Management Accounting

[santoshputhran]

Management Accountants are known for strategic accounting rather than doing mundane things. The Canadian Management Accountants recognise themselves as "Creative Accountants". Yes, internal accounting is like that. A product may show profit by applying overheads in the traditional way but may go into loss when applied the concepts of ABC.



Discussion point:

Do you feel advances in Information Technology has direct influence on Management Accounting ?

You now have the tools to capture business data in detail....

[appsconsulting]

Hi

My primary answer would be 'YES".

In various areas of management accounting, it is 'essential' to collect, calculate and present the data to the users. The advancement in the field of harware and software solutions has helped management accountant in a great way.

First example would be the ERPs. The regular job of the management accountants in manufacturing industries is to calcualte the cost of the invetories. This has become very simple (or fully automated). so the professional can look into the other areas.

I would also take the example of ABC. In the good old days when it was started the data collection was very difficult. The same myth is still continuning today. But today the data collection with the help of various back-end systems like ERP, CRM, SCM related software solutions has helped in capturing data easily as well as in more details. The 'web' technology has helped in a great way to collect the data. Today the data at the individual level if required can be collected usingf the web based tools. Similarly the results can also be shared with the people in remote paces with the same

Similarly the reduction in the cost of the harware in conjuction with the development of data warehouses, now we can calculate the profitability at PRoduct Group or customer segment, but we can calculate the profitability at the 'account' level in Banks, 'subscription' level in Telecom, 'Policy' level in Insurance or 'SKU' level in Retail.

With the development of various tools to generate cubes, we can nnow 'slice and dice' the data very easily and can use the tool to generate views to find the possible reasons for the business pains. Using the Business Intelligence (BI) solutions we can now use the information of profitability in other areas of Customer Intelligence solutions like cusotmer Segmentation, Cross Sell-Up Sell, Campaign management, Customer Life cycle costs etc.

So it has indeed helped the management accountants in using thier skills, experience, knowledge for taking the business decisions. The knowledge is most important but the advancement in the technology has provide various avenues to the management accountant to use the knwoledge and prove his/her value.

Thanks and regards

Rajen

[santoshputhran]

I also vote "Yes"... Management Accounting is influenced by advancement in IT.

As the businesses becomes complex and spread across the globe, the role of the management accountants is analyse the business to help the business in decision making. The concepts of Management Accounting like ABC, EVA, transfer pricing are creative in its own way with rules agreed how to analyse the business.

Similarly Profit Centre Accounting will only be a possibile for MNC like Infosys, Tata Motors etc to analyse the businesses independent of companies in different countries if they have good IT backbone. Moreover they would need a good BI system to slice and dice data for business analysis.

Traditional role of management accountant is shifted to analysing the data and interpreting it to the business. Management Accountants have to participate with the business in designing the the IT systems. That's one of the reasons Cost Accountants are more in IT implementations.

Another question arises,

"Should Cost & Management Accountants work only with the companies that the IT savvy ?"

If a company is not spending on Information system, then the accountants generally compile data in spreadsheets. Can a management accountant do any justice to his job or it is wise for him to leave the company.

Regards,

[bvprabhakar]

IT , has no doubt, revolutionised the Management Accounting.

ERP , such as SAP helps Management Accountant to prepare separate Financial Statements for Tax laws under Local GAAP and also under International Standards such as IAS/IFRS/US GAAP. The time taken by Accounting Groups for Monthly Closing Process such as Bank reconciliation, Inter-company reconciliation, FOREX Payables/Receivables reinstatements and Consolidation, is considerably reduced.

In addition, web-based Reporting tools such as COGNOS, TM1 helps a Management Accountant to upload the files with financial figures through web and then download the info in the format required by the Management for their analysis, review and decision-making.

Coming to the Q:
"Should Cost & Management Accountants work only with the companies that the IT savvy ?"

In the present globalisation scenario, it is hard to find Large Companies which are not IT savvy. If not, as a Management Accountant you can recommend to the Management the options on Reporting tools by doing a Cost/Benefit Analysis and justifying the cost of such tools.

[ashutoshkumargupta]

Though I subscribe the views expressed by Mr. Santosh and Mr. Prabhakar BUT I would like to address the problem to be faced generally in a country like ours by the CMAs or any specified Accountant in dealing with the process.
1) To be dependent more and more on IT are we not handing over our specialized field to the another breed of specilists: IT professionals?
2) Are we not therefore, guided with the supramacy of IT skills possessed by the IT professionls?
3) Thus Accounting professionals assuming the secondary role and operating under the structured defined by these very professionals, isn't it?
4) Are we not making our operational field a bit complicated technically and based with the output generated by this structured system with a very little scope for subjective modifications?
Regards

[santoshputhran]

Hello Ashutosh,

I have different view on the 4 points you listed.

The role of accounting in business has changed over the years. The tasks that were done by Accounts Department like posting customer / vendor invoices earlier are now done by the source department themselves since the ERP solutions are integrated.

Now the Accounting professionals have to be involved in ERP implementation right from the designing stage so that they get what they want. So Accountants have moved up in the ladder.

As Rajen has pointed out

First example would be the ERPs. The regular job of the management accountants in manufacturing industries is to calculate the cost of the inventories. This has become very simple (or fully automated). so the professional can look into the other areas.

Earlier accountant discussed about posting / casting errors which is now alien to us. Since ERP provides automation, roles of Management Accountants has gone through a fundamental change in assisting the business with providing analytical information.

Regards,

[appsconsulting]

Hi

My views are more generic, which are applicable for any person with domain expertise, as follows

1) To be dependent more and more on IT are we not handing over our specialized field to the another breed of specialists: IT professionals?

{Rajen} - Here the dependence is on the 'IT system' and not on the 'IT professionals'. All the IT solutions which are of Business Use are meant for the business users like Management accountants or any other. Here the Management accountant has to use his/her domain skill use analyze data and create meaningful information for the organization. This cannot be done by the 'IT professional', it can be done only by the domain person with the knowledge of the respective IT solution.

2) Are we not therefore, guided with the supremacy of IT skills possessed by the IT professionals?

{Rajen} - As explained above we are not guided by the IT professionals, in fact they are guided by the domain people to develop the various IT solutions. The solutions are for running the business and not that the business is for running the solution.

3) Thus Accounting professionals assuming the secondary role and operating under the structured defined by these very professionals, isn't it?

{Rajen} - No. the structure for the IT solutions even when they are designed and developed are defined by the domain people and not by the IT people. So during development of the solution, testing, deployment and use of the same is done by the domain people. The 'coding' part and the 'technical architecting' is done by the IT people.

4) Are we not making our operational field a bit complicated technically and based with the output generated by this structured system with a very little scope for subjective modifications?

{Rajen} - No, this is not true. The output has to be as per the requirement of business user. If it is not then the software solution will not get sold and used in the market. The modifications can always be done as they are called as 'customization'. The subjectivity can also come in analyzing the output, which is generally the case for a business user.

I am personally glad that you have brought those questions for discussion, so that the same can be answered, debated and once for all we take out those concepts out of our thinking. Do let us know your views, more questions and somebody or the other can take to the logical end.

Thanks and regards

Rajen
rajendra@appsconsulting.in
+91 98226 19986

[ashutoshkumargupta]

Dear Rajen and All concerned
The questions were basically aimed at enriching the discussion thread keeping in view the observations gathered from some professionals as well as non-professional accountants.
You have very well answered them to remove the doubts as would have cropped up in the mind of concerned lot.

The rapid and dimensional development of IT/ITES in phased manner has inevited the business firms to go for such changes as to adeptly update themselves But a few missings have also taken place which may be summarized as:

1. Automation is Optional not Manadatory hence no working uniformity among the business lines,
2. No Uniformity or Standardisation of ERP Models each varying with the degree, process, output class,timings, etc , PARTICULARY in Terms of CLass or NAture of Business Segments/Lines.
3. In the absence of Uniform Guiding Procedure even atleast for a Class of Industry, Accounting Specilists would find it difficult to get themselves in conversant with the changes of their jobs whether in practice or in employment.

All the benefits provided by the IT/ITES to the accounting and financial field are Technically General in nature as are available to any Specialized Branch whether Engineering, Medical, etc. BUT not Valuably Specific alike in other specialized field-Medical, Engineering, etc.

It is a welcome step to use IT/ITES for the purpose of accounting BUT still LOT of work/development and Specialization need to be done to achieve the fullest benefits of IT.
Regards