Managerial accounting is the process of identifying, measuring, analyzing, interpreting
and communicating information for the pursuit of an organization’s goals 
Management
accountants are needed so companies can know the efficiency of their budgets,
the cost of their operations, and be able to allocate funds accordingly in
investment, production and sales. A management accountant has a role that is
very crucial to any organization’s wellbeing. The role and incumbent
responsibilities of a management accountant are so huge, which leaves no room
for error. A single miscalculation or underestimation of a business plan done
by the management accountant can put a company in jeopardy.
The
role of a management accountant is to use knowledge and skills to influence
decisions that create value for the organization’s stakeholders while
maintaining an unfaltering commitment to ethical values. The management
accountant gets to assess risk and implement strategy through planning,
budgeting and forecasting. Their role is strategic as they have to focus on all
levels of the organization in helping it achieve its goals in today’s
increasingly competitive environment.
The
tasks performed by a management accountant are geared at ensuring a company’s
financial security, handling fundamentally all financial matters, and thus
helping to drive the business’s overall management and strategy. Management
accountants perform the following fuctions: planning, controlling, margin
analysis, constraint analysis, capital budgeting, trend analysis/forecasting
and product costing/valuation.
Although
strategic planning is established by senior management, they rely on management
accountants to provide the data required to ease the process. Possible inputs
to long range planning are: capital funding, forecasts of employee needs and
production and facility needs. Growing the company’s sales by 10%/year for the
next ten years may be one of the organizational goals. Management accounting
then provides cash flow forecasts showing the capital funding needs tied to
this objective (Marino, n.d.) .
Controlling: This
ensures that plans are being followed. Managers use daily accounting data such
as: time sheets, performance reports and operational statistics to evaluate the
performance of the various departments of their organization. For instance,
control procedures may specify that variances in excess of 8% of the budget
require further investigation and explanation.
Aid
to decision-making: Business owners are faced with countless
decisions every business day. Managerial accounting information is a
data-driven input to such decisions; this tends to improve decision-making in
the long run. Managerial accounting information is used by company management
to determine what should be sold and how to sell it (Freedman & Media, n.d.) .
The
use of activity-based costing techniques will enable management determine the
activities required to produce and service a product line. Also, deciding which
customers are less profitable or more profitable will enable the business to
focus advertising and promotion towards the most profitable customers.
Cost
Accounting: Although management accounting and cost accounting are often
used interchangeably, they really are not the same thing. Cost accounting is
one element of management accounting. Cost accounting is a system for recording
data and producing information about costs for the products produced by an
organization and/or the services it provides (Management Accounting, n.d.) . It is also used to
establish costs for responsibility centers or for particular activities.
Risk
Management: Management Accountants
contribute to the framework and practice of identifying, measuring, managing
and reporting risks to the achievement of the business’s objectives.
Constraint
Analysis: One of the roles of a management accountant is to manage
constraints within a production line or sales process. The management
accountant has to determine where principle bottlenecks occur and calculate the
impact of these constraints on revenue, cash flow and profit (Investopedia, n.d.) .
Product
Costing/Valuation: This is a
core focus of their role; determining the actual costs of products/services. They
get to calculate and allocate overhead charges to property and assess the true
expenses related to the production of a product. In addition to overhead costs,
they use direct costs to properly assess the cost of goods sold and inventory
that may be in different stages of production.
Trend
Analysis/Forecasting: This involves reviewing the trend line for
certain costs and investigating strange deviations and/or variances. They also
make use of historical data to calculate and project future financial
information. Tools used here include: sales volumes, historical pricing,
customer tendencies etc.
A
management accountant is required to prepare the following: annual statutory
accounts, budgets and forecasts, product profitability reports, cash flow
reports, capital investment appraisal reports, standard cost and variance
analysis reports, and returns to government departments like sales tax returns.
Being
a management accountant is a challenging job as there is need for awareness of
a wide scope of things that could affect the bottom line of the organization;
be it a political situation that could affect its market, economic conditions
such as inflation, competition, cost of labor, raw materials; or social
relationships like the interaction of the company with the rest of the business
world and social media.
Management
accountants have to be able to outline challenges in advance so that the
company for which they work is ready for a cash crunch or any other type of
risk. They have to inform senior management in advance so that they take
financial decisions with consideration of requirements and available funds (Editor, 2013) .
Works
Cited
Editor. (2013, August 19). Management Accounting:
Roles and Challenges ahead. Retrieved June 25, 2016, from On Target
Direct:
http://www.cmawebline.org/ontarget/management-accounting-roles-and-challenges-ahead/
Freedman, J., & Media, D.
(n.d.). Why Management Accounting Is Important in
Decision-Making. Retrieved June 25, 2016, from
Chron:
http://smallbusiness.chron.com/management-accounting-important-decisionmaking-53947.html
Investopedia. (n.d.). What is 'Managerial Accounting'.
Retrieved June 25, 2016, from Investopedia:
http://www.investopedia.com/terms/m/managerialaccounting.asp
Management Accounting. (n.d.).
Retrieved June 25, 2016, from Kaplan Financial Knowledge Bank:
http://kfknowledgebank.kaplan.co.uk/KFKB/Wiki%20Pages/Management%20Accounting.aspx
Marino, T. J. (n.d.). Managerial Accounting: Purpose and Roles. Retrieved June 25, 2016, from tjmarino.com:
http://tjmarino.com/blog/blog-management/managerial-accounting-purpose-and-roles.html
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