Management accounting is an urgent service for businesses of any scale and direction: businesses of all forms of ownership, organizations, and private entrepreneurs. Management accounting is aimed, especially to provide the necessary information about the functioning of the business primarily to the business owner and managers. This accounting reflects as fully as possible real information about the business in a convenient as well as understandable form. All accounting rules, estimates, income and expenditure definitions are determined by the company or the entrepreneur independently and are governed by domestic policy rather than the requirements of the law. For example, a functional currency can be a dollar if most purchases and investments are made in currency, and the cost of buying office furniture and appliances can be recognized as expenses at the time of commissioning without depreciation accrual.
The management accounting in the enterprise is an urgent task of management financial consulting in the current environment for companies of all kinds of activities, especially for companies with a complex organizational structure. Managers at all levels need to be informed online to make management decisions. The management accounting system optimizes cost accounting and helps improve the financial and economic performance in general.
Management accounting goals at the company
The introduction of management accounting in enterprises allows for the creation of a global system that provides solutions to a whole range of problems related to company management and operational planning. Management accounting in the enterprise, in particular, is carried out to achieve the following goals:
- Improve the quality of information received and management decisions.
- Ensure that objective data is quickly obtained.
- Maximize the financial result.
- Ensure risk control.
- Be able to make short- and long-term forecasts with a high probability.
Benefits of the service
Properly organized management accounting will allow you to see the real picture of the business “now for now” as well as make decisions based on current information. System approach, unification of operations, documents, and calculations allow to minimize errors and improve the efficiency of the accountant. High-quality accounting automation not only reduces labor, significantly improves efficiency, but also protects against distortion of credentials.
The management accounting from scratch and its subsequent automation are associated with the implementation of several stages. A specific step-by-step management accounting plan may vary depending on the needs of a particular company.
It should be added that the company should have developed a strategic development plan in advance, set goals and priorities for development. The strategic plan is an important guideline for the business when making specific management decisions: the company must know the direction of movement, and with the help of management accounting it determines its “location” at the moment.
Develop an accounting policy that takes into account the specifics of a particular business. Advising on the reflection of individual operations, as well as developing an adapted account plan. The development of unified forms of internal documents, as well as the development of an adapted documentation schedule. Automation of management accounting turnkey, as well as the development of internal forms of reporting. Or other services of a financier.
Accounting policy, account plan, and internal documents. Automation of management accounting. Operational accounting and especially the absence of errors. In particular, reliable data on the financial performance of the business.
Stages of management accounting at the company
The logic behind the management accounting system in this example is this: initially, the reports that are required for management or external reporting users (such as credit organizations or investors) are determined, and then the data that must be taken into account to obtain these reports is determined.
1.1. Assess information needs based on the specifics of the enterprise.
Information needs can be determined from the forms of key reports that management needs to make decisions or for outside investors. The information should be sufficient, but not redundant.
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1.2. It is necessary to determine the composition and scope of work.
1.3. Develop a plan of activities related to the management accounting and implementation.
2.1. To analyze the current state of affairs in the enterprise:
- System of financial and economic relations of a group of companies, structural units;
- Planning systems
- Organizational structure;
- Document systems
- Internal controls
- Budgeting systems
- motivation, etc.
3.1. Develop and approve a project on the organizational structure of the company:
- Transforming the structure of an organization (if necessary)
- redistribution of responsibilities between employees and the definition of areas of responsibility (for a large company, it may be necessary to establish a management accounting department);
- To fix certain functions related to management accounting for the executors;
- to draw up job descriptions in the light of the new provisions of the organizational structure.
3.2. Develop and approve the financial structure of the company:
- Identify financial responsibility centres (CTFs);
- Fix the powers and responsibilities of the CTF;
- Determine the performance rates of the CTF and its managers (KPIs);
- prepare and approve the Company’s Financial Structure Regulation.
4.1. Develop a management reporting system.
Management reporting is designed to streamline the process of managing reporting. The Internal Regulation on its creation should clearly define the sources of data to obtain each reporting indicator up to the indications of those accounts, sub-accounts and subconta accounts and/or operational accounting, which should contain the necessary accounting information. As a result, a request for the necessary accounting information about assets, liabilities, capital, expenses and economic processes will be formed for the necessary management services. This will help to establish the degree of detail of the information on the accounts of the analytical accounting. In the same order, a request for useful management services is formed for planning, regulatory, financial and other information.
5.1. Develop an accounting policy.
Accounting policies should determine the basic parameters of management accounting. For example, non-negotiable asset accounting policies may include parameters such as separate accounting of non-negotiable assets, asset valuation method, asset revaluation method (if revaluation is used), depreciation method, amortization of intangible assets, etc.
5.2. Develop a management accounting cost accounting system:
- To classify cost items
- Build a control system
- Form a cost reporting system
- develop and approve the Management Accounting Spending Accounting Regulation.
5.3 Develop and approve:
- Management accounting and reporting regulations;
- The regulation on the applied account plan and the relationship of management accounting with accounting (special attention is paid to accounting costs for management accounting);
- The regulation that defines the rules for collecting, registering, storing and presenting information.
6.1 Build an internal control system and approve the relevant provision.
The internal control system is designed to check the accuracy and completeness of management accounting, timely input of data into the system, prevent errors, etc.
7.1 To form a technical task.
The main task of the technical task is to identify and prescribe the requirements for the automated management accounting system. The requirements must meet three criteria: clarity, specificity and testability.
It should be stressed that at this stage it does not matter on which platform these requirements will be implemented. On the other hand, if we are talking about the introduction of a management accounting system based on a certain software product, then such a connection can be, but only at the level of screen forms, forms of reports and so on.
7.2 To select a software product that meets the system requirements as much as possible or requires minimal refinement.
7.3 Automate management accounting based on your chosen software product.
One option is 1C-based automation. It is a universal solution based on effective methods and management reporting, including international financial reporting standards (IFRS).
The subsystem is designed to automate the following business processes:
- Creating management reporting (and/or IFRS reporting).
- Consolidation of reporting by group of companies.
- Transformation of accounting transactions in management accounting, their necessary adjustments.
- Separate accounting (on the company’s internal accounting policy and/or by IFRS standards), including accounting of fixed assets, intangible assets, loans and loans.
- Get information to make management decisions quickly.
Management accounting should therefore begin with methodology, and automation should be the final stage. Effective use of management accounting is not possible without the introduction of automation tools. The result of the work will be formed management reporting, as much as possible corresponding to the needs of the management of the company or external users.