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What Management Accounting Really Means

 , 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
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
Risk Management
Performance Management
Process Monitoring
Internal Controls
Financial Reporting
Cost Accounting
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
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.
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.
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.
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