Management accounting is concerned with presenting information to internal decision-makers, whereas other branches of accounting are concerned with reporting financial outcomes to external stakeholders such as banks and shareholders. As a result, management accounting plays an important strategic role in businesses. Let us walk through the functions, job roles, qualifications, and skills of management accountants in detail.
What Is Management Accounting?
Management accounting is a combination of accounting, finance, and management. It combines the best practices needed to create successful businesses.
Management accounting is a challenging but rewarding career that requires a broad range of skills. A strong understanding of mathematics is essential. They won't be able to get by with just number crunching. They will also need to see patterns in data and use past trends to predict future events and guide business decisions. Manager accountants need to think big. This is why it's important to follow the news to see how successes, failures, and scandals affect markets around the globe.
Who Are Management Accountants?
Management accountants are an important part of an organization's decision-making process. They are responsible for ensuring that businesses make well-informed decisions. Financial analysis of management information is provided by management accountants. This is accomplished through preparing, developing, and analyzing financial data. This enables strategic and operational decisions to be made by the organization.
What are the Functions of Management Accountants?
The functions of management accountants are dictated by their job positions, agreement with the organization, knowledge, and capabilities. On this basis, the tasks of a management accountant are briefly explained below:
1) Planning and Accounting
Management accountants prepare an accounting system covering costs, sales forecasts, profit planning, production planning, and allocation of resources. It should also include capital budgeting, short-term and long-term financial planning. They also prepare the procedures necessary to implement the plan effectively.
Management accountants assist in the control of an organization's performance through the use of standard costing, accounting ratios, budget control, revenue and funds flow statements, cost-cutting initiatives, and assessing capital expenditure proposals and returns on investment.
Management accountants assist the top management in finding out the root cause of an unfavorable operation or event by identifying the real reasons for the adverse events and as well as the responsible parties and comprehensively reporting them.
Management accountants improve an organization's efficiency and profits by providing various coordination tools such as budgeting, financial reporting, financial analysis and interpretation, and so on. These tools aid management by comparing cost and financial records, preparing financial budgets and establishing standard costs, and analyzing cost deviations to enable management by exception.
Management accountants create a wide range of reports to communicate results to superiors, inspire staff, retain effective control over their operations, and help management to make smart decisions. Through published financial statements and returns, they also inform the outside world about their company's success.
6) Financial evaluation and Interpretation
Management accountants analyze the data and present it to the management in a non-technical approach, together with their comments and ideas, so that the shareholders and senior management employees can understand it and make informed decisions.
7) Tax Administration
Management accountants are in charge of tax policies and processes. They make the reports that are required by various authorities available. Further, they establish enough tax provisions, ensuring that quarterly tax payments are made in advance, as required by the Income Tax Act, to prevent the payment of penal interest on late tax payments.
8) Evaluation of External Effects
There may be changes in government policy and even existing laws. These amendments and policy changes can affect business goals; Management accountants assess the extent of any impact of these external factors on the business and report it to the stakeholder to take necessary precautionary measures
9) Economic appraisal
When the government makes regular announcements about the country's economic situation, management accountants do an economic study and determine the influence of current economic conditions on the company's operations. They compile a report containing their observations and present it to high management.
10) Asset Protection
Management accountants separate fixed asset registers for each type and provide internal checks and controls to protect the company’s assets. They also create the rules and regulations for each type of fixed asset and get insurance coverage for all types of fixed assets.
What Are The Roles Of Management Accountants?
The management accounting role is broad and includes identifying and managing risk, analyzing information, and using it to make business decisions, plans, and budgets. The roles of management accountants are:/p>
- To consult with the segments of management responsible for policies and procedures, and the effectiveness of those policies and procedures.
- To make comparisons to the operational plan and standards, as well as to report and evaluate operational outcomes to all levels of management and the business owners.
- Establish, coordinate, and execute an adequate plan for operation and control as an inherent aspect of management. To the extent required by business cost standards, such a plan would include spending budgets, profit planning, sales forecasts, and capital investment and financing program, as well as the procedures necessary to carry out the plan.
- To ensure the financial security of the company's assets through effective internal controls and adequate insurance coverages.
The Job Roles Performed By Management Accountants Are As Follows:
The job description of a staff accountant includes performing basic accounting tasks such as account reviews, reconciliations, journal entries, general ledger entries, and financial reports. Other duties include basic cost accounting and testing internal controls. (No prior experience is required)
Financial analysts often report to a director or manager and help with financial modeling, budgeting, and the preparation of supporting schedules and forecasts. Analysts can also monitor results and do variance analyses. (one to three years of experience required)
Accounting managers are responsible for general ledger accounting and the monthly financial closers. Several accounting managers act as liaisons with external auditors, and they implement changes to internal accounting practices to comply with regulatory requirements. (years of experience can vary )
Manager/Director data analytics
This role requires a deep understanding of statistics, data science, and data visualization. They analyze raw data to find trends and insights impacting business decisions. (over five years of work experience required)
Manager/Director – strategic planning
This role reports to the chief executive officer (CEO) or chief financial officer (CFO) and creates comprehensive growth strategies across all products and services. Their responsibilities include analyzing the external environment to identify organic growth potentials and opportunities through mergers & acquisitions (M&A) (over five years of experience required)
Vice President - Financial Planning and Analysis
The Vice President of financial planning and analysis manages a team of financial analysts and managers and reports typically to the CFO. They are responsible for finalizing and implementing corporate strategies that emphasize profitability and cost control. They also ensure that the strategic priorities are included in the planning process. The VP of FP&A plays a key role in analyzing business cases to develop new markets, products, and services. (over 10 years of experience required)
The Treasurer oversees cash operations, cash forecasts, and lender relationships. They usually report directly to the CFO and have extensive finance and hedging strategies. They also lead communications with rating agencies and investors. (more than ten years of experience required)
This is a senior leadership position that reports to the CEO or CFO. The Controller oversees all aspects of financial reporting and accounting operations. This includes internal and external financial statements, regulatory reporting requirements, and financial reporting. Other priorities for Controllers are to implement internal control systems, evaluate the effectiveness of the accounting system, and monitor business performance metrics. (years of experience can vary)
The CFO serves as a key advisor for the CEO and is part of the senior leadership team. The CFO's priorities include capital requirements for the business, structuring corporate financing, maintaining relations with investors and lenders, and evaluating mergers and acquisitions. External parties, such as regulators and journalists, are often contacted by the CFO. Additional responsibilities include financial reporting and accounting operations. They may also have additional functions like IT, Human Resources, and Facilities. A controller is usually the CFO's support person. (years of experience can vary)
How To Become A Management Accountant?
For those who are interested in a management accounting career, it is advisable to start early. Professionals can read widely across trade and national publications that will help them build knowledge. Working experience in the financial or business sector is important to demonstrate their willingness and ability to learn. However, professionals can still learn workplace skills in many roles. Most will be applicable if they can explain the skills that they have acquired, such as using data to solve problems, making predictions, and responding quickly to changes in their organization.
Education And Experience
- Both university graduates and school leavers can pursue a career in management accounting.
- Any degree is acceptable for graduates, though qualifications in accountancy, mathematics, management, or business topics may allow them to skip some of the required tests
- Generally, top organizations require candidates, to hold a bachelor's degree, with at least two years of management accounting experience
- Earning certifications is one way for potential management accountants to learn new skills and competencies.
Skills of Management Accountants
1. Commercial Awareness
This skill would help if professionals have a basic understanding of the business and how it works. They need to understand how the business operates and how it is affected in the external environment and also understand the key business drivers in their company
2. Keep up with technology
While it seems obvious that virtually no job will be untouched by technology. management accountants need to understand the latest developments and be able to utilize those technologies to provide a competitive advantage to their organization. While management accounting is rapidly changing due to emerging technologies, the need of being tech-savvy will remain on high priority.
It is important to show that management accounting professionals can work well with others within and outside department. They must earn the respect and trust of their colleagues and be interested in their lives and work. Further, they must think of the company as a whole and not just the numbers.
4. Delivery of information
Management accountants must quickly gather and analyze data and understand how to communicate that information to the intended audience. This is especially important when presenting reports to senior management and non-finance people. Summarizing the key data, explaining what it means, and answering any questions is a delicate balance that must be maintained.
5. Set an example
While the finance and related courses will teach a lot about ethics and transparency, management accountants have to put them into practice. Encourage others to learn about financial controls and procedures. They also should ensure to adhere to the HR guidelines and codes. This is a valuable but often overlooked strength that can help them move up the ladder to leadership and management roles.
Technology will continue to change, accordingly, accounting, and management accountants will be challenged to reshape their roles and functions as they influence their organization's direction and strategic planning.
Many of today's graduates will eventually work in roles we can't yet imagine in a rapidly changing world. Irrespective of whether they are just starting their career or have already reached the ceiling in your current organization, management accounting will open up various rewarding career options at present and in the future.