8 Reasons to Implement Management Accounting Right Now

Management Accounting includes several indicators for entrepreneurs and finance directors. Those indicators taken together are what help to estimate business efficiency and make reasonable business decisions. We all know that the main point of financial accounting is reporting to tax authorities. Management accounting, on the other hand, is aimed at solving the inner problems of the company.
Let’s get back to the point: what are the 8 reasons to implement Management Accounting right now?

When a founder or an FD makes a decision, they need not only raw numbers but also the story behind them. Of course, well-known Excel can help with reporting and even filters, however, you can’t drill down to see the details you need. Management accounting is about an opportunity to see how the data are formed, create groups of reports, and learn more about each and every indicator.

Accounting definitely lets you know that you are about to bankrupt if that’s the case. However, what it can’t do is show the promising areas of focus or give digitalization on the products for you to see which ones are profitable and which are not. Management accounting helps to estimate the opportunities and create a data-driven strategy. Besides, potential investors also require that kind of analysis to understand when to expect returns better.

The value of FD and their team has increased since the beginning of the pandemic. Each step required deep analysis and estimation of possible risks. If it wasn’t the case before, finance experts have become the ones who determine the strategy of the company.
Management Accounting can make the job of finance experts easier and lessen the pressure on the department. Instead of creating all the reports manually, they can focus on recommendations, estimations, and advising the management.

Many tasks of the financial departments imply manual work. The more tasks like that are faced, the bigger the risk of human error is. For example, if Excel is used, there is a big chance to make a mistake while transferring data from an ERP system, consolidating reports, or adding a new column to the monthly report.
During a crisis, one single mistake like that can lead to losing tons of money. One wrong number — and all the conclusions are wrong, resulting in creating a wrong strategy. Automatization of Management Accounting eliminates the risk of human error.

How much time does it take you or your finance department to process and analyze data? It also answers the question of how outdated the information you base your decisions on is. It results in reports and prognoses based on backward-looking data with no account of the most recent transactions. Thus, the strategy can be inefficient for the current period of time.
Automatization, on the other hand, can do all the background work for the people and update all the data as soon as it appears. That allows the finance department to focus on the analysis and provide the management with relevant analytics.

The cash gap is a problem not only for startups but also for big companies. It can be challenging to keep track of all the projects and liabilities. One mistake — and you have to get a bank loan or pay fines.
Management Accounting compares profits and losses and can predict cash gaps before it’s too late. Even if a cash gap is inevitable, it still gives a chance to discuss possible respites in advance and avoid a crisis.

Have you ever faced a situation when you check your company’s accounts and they are empty even though they for sure shouldn’t be? Sometimes the reason is a hidden bank commission or payment delay. And an FD has to go through all the cash flows of all the legal entities and accounts to find out what happened.
Management accounting includes analytics, a payment calendar, and other features allowing one to keep track of every penny.

Tax reports and bank statements are strictly regulated. Only specific organizations know how to read them easily. No wonder founders and managers can get overwhelmed and not be able to make conclusions based on that kind of reports.

In order to avoid the agony of trying to figure out complicated diagrams, some entrepreneurs turn to their intuition rather than financial indicators. Obviously, it usually leads to making wrong decisions.

Automated management systems create reports based on the manager’s preferences. For example, unnecessary data can be excluded to avoid distractions. All the attention will be focused on the numbers required for strategic planning.

Management Accounting makes the company operations easier, faster, more transparent and understandable. It helps finance managers estimate how much money the company has made, which amount can be taken, and how possible the risk of getting into a cash gap is.
It still is just a tool. The final decision is always made by the CEO. But why not make this process?