Managerial accountants have a different focus that financial accountants, who are primarily concerned with providing information to persons outside the company—stockholders, the government, and investors.
According to the Web site managerialaccounting.org, managerial accountants provide information to the organization’s decision-makers—managers and executives. The data they produce help them set prices, budgets, and inventory. They provide the information needed to keep the company moving forward and using its financial resources wisely.
There are four types of managerial accounting:
- Traditional managerial accounting was primarily concerned with internal company processes. It regarded items such as raw materials and labor as the main cost-drivers. This focus is rarely employed today, as it is unable to measure the effects of technologies and other tools of modern businesses.
- Activity-based costingfocuses on activities that drive costs. It looks at how resources are used and where they can be made more efficient at four levels:
- Unit-activity levels, driven by labor hours
- Batch-level activities performed each time a batch of goods is produced (for example, setting up machinery is a batch-level activity)
- Product-sustaining level activities, which is the number of steps needed to support production
- Facility-sustaining activities that keep the facility working properly
- The Balanced Scorecard approach looks at performance measures. It looks at financial and operational measures as well as internal processes, innovation, and improvement. Total Quality Management (TQM) is an example of a balanced scorecard approach created by Edward Demming. More recently, the balanced scorecard has been used as a strategic management system that supports four key processes:
- Translating the corporate vision into a measurable set of objectives
- Communicating strategy and linking it to goals and performance measures
- Business planning with defined milestones to meet long-term goals
- Feedback and learning through customer satisfaction surveys and internal measures such as financial stability
- Bottleneck Accounting builds on the traditional variance analysis used to measure the difference between projected and actual sales. Bottleneck accounting looks at where the process stumbled and how much it cost the company. It allows managers to pinpoint where problems arose and target that area for improvement.
Anthem College Online offers an Associate of Science degree in Accounting Technology that helps students prepare for entry-level positions that directly support accountants, such as clerks, bookkeepers, and payroll and inventory specialists. For more information on the program, please visit our web site or call us at 1.866.837.1010.
Geense, Martjin. “Managerial Accounting.” Managerialaccounting.org, n.d. Web. 5 April 2011.