What is Management Accounting?
First of all it is using accounting and business information to make informed business decisions more efficiently, and more immediately.
This tells your business story through your financial statements to those outside of your business. These statements are typically your profit and loss, balance sheet and cash flow statement. They are produced once a year (twice if you are a PLC).
Although important, it’s not much good for running, sustaining and growing your business. Consequently management accounting is where it’s at and owners and managers need to be connected to and understand it.
Compared to financial accountancy information, management accounting information is:
• Forward-looking, instead of historical;
• Aimed at those that lead and manage a business
• More about planning, controlling and making decisions
• No prescribed formats or rules, adapted for the needs of the user
• Looks at product, projects or segments – not just the whole business
• Usually confidential, instead of publicly reported;
Management accounting will:
• Show how much profit you are making
• Inform what your costs are by product, project or in total
• Help control your costs
• Manage cashflow more easily
• Help measure, manage and react to your business performance
• Turn your business dreams into reality?
Above all information is a valuable commodity; hence it is the diamond of the business world. Most noteworthy the source of that uncut data stone lies buried within the record mines of your business.
Technology can help
Cloud Accounting is a great solution for all businesses, from acorn size to oak. Hence there are options and price points to match the start of your business journey, to ones that match your growth.
Furthermore technology and the cloud can help with the lifting of capturing and recording the huge volume of transactional data. For that reason coupled with the power of the human, this data can be more easily mined and above all used to deal with your business challenges
Similarly it also helps those businesses that don’t have the resources and budget of a team of dedicated accounting staff.
• Easily record, connect with & understand your business numbers
• Monitor your profits
• See what things cost
• Control & manage your business
• Manage and accelerate your cash flow
• See where to improve
• How to turn ideas into something meaningful
• Keep the tax authorities happy with what they need!
Therefore knowing how to produce the information is one part of the ‘process’, interpreting and using it is the remainder. Consequently you will to need adopt a sense of perspective and focus when using financial information. Above all you should avoid getting bogged down with an abundance of (meaningless) financial data, for that reason always bear this in mind
• What’s the decision all about?
• Which information and techniques will help you make that decision?
• How do you apply those techniques?
• What does it all mean?
Finally financial techniques support management; they do not replace it. Hence responsibility and ownership for the decisions should remain yours. They should not be taken away and become an automatic process.
Thanks for reading this blog and we hope you’ve enjoyed it.
Contact us if you want us to help you develop and implement a management accounting capability. We can have a cup of (virtual or real) coffee, biscuit and a chat to see how we can help you.