"I want to become an accountant," you assert. Nobody will be surprised by your assertion. In fact, no one will show an expression of joy or enthusiasm (except for your parents of course). Many people think that there is nothing glamorous about being an accountant.
"I want to become a management accountant!" is an assertion that will probably turn heads. Why?
Because not many people know or have heard of the job title "management accountant". When people first hear the term, they assume you have a leading role at an accounting firm.
But is this really what management accounting is all about?
We all know that accountants are always getting the finances of a company sorted behind the scenes so that the company that they work for can shine.
Did you know that management accountants also work behind the scenes in an organisation?
These management accountants help to ensure that businesses can function and continue to thrive in the future. Whereas the financial accountant usually comes to light providing financial information to external parties, shareholders, and tax executives, the managerial accountant has a far more subtle role of sharing financial information internally with directors.
A common misconception would be to think that the title of management accountants refers to the accountants in top leading roles. This is not at all what management accounting entails.
Let us look at the exact role of a management accountant and how this role extends beyond financial statement observation and analysis.
Standing in the Management Accounting Spotlight
Managerial accountants have often been labelled private accountants. This is because these management accountants literally do work behind the scenes.
They assess the financial health and wellbeing of an organisation. They predict whether it is feasible for an organisation to employ new endeavours or not. They make sure to apply all the accounting concepts and principles to make core decisions about the potential future of an business. They analyse finances and draw up a budget. Yet, management accountants do not have the final say with regard to the proposals that they have drawn up.
A management accountant shares his or her proposals and analyses internally with directors and others within a company. This is where the job description of a managerial accountant and financial accountant differs.
It is the financial accountant's job to prepare reports that may be shared for external publication. These reports prepared by the financial accountant include the stock reports for shareholders and other corporate financial reports.
The job of management accountants in firms is to strategise, plan, forecast, and try as best as possible to control risks within an organization.
Needless to say, the management accountant at a firm has a big challenge on his or her shoulders. Ultimately, there are quite a few management accountants in bigger companies as one is not merely enough.
Why would an accountant decide to take on the role of a management accountant anyway?
Like most stressful jobs in South Africa, management accountants enjoy a fabulous pay packet at the end of the month. It is also likely that you can progress and get promoted from your role as a management accountant. Perhaps the fact that it seems as if management accountants enjoy promotions easier is the reason more people take on this responsibility. From management accountant, you can also be promoted to director.
Surely if you are an accounting student, you may have started thinking about branching into the management accountant route once you complete your studies. At Superprof, we understand your need to know more about what a day in the shoes of a management accountant could feel like. So we take the onus upon ourselves to describe what your working day could be like.
You are working at a company called ABC. The company is looking at expanding its reach by selling its products internationally.
Contrary to popular belief, the company cannot just decide to go to international shores within seconds. The company first has to ensure that the idea is viable enough to ensure success and not risk the chance of gaining far too many losses and inevitably debts.
Key factors to keep in mind are:
- How much money the company would need to take its products to international shores?
- Is the idea viable or not?
- Is the company in a financial position to take the risk?
- How much inventory does the company have?
- Will any property expenses be incurred if a brick-and-mortar business is started internationally?
The answers to all the abovementioned questions need to be found. This is the job of the management accountant. To find the answers to these questions and many more by digging deep into the company's financial history, current finances, and predicting what the company's possible finances will look like.
In order to gain success in a task such as theirs, management accountants need to manage risk by employing strategic thinking skills.
Once these questions are answered, the management accountant can draw proposals and budgets for concerns like:
- Where does the brick-and-mortar store need to be located?
- What advertising fees will the company incur?
- What proposed strategies will bring international customers to the store?
Yes, the management accountant will be in charge of ensuring the company budgets well in all decisions. The management accountant will also pitch his or her proposal to the owner of the company to suggest whether a jump forward is necessary or not.
Stability in a company is everything. The job of an enthusiastic management accountant is to ensure that the company remains financially stable but still managers to take risks.
Finally, this management accountant ought to prepare all the financial statements for the business. Part and parcel of the planning process would be to prepare a budget so as to present it to the owner of a company, where all the money will be spent in terms of opening the new international store.
The Meaning of Management Accounts
You might have changed your idea of becoming a management accountant after reading all about a day in the shoes of one. Or you may have become all the more excited about the possibilities at your feet should you secure the job of a management accountant in the future.
We have learnt all about the job of the management accountant but what are the company's management accounts?
Management accounts are financial reports drawn up monthly or even every quarterly. The statements and reports that fall under the broad category of management accounts include the balance sheet and profit and loss report.
These management accountants mean more for the business than you may think.
Without drawing up these accounts, management accountants can direct the company in the wrong direction or even jump in with both feet without properly contemplating risks.
Yes, the job of the management accountant is to take risks but the job becomes too risky when a management accountant does not draw up proper management accounts.
Many companies are in dire need of management accounts but have none because:
- The company has a lack of interest to draw up these reports
- The company does not see these records as being necessary
- The company's staff are too busy to do it
For many small companies, the value of the job performed by a management accountant is underestimated. In this regard, these smaller companies do not properly analyse risks and may find themselves facing dire consequences. Remember management reports extend beyond just financial data, they also include non-financial data as well.
If the role of the management accountant is not for you, learn more about the role played by financial accountants in companies.
Management Accountants in Brief
Basic accounting tasks fulfilled by cost accountants include recording expenses and tracking income and assessing tax liabilities.
This data that is derived is then routinely compiled into reports, called income statements, balance sheets, or cash flow statements.
Those reports would go to the company executives, who would further analyse the reports. Only company executives are convinced by your presentation, will they accept budget changes, and take up the performance plans. These company executives are most informed about the impact decisions have on the company's profitability.
How to Become a Certified Management Accountant?
If this article didn't interest you, it's not worth taking the risk and becoming a management accountant.
If you enjoy number crunching and are knowledgeable of the core accounting skills, this could be the job for you!
In South Africa, you need to become a chartered management accountant to tackle all the responsibilities associated with financial risk-taking.
To do this you first need to get into university by passing Mathematics and English, as well as getting the desired score to be accepted at a university of your choice.
You need to complete your BCom Accounting course over 3 years and secure a BCom Honours degree that will take you another year. Thereafter you will need to sit for the qualifying examinations with CIMA. Lastly, you must have acquired at least 3 years of all-around working experience.
CIMA stands for the Chartered Institute of Management Accountants and the CIMA syllabus draws on global accounting principles. CIMA wants to ensure that all businesses in South Africa continue to grow and strive by utilising the full power of management accounting.
Once you become a management accountant working within a business environment, you must have the necessary soft skills such as the ability to communicate and mediate discussions.
You also need to be able to be persuasive in the way you share your information.
More About Management Accountant Jobs
You have become very well-versed with the day-to-day tasks that a management accountant has to do, but as a management accountant working in a company, you will have to familiarise yourself with the business environment that you are working in.
This is to ensure that you are comfortable to do your job in the specific business context in which you find yourself.
Being a management accountant is a risky job and, in order to handle all that you have on your plate, you need to constantly work on improving your skills and learning more.
Continuously take up courses so that you can personally and professionally grow as a management accountant.
In a job like this earning continuous professional development (CPD) points is a must.
If you are still not sold on the idea of becoming a management accountant, revisit the idea of being a financial accountant with the article: management accounting versus financial accounting!
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