The purpose of management accounting (MA) is to provide the insights necessary for effective planning, control, and decision making.
MA is a discipline within finance and a business skill that managers can use in their short to long-term planning and reporting activities for the control, creation, and maintenance of value.
A business manager needs to be proficient in the language of the business and MA provides the financial acumen required to be fluent.
Management accounting is about effectively using information
Not everyone in the business uses information in the same way. Which info is used and how will be determined by the level at which it is engaged.
Short-term operational decisions often rely on highly structured data sourced from primary sources like sales reports or client satisfaction measures.
Medium and long-term planning require semi-structured or unstructured data to analyse risks and trends. Unstructured data can be secondary and doesn’t have to follow any specific format.
| Short-term (Operational) | < 1 year | Historical; primary sources of information |
| Medium term (Managerial) | 1 – 3 years | Historical and future focused; includes estimates, summaries and multiple sources of information |
| Long term (Strategic) | > 3 years |
What is the difference between management accounting and financial accounting?
Financial accounting focuses on formal reporting for external audiences and needs to adhere to regulatory principles. Management accounting, however, is consumed internally within a company to facilitate planning control and decision-making and can follow any format.
Who is the management accountant?
The ‘management accountant’ isn’t a standalone role or title but rather a shared function among various business leads like the business analysts, cost accountants, finance managers and controllers. The MA function supports planning control and decision-making within the business.
