The Diverse and Important Role of Management Accountants in Organizations

The Diverse And Important Role Of Management Accountants In Organizations

Submitted by: hookedonwebusaDate Submitted: 01/05/2009Category: BusinessWords: 2344Pages: 10Views: 2053Popularity Rank: 3054

It doesn't matter if an organization is measured by its nonprofit contributions to humanity or its ability to turn a profit, financial information is the lifeblood of any organization and the quality of its interpretation and flow to the firm's decision makers falls on the Management Accountant. However the role that the management accountant plays in the organizations success is largely unknown, unnoticed and is often misunderstood.

To briefly change this mystery around management accounting, this paper will first explore in summary the diverse role and importance that management accounting plays in the organization followed by a comparison of financial accounting with management accounting. From there a brief discussion of the responsibilities of security and financial integrity will follow and lastly, this paper will discuss the expanding role of management accounting in organizations today.

When a person is faced with having a surgical procedure, they usually focus on finding the most qualified surgeon within their means. After all, do you want heart surgery performed by the person who barely passed med school? Most reasonable people would agree that perhaps this is not the best or most qualified person to do your surgery.

What most people do not realize is that although the skill of a surgeon is certainly an essential and critical success factor in any surgery, the skill of your anesthesiologist is equally paramount.

The anesthesiologist's main function is to monitor and manage the medical care of patients before, during and after surgery. However, the important and critical role your anesthesiologist plays, not only in your surgery but your recovery; usually goes unnoticed, when in fact they are a true unsung hero because they literally take you from an alive state to near death and back again.

In comparison, the role of a management accountant is much like an anesthesiologist--someone who is in the background, that is seldom heard or seen but without them, the surgeon or a decision maker within an organization, lacks valuable information and data to make key decisions, decisions that can determine the economic future and life of an organization.

Management accountants play a useful if not vital role in enabling mangers and key decision makers to reach sensible decisions in their crucially important choices, making the flow of financial information or financial accounting the primary means of communication between an organization and its stakeholders. For this reason, most organizations use financial accounting as a broad indicator or measure of the organizations overall performance or financial health.

With financial accounting as one of the main languages within an organization, this information is used as a signal that performance is on track or on the other hand that something is wrong but unfortunately it is not an indicator of what is wrong and to locate the problem, decision makers must go beyond their financial statements and dig deep.

Here in lies the valuable and critical role that management accounting plays--just as an anesthesiologist monitors and manages the medical care of patients before, during and after surgery so does the management accountant. They monitor and manage financial data and deliver valuable information and knowledge for decision makers that provide insight into what is happening within the organization just as an anesthesiologist provides valuable information to the surgeon on the patient's situation.

Most of the information that is supplied by management accountants is financial or expressed in some form of monetary terms; however, this is not always the case. Management accountants must be diverse and synthesize data into qualitative information relating to such factors as "physical units of research...customer goodwill, workforce morale" (Atrill & McLaney, 1994, pg. 7) or employee capabilities, service levels and product performance.

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What Is The Relationship Between Financial Accountants and Management Accountants?

Comparing financial accounting with management accounting is similar to comparing a hamburger with a veggie burger. The concept of a hamburger--what it looks like, what it tastes like and how its made is generally well understood by most everyone, even when it comes in various varieties such as a turkey, chicken or a beef.

A veggie burger on the other hand is a bit mysterious. It looks somewhat like a hamburger. It shares many of the same condiments and is usually served between two buns, just like a hamburger. However, a veggie burger is nothing like a hamburger. It's an enigma of ingredients that have absolutely no resemblance to any vegetable--and most people have a hard time understanding what is actually inside a veggie burger.

Financial accounting is much like a hamburger, when you order a hamburger, most people have a good idea of what they are dealing with and what they will get in return--a piece of meat toped of some rather standard condiments that together are placed in-between two buns. Although there can be many variations of what makes up a hamburger, the basic concept of a hamburger doesn't change, just as in financial accounting. Most people have a good understanding that basic financial accounting, in one way or another, deals with some short of financial data or data that has occurred in the past, such as a company's annual report or previous stock performance or in the simplest of terms that most people can relate to is their previous month's bank statement. However, the easiest association of financial accounting is what happens on April 14th of every year. Your taxes are due and hopefully, your financial accountant or tax preparer has created a financial statement that you can use to present to an outside organization such as the Internal Revenue Service (IRS), whereby the IRS will use this financial statement to make certain financial decisions and judgments about you're previous financial year.

Just like a hamburger, financial accounting comes in many variations but the basic function of financial accounting doesn't change--reporting financial data in some form of generally accepted accounting practices, which has occurred in the past and is generally available for public viewing to people outside the organization like stockholders, creditors, suppliers, banks and government agencies.

On the other hand management accounting is much like a veggie burger in that it is mysterious