What Management Accounting Really Means

John Spacey, December 07, 2019

Management accounting is the practice of applying formal numerical analysis to the strategy and management of an organization. This should not be confused with financial accounting that is concerned with reporting financial results to stakeholders. Management accounting is value-creating, forward-looking and often evaluates non-financial data that has a financial impact such as the throughput of a production line. The following is a comprehensive overview of management accounting.

Overview: Management Accounting
Definition	The practice of applying formal numerical analysis to the strategy and management of an organization.
Applied To	Management Reporting Strategic Planning Decision Making Problem Solving Troubleshooting Risk Management Performance Management Process Monitoring Internal Controls Financial Reporting Cost Accounting
Scope	Any financial or non-financial measurement that is relevant to the strategy and management of an organization.

High Level Examples	Executive Dashboards Key Performance Indicators Business Metrics Management Analytics Reporting Throughput Analysis Operations Monitoring Risk Analysis Budget Controls Quality Controls Activity Based Costing Transfer Pricing
Concrete Example	An ecommerce company is building a business case for completely automating a distribution center and needs to calculate the throughput of the proposed robotic systems. A management accountant performs an analysis based on the proposed system and real business conditions to forecast the throughput.

Characteristics

Value-Creating

Unlike financial reporting that generally reports what happens and forecasts what is expected to happen, management accounting actively seeks information that can create value for an organization.

Forward-Looking

Management accounting is about improving a business today or in the future as opposed to reporting historical results.

Competitive Advantage

Where financial accounting is constrained to follow established standards, management accounting is an area of innovation that potentially represents a competitive advantage. In other words, it is often unique to a firm whereby one company may measure things that competitors can't measure.

What Management Accounting Really Means

Management Accounting

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