Management accounting is an interesting career to get into; they’re a substantial portion of the 1.5 million professional accountants and auditors working today. but it can also be difficult to understand at first. It’s frequently mixed up with other accounting branches, such as financial accounting and controller accounting. However, it differs from the other branches in key areas.
I’ve compiled all the major aspects of management accounting into one resource for you to reference. Consider this when trying to decide the best starting point for your career as an accountant!
The Typical Managerial Accounting Workday
By definition, management accountants work to create goals at the organization level. In order to accomplish this, you’re required to identify, analyze, and communicate important information regarding areas that are important to the business, such as product costs, budgets, performance reports, and operational metrics. This information is then used to make changes within the company to make short and long term changes.
Here are a few more specific applications for this work that frequently arise from day to day:
- Management accountants have to accurately predict the impact of their decisions on the company in the future. The best way to accomplish this is by identifying future trends and focusing your accounting work to take full advantage of them. This may include branching out into other markets, acquiring more staff and equipment, or cutting costs in certain areas (frequently addressed in “cost accounting”).
- At times, your predictions may be incorrect— mostly due to unforeseen circumstances. You need to be able to find out why there were variances between your predictions and the actual results. Then, you can use that information when analyzing and reporting financial statements to mitigate any additional variances in the future.
- You must also be able to forecast the effects of your managerial accounting decisions on cash flows. If a business knows what areas will incur future costs and which ones will return a profit, they can easily make financial decisions for their future, so it’s your job to ensure that companies know where to allocate their money and resources in order to maximize growth.
- Regarding business operations and goods, management accounting necessitates the ability to make decisions about their production— including any equipment used by the business in the process. Among other things, it’s important for you to evaluate whether it’s cheaper to buy what’s needed or have the company make it themselves.
- Lastly, you need to be able to understand and predict the rate of return on the work your company undertakes. You need to be able to present your company with options that maximize profit. Plus, you need to be able to explain how long it will take to make a profit and what the risks are with various investment opportunities.
As you can see, management accountants have a lot to take care of. But if you can do this job effectively, then your company will thrive; that’s what makes management accounting so important in the day to day operations of any business.
“Management accountants have to accurately predict the impact of their decisions on the company in the future. The best way to accomplish this is by identifying future trends and focusing your accounting work to take full advantage of them.”
Management Accounting Employment Outlook
According to the BLS, employment for fields related to management accounting is expected to grow by 3% in the next 10 years. This is close to the average for all careers, which makes sense when you consider how management accountants are needed in almost every company. Thanks to that, this is a very secure career path to choose if you want to participate in the global workforce over the next decade.
“Management accountants have a lot to take care of. But if you can do this job effectively, then your company will thrive.”
Management Accounting Salaries
According to ZipRecruiter, management accountants can expect to make between $62k and $85k a year when doing their job. Despite the country wide demand for management accountants, California has the highest wages for this position; in fact, 6 of the top 10 highest paying cities for this job are in California. The others are spread out across the east coast.
“Despite the country wide demand for management accountants, California has the highest wages for this position; in fact, 6 of the top 10 highest paying cities for this job are in California.”
Management Accounting Certifications
There are 3 major certifications associated with management accounting. However, two of these certifications have nearly identical initials, so it can be confusing to tell the difference between them. These are the Certified Management Accountant (CMA), Certified Investment Management Analyst (CIMA), and Chartered Global Management Accountants (CGMA) designations. The two are fairly similar, but they differ in terms of prerequisites and test content.
Certified Management Accountant Requirements
CMAs need a bachelor’s degree from an accredited university. It’s recommended but not required for that degree to be in accounting. Once you’ve done that, you must then complete 2 years of management accounting experience. Doing so proves that you have a solid baseline of professional knowledge to pull from before you become certified.
After meeting all the requirements, you’re then able to enroll in the CMA exam. The test is split into 2 parts that last 4 hours each. Both tests consist of 100 multiple choice questions and a pair of 30 minute essays. Part 1 focuses on financial planning, and part 2 on strategic financial management.
Read the CMA handbook for more specific information about the certification and requirements. Also, it’s highly recommended that you enroll in a CMA exam review course if you want to pass this test on your first try!
Certified Investment Management Analyst Requirements
CIMA’s requirements are slightly easier to achieve than the CMA’s. In terms of education, you only need to complete a program of Investments and Wealth Institute (IWI) approved registered education providers. Once you’ve done so, you’ll then need to have 3 years of financial services experience and a satisfactory record of ethical conduct.
The CIMA exam is also a little easier than the CMA test. It’s a 5 hour long test held at local Pearson VUE testing centers. It consists of 140 multiple choice questions and has no essay portions. You also have access to a calculator and formula sheet during the examination.
If you’re familiar with any other Financial Industry Regulatory Authority (FINRA) exams, you’ll have an easier time passing this one. Ultimately, it focuses on financial accounting more than management accounting, but has utility in either career path.
Chartered Global Management Accountant Requirements
It’s easy to confuse CGMA certification with the previous one we mentioned because it’s organized by a governing body with the same initials— the Chartered Institute of Management Accountants (CIMA). The requirements are a bit more involved than CIMA certification, but not as difficult to complete as the CMA’s exam requirements. Additionally, this is a fantastic choice if you’re already a Certified Public Accountant (CPA), since it meets most of these requirements already.
The CGMA exam is on the short side: 125 multiple choice questions over a 5-hour testing period. You’re also able to bring a calculator with you as well as an electronically accessible Sample Formula Sheet. Check out our list of the best online study materials if you want to pass this exam on your first try.
Management Accounting FAQs
Q: What is the purpose of management accounting?
A: Essentially, a management accountant makes sure that company management has all the information they need to set company goals. They provide accurate financial reporting and use key accounting principles to ensure organizations are making decisions that will have the best long-term results.
Q: What is the difference between managerial accountants and financial accounting?
A: Financial accountants use accounting data to create financial reports. By contrast, managerial accountants gather data to use when deciding on business transactions. There are many similarities, but also substantial differences in their career paths, salaries, and day-to-day priorities.
Q: What are the tools of management accounting?
A: Management accountants use a wide range of tools when making their decisions. Of particular importance are financial reports, budgetary control, and decision accounting. Using these ensures management accountants stay informed no matter what they’re working on.