Accounting helps to track a business’s financial state and whether it is generating revenue. This data can be used to interpret a company’s profitability and whether it is in a position to expand or limit operations.
Management Accounting is an internal accounting process that assembles and provides financial information for managers and executives. It helps managers make informed decisions regarding pricing strategies and resource allocation.
In this article, we will cover what is management accounting, the role management accountants play, and how it helps South African businesses.
Table of Contents
What is Management Accounting?
When searching for an answer to what is management accounting, it is an in-house management position that hires accountants and finance graduates to help guide the company by providing financial expertise. The main purpose is to support operations and decision-making within the company. The role is designed to help relay critical financial information to various organisational stakeholders.
When we try to define management accounting meaning in the simplest terms, it is providing relevant financial data to managers to enable them to make decisions that will help achieve company targets.
What is the Importance of Management Accounting in South Africa?
Companies need an internal accounting team with a management accountant leading it. Instead of relying solely on an external accounting firm for tax purposes, companies alse need to hire in-house management accountants to help guide strategies and annual targets.
Management accounting is important for South African businesses as it helps them achieve organisational effectiveness, promotes growth, and ensures that businesses are equipped to handle challenges.
We have identified what is management accounting, let us now examine its importance in South Africa.
- Informed Decision-Making: Management accountants help companies make informed decisions based on their financial standing. Management accounting examples include pricing strategies, cost-cutting, restructuring, etc.
- Business Growth: When South African companies make informed decisions with the backing of management accountants, it leads to business growth, which helps to increase profits.
- Economic Impact: In sectors like mining and finance, management accounts help companies navigate challenges like inflation and exchange rate fluctuations.
- Support for Small and Medium Enterprises (SMEs): This helps promote growth for SMEs by allowing them to better track their financial state. Growth in this sector helps fuel economic activity in the country.
What are the Key Functions of Management Accounting?
An overview of what is management accounting allows readers to understand that its main purpose to provide financial information for internal company use. Management accountants help prepare budgets, find ways to reduce costs, and help set long-term company goals.
Individuals who hold this position guide South African companies in making decisions and designing strategies that drive growth and profitability. This, in turn, helps companies stay competitive in the global marketplace.
Management accounting systems help companies keep track of expenses. It can also help with inventory tracking, productivity, and cost analysis. It helps to centralise accounts and provides management accountants with financial and non-financial information.
Let us examine what is the role of management accounting:
- Budgeting and Forecasting: Management accountants help prepare budgets that outline expected revenue and expenses. It is studied later to notice any deviations from expected results. They need to review this information regularly to make changes going forward.
- Cost Management: They also help to identify cost-to-profit analyses for different products or services that a company provides. This allows management to set prices and evaluate areas where cuts can be made.
- Performance Evaluation: These managers also help develop key performance indicators (KPIs) to help study productivity. These can also allow department heads to monitor and evaluate performance so that it reaches efficient levels.
- Strategic Planning: Timely financial data provided by management accounts can help companies plan long time growth. They can also be better prepared for unexpected challenges.
What are the Qualifications Required for Management Accounting?
Before an individual can become a management accountant and help guide companies to increased profitability, they must study to become accountants. Students need a high Admission Point Score (APS) on their matric exams to gain admission to a top-rated accredited accounting programme. They must also have a high score in mathematics and accounting.
Students can enrol in a South African Qualifications Authority (SAQA) accredited Bachelor of Accounting, Bachelor of Commerce (Accounting), or a related accounting degree. Accredited programmes help provide students with the knowledge and skills required for efficient accounting practices.
Students who do not qualify for a degree programme can choose to enrol in an accredited diploma programme for accounting. As they complete each level, they will be rewarded with an equivalent National Qualifications Framework (NQF) level. This can demonstrate to employers the level of education a candidate has received.
Additionally, since accounting is a professional qualification, all accounts must apply for a Chartered Institute of Management Accountants (CIMA) accreditation.
Career Opportunities in South Africa
Management accountants are required in companies that are going through a growth phase and also for well-established companies. They help to present financial data to upper management to help them develop strategies, explore investment opportunities, or reduce operational costs.
We have covered what is management accounting and its importance, but are there career opportunities available in South Africa. Accountants are in high demand in South Africa and many companies find it challenging to recruit skilled accountss. If candidates are well educated and receive their accreditation, they can enjoy a successful career.
Management accountants help to drive growth and help companies navigate challenging economic environments. These are some management accounting roles available in South Africa:
- Management Accountant
- Factory Cost and Management Accountant
- Senior Management Accountant for e-Commerce
- Graduate Management Accountant
- Financial Controller
- Trainee Management Accountant
What is the Difference Between Financial and Management Accounting?
While we have understood what is management accounting, it is often confused with financial accounting. Although they both use financial data to summarise and report the financial state of a business, they have different audiences. Financial accounting is meant for external stakeholders, while management accounting focuses on the needs of company managers and leadership.
These are some of the key differences between financial and management accounting.
| Aspect | Financial Accounting | Management Accounting |
| Purpose | Support internal decisions and strategies | Provide financial data to external stakeholders |
| Audience | Company managers, team leads, and executives | Investors, creditors, regulatory authorities |
| Reports | Can be customised | Standardised to meet accounting reports |
| Frequency | As needed | Usually quarterly or annually |
| Detail | Can be focused on a department or operation | Focuses on the overall health of the company |
How Does Management Accounting Help South African Businesses?
When we take a look at what is management accounting, it is easy to understand the purpose it serves within an organisation. It is essential for businesses, especially those in the growth phase, to employ a management accountant.
They can help guide companies to greater growth by supporting strategic plans for expansion or delivering new products to the market. This allows managers to make financially sound decisions and manage risk in the long run.
- Cost Control: It helps businesses reduce excessive spending by streamlining processes and reducing production or operational costs.
- Business Strategy: Helps businesses make informed decisions backed by solid financial data. It can guide the management in creating and implementing future growth strategies, which can include new market penetration.
- Risk Management: This helps businesses identify potential risks and challenges. This allows companies to be prepared, reducing the financial burden.
Conclusion
Companies are started to help meet a gap in the market, but companies can only be successful if they have a sound financial mind helping to guide their operations. Businesses need a management accountant to help provide them with regular financial updates that departments can use to cut costs and drive productivity. At the same time, it can help companies devise growth and expansion strategies.
The process of preparing financial and non-financial data to guide internal management is the best way to describe what is management accounting. It can help organisations improve efficiency and productivity while achieving their goals.
What is Management Accounting? – FAQs
What is management accounting?
It focuses on providing relevant data and insights that help organisations in decision-making, planning, and controlling operations.
What is a management accounting system?
These can be software or a framework that helps to collate and help in reporting financial and non-financial data to department heads and management.
What is the role of management accounting?
Management accounting helps to provide relevant financial and operational information that helps to measure performance and help develop strategies.
What is the difference between management accounting and financial accounting?
Management accounting focuses on internal decision-making and is tailored for managers, while financial accounting produces standardised reports for external stakeholders.
Can SMEs benefit from management accounting?
SMEs can significantly benefit by using management accounting to track their financial health, make informed decisions, and promote sustainable growth.
