Management accounting is the analysis and interpreting of identified data related to the organization’s goals, also known as ‘cost accounting’. The work combines accounting, finance and management with business skills and techniques in order to help develop the organization. Management accountants are qualified to work across the business, not only in finance, advising on the financial consequences of important decisions, developing business strategies and risk assessment.
In order to develop dynamic solutions and improve business, management accountants use all kind of information, not strictly financial. These managers may work in all areas of business, in all types of organizations from both the public and private sector, worldwide. They may work in finance, IT, marketing, HR, operations and senior management positions. They may fulfil other roles such as project managers, management consultants, finance directors or chief executives.
Differences between management accounting and financial accounting
While financial accounting comprises preparing reports, generally based on past performance aligned with reporting requirements, management accounting focuses on collating information such as revenue, cash flow and outstanding debts to produce timely reports and statistics to produce important, day-to-day management and business decisions.
On the other hand, financial accounting aims to produce the required financial information for use by other functions within the business, for example department managers. Management accounting focuses on combining financial information with non-financial information data to offer a general perspective of the business in order to achieve business success.
The main difference between managerial and financial accounting is the purpose of each of them. While management accounting aims at helping managers within the organization take informed and relevant decisions, financial accounting consists of providing information to parties outside the organization.
Role in the organization
The main activities that are done by management accountants are forecasting and planning, performing variance analysis, reviewing and monitoring costs inherent in the business. They have dual accountability, to both finance and the business team, with tasks such as the development of new product costing, operations research, business driver metrics, sales management score carding, and client profitability analysis. On the other hand, they might fulfill more corporate tasks such as the preparation of certain financial reports, reconciliations of the financial data to source systems, risk and regulatory reporting.
Given their dual accountability, management accountants can be considered the link between the business team and senior corporate management given their broad responsibilities to the corporation’s finance organization and finance of an organization.