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What is Management Accounting ?

What is Management Accounting ?

Management Accounting is the preparation and presentation of financial and other decision oriented information to assist management in the formulation and evaluation of policies and strategy.

A Management Accounting Solution should help the Accountant achieve the following:

  • Strategic management—advancing the role of the management accountant as a strategic partner in the organization.
  • Performance management—developing the practice of business decision-making and managing the performance of the organization.
  • Risk management—Identifying, measuring, managing and reporting of risks to support the objectives of the organization

Management accountants therefore are seen as the “value-creators” amongst the accountants. They are more concerned with the future, and making decisions that will affect the future of the organization. This differs with the historical recording and compliance aspects of the profession. Management accounting reports assists in information management, KPIs, treasury, efficiency auditing, marketing, valuation, pricing and logistics.

Industry specific Management Accounting reports often make use of “segments” structured within the financial management system. Segments that are commonly used are Departments, Products, Sales Person, Sales Channels, Projects, Tax rates, Suppliers, Cost Centers etc. This allows management to view the company’s operations from multi-dimensions, as close to real time as possible. Managers will use these management reports to affect change in operations to support the achievement of forward business goals.

An example of an industry specific management report is the Hotel Uniform Reporting standard. These are periodic (ie. daily flash, weekly, monthly etc) reports on room occupancy rate, room revenue, banquet revenue, restaurant revenue etc. With such analytical data delivered in a timely manner, managers can make operational changes immediately (ie. lower room rates, set campaigns for banquet parties etc.) to support business goals. Likewise, an insurance company will need sophisticated, real-time management reports to monitor profit/loss positions on the multiple insurance products, foreign exchange exposure, insurance channels etc.

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