Why do we need Management Accounting?
Although it’s important to produce Financial Statements to meet the legal requirements, this does not give the company the timely information it needs to manage the business.
Management accountants look at the events that happen in and around a business while considering the needs of the business. They handle many facets of accounting, which include margins, deviations, capital budgeting and forecasting, valuation and product costing. From this, data and estimates emerge. Cost accounting is the process of translating these estimates and data into knowledge that will ultimately be used to guide decision-making.
We are all guilty of getting caught up running our business and not standing back and asking those important questions, such as: “which areas of our business are the most profitable?” or “what was the profit for last month or quarter?” yet “how have we performed against budget or forecast?”
Management accounting analyses and results are kept in-house for business leaders to use to drive decision-making and run the company more effectively. It does not matter the size of the business, when the data entry is done accordingly, it is possible to get a few analysis to help managers and owners to make better decisions.