the best that can be taken for the long-term wellbeing of the organization. They look at how particular decisions might affect management behavior, including decisions that have a long-term impact.
Management accountants develop plans and prepare information to optimize managerial and top-management decision-making. Budgets are key to management accountants, whereas because they focus on the future, they are of little interest to financial accountants.
- Solving problems
Unlike in financial accounting, where the emphasis is on the past and on historical reports, management accountants look at an organization’s actual performance versus its future goals and objectives. This allows managers to identify problem areas in budgeting and then to develop a different plan.
The information, documentation reports supplied by management accountants are used to solve complex problems. This leads to improved and better services to customers.
- Coordination
Managerial accounting also involves the integration of various aspects of an organization’s work to facilitate the proper achievement of objectives. This requires excellent coordination between various aspects of the company, such as production, personnel, sales, finance, and so forth. This is achieved via the preparation of budgets and performance reports.