I often get asked, What is Management Accounting ?

Great question, Management accounting is about is using accounting and business information.  It’s about making informed business decisions more efficiently, and more immediately.

Financial accounting

This tells your business story through your financial statements to those outside of your business. These statements are typically your profit and loss, balance sheet and cash flow statement. They are  produced once a year (twice if you are a PLC).

Although important,  it’s not much good for running, sustaining and growing your business. Most importantly management accounting is where it’s at and owners and managers need to be connected to and understand it.

Compared to financial accountancy information, management accounting information is:

• Firstly, forward-looking, instead of historical;
• Secondly, aimed at those that lead and manage a business
• Thirdly, it’s more about planning, controlling and making decisions
• Fourthly, there are no prescribed formats or rules, adapted for the needs of the user
• Fifthly, it looks at product, projects or segments – not just the whole business
• Finally, is largely confidential, instead of in the public domain;

Management accounting will:

• Firstly, show how much profit you are making
• Secondly, tell you what your costs are by product, project or in total
• Thirdly, help control your costs
• Fourthly, help you manage cashflow more easily
• Fifthly, help you measure, manage and react to your business performance
• Finally, turn your business dreams into reality?

Above all information is a valuable commodity; hence it is the diamond of the business world. Most noteworthy the source of that uncut data stone lies buried within the record mines of your business.

Technology can help

Cloud Accounting is a great solution for all businesses, from acorn size to oak. Hence there are options and price points to match the start of your business journey, to ones that match your growth.

Furthermore technology and the cloud can help with the lifting of capturing and recording the huge volume of transactions. For that reason coupled with the power of the human, this data can be more easily mined and above all used to deal with your business challenges

Above all it helps businesses that don’t have the resources and budget of a team of dedicated accounting staff.

• Easily record, connect with & understand your business numbers
• Monitor your profits
• See what things cost
• Control & manage your business
• Manage and accelerate your cash flow
• Helps with planning
• See where to improve
• How to turn ideas into something meaningful
• Keep the tax authorities happy with what they need!

Therefore knowing how to produce the information is one part of the ‘process’, interpreting and using it is the remainder. Furthermore, you will to need adopt a sense of perspective and focus when using financial information. Above all, avoid getting bogged down with an abundance of (meaningless) financial data.  That is to say bear in mind

• What’s the decision all about?
• Which information and techniques will help you make that decision?
• How do you apply those techniques?
• What does it all mean?


I hope you have an answer that makes senses to question What is Management Accounting .  You can see the power and benefit it brings to your business.  Moreover, financial techniques support management; they do not replace it. Above all, responsibility and ownership for the decisions is yours. They should not be taken away and become an automatic process.

Contact us if you want us to help you develop and implement a management accounting capability. For more business and finance , news, advice and tips, finally don’t forget to watch our weekly broadcasts, listen to our weekly podcast I Hate Numbers.

Sign up for your  FREE trial to Numbers Knowhow, the revolutionary cashflow software designed to empower you with the numbers you need to transform your business. With Numbers Knowhow, you’ll have access to powerful tools and features that will unlock a world of financial understanding and growth.