In our ever-changing world, businesses cannot survive by using the past to predict the future. Therefore, they cannot thrive using only financial accounting, they require management accounting to look ahead. If you don’t control your activities through management accounting, you won’t have the desired results reflected in your financial accounting. We want to highlight how important it is to incorporate management accounting into your business by listing just a few of the benefits:
- Proactive, not reactive
Management accounting allows you to be proactive. Rather than looking at the past year’s performance and reacting to any problems that have already occurred, management accounting looks into the future and identifies issues before they happen. Forecasts and reports are produced and they allow for the cause of these issues to be eliminated, saving resources, costs and time.
- Increased efficiency
Management accounting has a strong focus on continuous improvement. Processes are evaluated and compared to benchmarks with value added and non-value added activities being distinguished. Any redundant tasks can be removed and therefore processes are streamlined. Essentially, management accounting provides decision-makers with better quality information allowing for quicker, more effective decisions to be made, which increases the overall efficiency of the business. For example, products can be compared to identify the best performing product and therefore decisions are made easier when considering reducing a product line.
- More competitive prices
With increased efficiency comes lower costs. Management accounting is also often called cost accounting as it focuses heavily on cost control. By being able to calculate the quantity of resources being consumed by each process of a product or service and its corresponding cost, you can identify where costs need to be reduced. Thus, this detailed cost information can point you in the direction of a cheaper supplier, alternative process or labour cuts. As a result, costs are lowered and more competitive prices can be charged. Variances between budgeted and actual costs are also identified and any discrepancies can be followed up to stay on budget.
- A customised service
Unlike financial accounting, there are no accounting standards or frameworks in management accounting. Due to its flexibility, your accountant can produce reports that are personalised to your business’ objectives. For example, at AMAS, we select 5 KPIs to track based on what your business wants to achieve and we monitor and report on these regularly. The reports have no deadline or year-end, they can be produced weekly, monthly or yearly; whatever frequency is most useful to your business.
At AMAS, we have a team of experienced chartered management accountants who can help your business strive and meet its objectives. Management accounting is our area of expertise and have witnessed first-hand the results it brings to clients. The future of your business is in your hands. Take control today by contacting us to follow in their footsteps and make your business the best it can be:
- Phone: 01292 388 031
- Email: email@example.com
- Office: 8 Miller Road, Ayr