Management accounting is a specialty branch of accounting that involves analyzing
financial information to develop and assess a business strategy. Management
accountants can also help their companies with risk management, strategic
management, and performance measurement.
Qualified management accountants can work in every sector of business — for both
public and private organizations. By earning a Master of Accountancy, accounting
professionals can obtain the industry knowledge they will need to become certified
as a Chartered Global Management Accountant (CGMA).
What Is Management Accounting?
An Introduction
Management accounting typically entails gathering and analysis of data to provide
an organization with information that can help it achieve its business goals. A
management accountant helps business leaders make critical decisions by
identifying the financial risks of each option available. But when business
professionals ask “What is management accounting?” they may also wish to know
how this field is different from other areas of accounting, such as financial
accounting.
A financial accountant is more oriented toward tasks such as preparing reports of
past performance to help the organization’s leaders understand exactly how
resources are being spent. A management accountant focuses on aggregating
financial information to create reports that can be used to inform business decisions
on a day-to-day basis. Through management accounting coursework, students can
learn how to effectively implement dynamic solutions that can improve business
strategies and counteract financial risks.
What Is Management Accounting
Coursework Like?
Management accounting coursework covers the following accounting and asset
management techniques:
Capital Budgeting. Capital budgeting is the process of deciding whether long-
term investments are worthwhile for business.
Forecasting. Using past financial records to project future trends that may
have an impact on a business is known as forecasting.
Valuation. Valuation is the act of determining the value of an asset (or
business) based on its past, current, and potential future financial standing.
Margin Analysis. Margin analysis is a technique used to determine whether
pursuing a business decision is advisable by comparing the potential costs and
benefits of that decision.
What Is Management Accounting?
Risk Management
According to the Chartered Institute of Management Accountants (CIMA), risk
management is the process that organizations use to control risks associated with
their business activities. To be effective at risk management, accounting managers
must understand the following concepts:
Risk Assessment. The risk assessment process involves observing business
operations to identify potential risks and begin planning how to address them.
Risk Evaluation. This process focuses on brainstorming potential ways that a
risk factor can impact a business. The accountant uses his or her knowledge of
finance to determine what gains or losses could be incurred if a risk is ignored or
addressed.
Risk Treatment. Risk treatment is the phase of risk management that
focuses on creating a plan of action to address a risk factor. There are several
options that a management accountant might suggest, such as avoiding, improving,
or retaining the risk. The risk treatment process also involves managing the selected
method of intervention. Therefore, a management accountant may need to adapt the
chosen risk treatment strategy to current circumstances.
Risk Reporting. Finally, the management accounting team will need to
constantly monitor the potential risk after an action has been taken to treat it. The
goal of risk reporting is to ensure that the risk is no longer of concern.
What Is Management Accounting?
Strategic Management
According to CIMA, strategic management accounting involves obtaining and
analyzing accounting data about a business’s competitors to inform its business
strategy. Through management accounting classes, accounting professionals learn
how to contribute to the process of creating a business strategy from an accounting
perspective. This includes recognizing how external factors influence the
organization and may affect the business strategy.
What Is Management Accounting?
Performance Measurement
Once a business strategy is in place, management accountants are also responsible
for monitoring the strategy to ensure that it is performing well. They record
accounting data and verify that the results are meeting the stakeholders’
predetermined goals. This area of management accounting often focuses on
financial metrics, such as profit, cash flow, and return on investment.
Management accounting helps business leaders create strategies that are less likely
to fail. A management accountant can help an organization maximize its profitability
and minimize the threat of financial risks. Expanding on this brief introduction to
management accounting by earning a Master of Accountancy can help professionals
find careers specializing in this field of business accounting.