What is management accounting?
Management accounting – also known as managerial accounting – is a branch of accounting that enables decision-makers to establish goals for their business activity and assess their results. In this strategic process, people collect, compile, and use various information essential to plan, control, and analyze their company’s future financial decisions.
Managerial accounting is essential for businesses at different organizational levels and helps people manage the present state of things and evaluate the risks of future endeavors accurately. Tracking how a financial action has performed is critical in the life of a business, and managerial accounting helps business owners and other decision-makers have that entire process under control.
Management accounting is sometimes confused with financial accounting. Both are types of accounting that combined work to help identify, collect, record, and communicate a company’s fiscal information. However, contrary to how things function in the financial side of things, where the emphasis is mainly on the past, in management accounting the focus is on the future. Managerial accounting is centered on creating a winning strategy and making accurate business plans for times to come.
Also, while in financial accounting the emphasis is on external parties such as shareholders, management accounting focuses on internal users like employees and uses different information than financial accounting. When a business thinks of a strategy for the future, it will look at things such as expansion opportunities, outsourcing various services, or new product launches. These decisions have a financial impact on that business’s economic state and must be taken based on data and budget creation. Also, they must be taken at the right time.
In managerial accounting, relevance and timeliness play a crucial part. Sometimes, decision-making in the business world doesn’t leave much time for thinking, so actions must be taken quickly. Furthermore, if in financial accounting everything revolves around the correctness of all information used, in management accounting information must be relevant to the decision-making process or the plan that is put on paper.
Requirements for a career in management accounting
A career in management accounting can be truly lucrative. Still, it requires a good amount of work, commitment, knowledge, and experience to get to a high level on the employment ladder. If you want to have a career in managerial accounting, you need specialized expertise in the field of accounting to help you make informed decisions. Further, a set of interpersonal skills and competencies that help you succeed in your decision-making process is essential.
Employers in this field seek professionals with strategic management abilities that can think critically in different situations and develop strategies to grow their business. As the name suggests, companies want to hire professionals with manager abilities and a high level of accounting knowledge. To stand out and succeed, you need a set of skills that managers typically have, and even more so, you need to need to start thinking like a manager.
Skills you need for an accounting management career
Apart from specialized accounting expertise – the details of which we’ll discuss further down in this article – to have a successful management accounting career you need specific skills, competencies, and abilities.
You need to understand what information you need, analyze the data you work with, and then measure the desired result. The ability to measure does not stop at calculating numbers; it also involves the capacity to analyze figures, use of critical thinking skills, and a strategic mind.
Communication and writing skills
In decision-making roles, not only do you need to think well, but you also need to be able to speak and write well. It would help if you had confidence in yourself and your decisions to convince other people of their usefulness. You need to motivate people to help you reach the desired goal. You need to be able to sell your ideas either verbally or in written form. You need to know how to communicate information, write compelling emails, or create and deliver effective presentations.
This continues from the previous point. Being able to motivate and convince people is critical when you are in a decision-making role. Leadership skills help you move forward as a company and as a professional, enabling you to advance in your career and become successful in your field of work.
Risk and project management skills
Project management skills enable you to continuously improve your day-to-day job efficiency and your company’s business processes. Risk management impacts everything in our lives – personal and professional – because every decision we take has associated risks. You need to be able to assess the risk associated with your decisions and choose the proper course of action, knowing what to expect in the long run or the short term.
Ethics is highly important in the business world and treating people the way you want to be treated will always help you build better connections at the workplace. If you have excellent ideas, but people do not look up to you as a person, you’re not a very good manager. The American Institute of Certified Public Accountants (AICPA) says in its code of professional conduct that “integrity is an element of character fundamental to professional recognition. It is the quality from which the public trust derives.”
You need to be competent in your field of work. This is probably the most important skill in this list, and it is closely linked to the next section we touch on in this article, which is how to become a specialist in managerial accounting.
Earn a bachelor’s in accounting
Earning a bachelor’s degree in accounting (BA) is a box you must check to start a career in management accounting. This type of program provides you the body of knowledge necessary for a junior accounting role and holding such a degree is a plus in the recruitment process.
Earning a bachelor’s degree typically takes 4 years or 120 credit hours, but you can complete it in less time if you choose an accelerated format, or if you transfer credit hours from other accounting-related education programs. Most universities offer full-time bachelor’s programs, but you can also choose hybrid formats or even programs that are entirely online.
Entry requirements for a bachelor’s program in accounting depend on the type of institution that offers them. Nevertheless, having a high-school diploma or a GED is a general prerequisite. Well-established institutions tend to ask for excellent high-school General Public Assessment (GPA) test results, usually of 2.5 or above, and a strong college admission test score.
Continue your accounting education with a master’s degree
If you want access to better employment opportunities, consider earning a master’s of accounting. This program aims to give students advanced knowledge of accounting principles and practices already studied during their BA degree.
It usually takes 2 years or 35-40 credit hours to earn your MA in accounting. The courses in this program dive deep into accounting practices, and processes, helping you gain skills needed to advance your career. A master’s program also lets you choose a specialization, enabling you to gain in-depth knowledge in that area. Doing this specialization can differentiate you from other candidates who compete with you for a good management accounting role.
Employers want candidates who already hold high-education degrees in the field. Since most applicants bring that to the table when applying for a mid-level position, one way to set yourself apart from the competition is to become certified in your area of interest. Having a BA and an MA will most likely qualify you to earn your accounting certifications.
Become a certified management accountant
Certified management accountant (CMA) is the most important professional certification you can earn in management accounting. This credential certifies that you have in-depth knowledge of financial planning, control, analysis, strategic financial management, and decision-making. You can obtain the CMA certification once you pass the exams organized by the Institute of Management Accountants (IMA).
As a certified management accountant, you’ll get to oversee the work of other accountants, contribute to strategic business decisions, or be involved in creating business plans.
How much do CMAs earn?
According to the IMA 2020 U.S. Salary Survey, certified management accountants earned in 2019 a median salary ranging from $76,000 to $133,000 per year based on their age. The same survey notes that those holding the CMA credential earned a 36% higher median total compensation compared to those holding neither the CMA nor CPA (Certified Public Accountant) credential.
Entry requirements for the CMA examination
To qualify for the CMA exam, you need to have significant business and accounting knowledge. IMA requires candidates to hold at least a bachelor’s degree in accounting obtained from an accredited institution.
IMA will evaluate candidates with unaccredited degrees and decide on a case-by-case basis whether they are eligible to take the exam. Moreover, to earn this certification, you should have at least 2 years of professional experience in management accounting or finance.
The cost of the CMA exam varies. You will have to pay less if you are a member of IMA, a student, or a professor. The regular entry fee is $250, and the reduced one is $188. For the 2 parts of the exam, you should pay $830 or $622 for students, professors, and IMA members.
Other career opportunities in managerial accounting
Apart from being a Certified Management Accountant, the field of managerial accounting opens a wide range of employment opportunities and high-level positions in private companies or government agencies. Here are some of them.