Managerial accounting, also known as management accounting, is a practice that combines accounting, finance and management techniques to run companies effectively.
In other words, it is an area where accountants work more collaboratively with entrepreneurs, helping them in the decision-making process.
A management accountant, therefore, provides more complete information about the company’s situation through the balance sheet, income statement , and other important reports.
These reports can include details about the costs of specific products or services, operational efficiency, profitability of different product lines or business areas, and forecasts for the future.
What is the purpose of management accounting?
The main objective of management accounting is to provide detailed, accurate and timely information to a company’s managers to assist them in making strategic and operational decisions.
In general, it is up to the accountant to gather all the company’s numbers, transforming them into relevant indicators so that managers of the most varied departments have a greater parameter when making a decision.
In this sense, managerial accounting provides detailed information about the company’s costs, revenues, assets and liabilities. Based on this information, managers can assess the feasibility of future projects, identify areas for improvement, etc.
What is the importance of management accounting?
This accounting model is very valuable for small businesses, because with the information gathered by the accountants, it is possible to better understand the numbers to make a more informed decision. In addition, it brings many benefits, such as:
- improvement of management efficiency;
- greater control of waste;
- better financial control;
- clearer view of your business.
Improved management efficiency
Efficiency in the business world is nothing more than doing more with less. In this sense, managerial accounting supports the entrepreneur, offering concrete information so that he can make more informed decisions.
For example, it is through this accounting that the manager can assess inventory turnover , the business’s debt level, the volume of accounts payable and receivable, and then think of strategies to improve the situation.
Greater waste control
When you are not aware of all the company’s resources correctly, you end up wasting more. This means that as managerial accounting brings relevant data, managers begin to better understand the business.
As a result, they waste less. Let’s exemplify. If the inventory turnover has been slower and slower, this means that there is a waste of resources that are ending up in the inventory.
By understanding this indicator, the manager can make a decision to liquidate part of the inventory, reduce the volume of raw material purchases, thus aiming to reduce this waste.
Better financial control
One of the practices of this type of accounting is to bring numerous financial data to the manager, such as: profitability, cash flow , tax framework, liquidity, etc.
Let’s imagine that an organization is selling cash and buying on credit, which is resulting in a positive cash flow at first. However, consider that in this example, this company is not making a profit in the operation.
However, as sales are in cash and purchases on credit, the loss will only be evident in future periods. And until then, the entrepreneur can fall into a very big hole.
But with the data in hand quickly, he can make decisions to reduce costs or improve the price of the product to make a profit. Note how important this data was.
A clearer view of your business
Another important aspect of management accounting is that you gain a more accurate view of your business, understanding issues related to corporate finance in greater depth.
After all, with the reports that are generated and the indicators obtained, it is easier to know if there is a need to adjust the receipt and payment deadlines, if it is necessary to cut costs, or even to redo the sale price of a product.
This prevents the business from causing losses without you being aware of it and, as a consequence, going into debt for the simple fact of not knowing exactly how your business is doing.
How to put management accounting into practice?
Putting managerial accounting into practice doesn’t just require hiring an accountant. Even because he will need data to turn them into a report.
Therefore, the best way to put it into practice is to organize your company so that this data is easily obtained, and then transformed into valuable information.
In this sense, the best way is to use technology. Because, through a system that enables an integrated management of your company’s sectors, as well as the automatic issuance of invoices, it is easier to have data to send to the accountant.