What is Management Accounting?

Definition of Management Accounting:

Management Accounting helps you analyse financial aspects of business operations, make informed business decisions, and monitor performance of specific functions within the business.

As a business owner management accounting is about what you need to know and understand, including:

1. The key elements of effective budgeting

Analysing previous results and projecting –

• Sales (Revenue)
• Cost of Sales (Cost of Goods Sold)
• Gross Profit
• Expenses ( Fixed & Variable)
• Net Profit
• Calculating Break even analysis
• Ensuring validity of assumptions used for modelling financial forecasts
• Fixed Budget, rolling budget or forecast

2. Key impacts on operating performance

Understanding the key impacts on and potential solutions for –

• Improving sales
• Reducing cost of sales
• Improving margins
• Reducing overheads
• Reducing financing costs

3. Effective management of day to day operations from an operational performance perspective

• Real time data (what is needed, where to get it from, how to ensure it is accurate)
• Red flags (or a trip wire, warning of impending danger)
• Dashboards (summarising performance in an easy-to-read display)
• How to take immediate and decisive action (based on having current information on hand)

4. Management reporting

How to effectively prepare and present standard reports, variance reports and other key management reports –

• Digital and other options of presentation
• For internal purposes for managers and staff
• For Board purposes to aid in reviewing progress and strategies
• For external purposes such as for stakeholders or financiers

5. Other aspects

• Inventory management
• Preparing capital budgets and determining ROI
• Utilising online and other tools to analyse performance
• Preparing consolidated accounts
• … and more

To arrange a complimentary jargon-free discussion of how to achieve the benefits of management accounting in your business contact us.