Jan 19

Written by:
Wednesday, January 19, 2011 

Many times I've heard that accountants are boring and only do the backend postmortem for the financials of a company - well I never have agreed with this.

Are we boring? ...Naah!

Accounting is as interesting and important as any other aspect of business. Let me discuss one of the most interesting parts that I like in accounting... Management Accounting.

So what is Management Accounting?

According to the Chartered Institute of Management Accountants (CIMA), Management Accounting is "the process of identification, measurement, accumulation, analysis, preparation, interpretation and communication of information used by management to plan, evaluate and control within an entity and to assure appropriate use of and accountability for its resources. Management accounting also comprises the preparation of financial reports for non-management groups such as shareholders, creditors, regulatory agencies and tax authorities".

Huff... no wonder people think accountants are boring!

In simple terms management accounting is concerned with the use of accounting information for managers to help them by providing clear and relevant input to make business decisions. Now please let’s not confuse it with financial accounting it differs in many ways including:

• Management accounting is designed to be used by the managers and not for shareholder, creditors and public regulators
• Management account reports are confidential and not published
• The report often includes some forward looking projections on the basis of the historical data, economic conditions, and knowledge of future business expectations
• MIS (Management Information Systems) are used quite often for producing management account reports. Manager feedback and requirements are kept as the top priority

So we're as involved in the business as any production department of a production firm, to make the right decisions at the right time as they produce the right products at the right time.

The Management Accounting Skill Set

Management accounting is a combination of accounting, finance and management with the leading edge techniques needed to drive successful businesses. Thus it requires skills in all accounting, finance and management and thus some of the common features needed are:

• Analysis - analyze information and using it to make business decisions.
• Strategy - formulate business strategy to create wealth and shareholder value.
• Risk - identify and manage risk
• Planning - apply accounting techniques to plan and budget.
• Communication - determine what information management needs and explain the numbers to non-financial managers in a way they can understand.

Now isn’t this some interesting stuff to get involved in?

If business has this sort of internal management account report service, can you see how it can be beneficial to managers making decisions?

I invite everyone to please share your thoughts.

Mukul Ranjan
The Accountants Circle

Visit our Financial Management Reporting System page to see our solution for preparing and presenting management account reports for SMEs