Management accounting refers to a function of tracking internal cost for any business process that helps an organization, firm or an individual in making decisions related to production, operation and investment in market. Companies need management accounting to know the efficiency of their budget, the cost of their operations and then allocate funds accordingly in production, sales and investment. The role of a management accountant is thus, very crucial for a firm’s well being. His role and responsibilities are so huge that even a single miscalculation or underestimation of any business plan by a management accountant can put a company’s future in danger.
The role of management accountant include collecting, recording and reporting financial data from several units of an organization, observe and analyze their budget and suggest their funding and allocation. This includes estimation of cost of raw material, labor, manufacturing, sales and advertising, social media networking, lobbying and company’s internal operation cost. A management accountant need to coordinate with all concerned departments to make an overall analysis of company’s functioning capital and availability of funds and then he or she has to report all the information to senior management and board of directors. Thus a CFO is a source of information required by directors and CEOs to take decisions.
Management accounting’s main role is budgeting. For a small company budgets are guide to all expenditures. Small businessmen decide a budget every year to fix their expenses on each process that is operation and production cost and then further investment. Thus here a management accountant has to review historical data to prepare an accurate prediction of a year’s future expenses. Budget ensures coordination between the entrepreneur and his employees in implementing all the plans for the year ahead.
Time is very important for making all plans for a company’s management. A management accountant’s functions are time bound since he or she has to make predictions, budgets and report within a stipulated period so that they can be implemented at the time of need. A timely forecasting is needed with taking consideration of market uncertainties. The budget need to be according to the available working capital and exposure to market risks thus a certain amount of accuracy is very necessary. Before reporting the owners, a management accountant has to ensure accuracy of all information gathered to help in correct decision making.
Business technology software plays an important role now a days in preparation of financial records, their analysis and forecasting. They help in dissemination of digital information and speedy processing of data for formulation of budget and its interpretation. This software provides tools that take required track record and automatically create financial predictions. Thus time and effort to calculate this lengthy information get reduced saving management accountant from lots of burden.
A management accountant need to be aware of everything, be it political situation that affect market, inflation, other exposures in market, competition, cost of labor, raw material, internal operations, coordination among different departments within a company as well as its interaction with rest of the business world and social media. Thus, he should be master of everything. He needs to outline challenges in advance to make his organization ready for cash crunch or any other risk. He needs to inform company owners in advance so that they can take financial decisions with consideration of available funds and requirements.