Today on the Rules of Thumb blog from MoneyThumb we want to discuss a different type of accounting called management accounting. The truth is that there are many different types of accounting, and not all of them involve tracking expenses and income to the penny. One of the more creative options for those with a strong background in accounting and business is managerial or management accounting. This is a system that requires accounting professionals to generate reports for management that provide the information they need to make decisions on behalf of the company.
Management accounting generates reports that are meant for the internal use of the company. This is very different from financial accounting, which tends to generate reports for stakeholders and other external reviewers. This often means exhaustive reporting of every financial detail in a process that can take months or even years to produce.
One big difference between regular financial accounting and management accounting is that in management accounting the accountant generates reports on a near-constant basis. These reports are meant to be reviewed only by the internal employees and managers of a company; they are rarely shared with anyone outside of an organization. The reports provide specific information geared toward helping company personnel to make informed, yet quick business decisions.
To this end, management accountants tend to produce reports with much less detail than financial accountants. These reports give managers just enough data to make decisions, but not so much that they are overwhelmed. It is common for generalizations to be made, giving the accountant some discretion over what and how data is presented. Because of this, most management accountants are very experienced and familiar with their industry. While a financial accountant may work with a variety of companies and organizations and focus only on the data, a management accountant must, themselves, make decisions as to what information is most relevant to the decision makers.
It is important to realize that both financial and management accounting are important and must be used together by company management. Without the ability to have ready access to reliable and accurate figures on company performance, costs, and sales, it is impossible for the managerial accountant to quickly create the reports needed by a management team.
Another important part of management accounting is the creation of models and simulations. While traditional accounting looks back on the financial history of the company, a managerial accountant must consider future decisions that the company leadership could make. Therefore, it is a critical part of the job to run computer-based simulations of everything from the effects of spending capital on new equipment purchases to the possible side effects of closing a factory location. The reports generated from the processing of data through a number of scenarios which can detail possible and likely outcomes are crucial to intelligent decision making.
MoneyThumb offers PDF financial file converters that can be of great use to management accountants. Our tools allow a management accountant to quickly convert data to make creating reports for company managers much easier. Every version of the MoneyThumb suite of PDF financial file converters offers a free test drive. Try out the version you feel is best for your accounting practice today.