Role of managerial accountants in today's business environment

Managerial Accounting

Managerial accountants are charged with all financial matters that do not pertain to the financial accounting statements. Within their company, they ensure that the company has good financial security, they perform analysis on costs and revenues, they perform budgeting, handle taxes, and their work is frequently used in strategic planning, whereby they provide the financial analysis to management to help make better decisions (No author, 2012). Some of the ways in which the job contributes have changed, especially with the advent of computerized decision-support systems, information systems and dashboards, each of which provides real time information to the managers, including cost information. The integration of these systems with managerial accounting has only served to make the managerial accounting role even more important over time.

This role has not changed over time, although arguably the management accountant role has become more prominent. Management accountants have always performed their existing functions, so in that sense they still do the same things as always. However, in today's business environment, there is increased emphasis on tracking and control. This means that there is a lot more need for data, and a lot more data to be processed. As such, the management accountant is more important to the organization. Quantitative analysis plays a bigger role in decision making, both in terms of capital budgeting, regular budgeting, cost-benefit analysis and breakeven analysis.

In response to the increased role that management accountants have had within the organization, the techniques used in managerial accounting have become more sophisticated over time. For example, traditional cost accounting has been a simple function, but today there are methods like activity-based costing that are different from traditional techniques. These different ways of breaking down the business have been developed by managerial accountants in order to provide better insight into managerial decision-making. The managerial accountant must develop the different measures used in such analyses, and must find ways to collect the data and put all of that data together. The role therefore includes a significant amount of designing managerial accounting systems, to ensure that the information that is delivered to management is accurate and useful.

Additionally, these tasks have become increasingly computerized over the years. Today's managerial accountants use more software than their predecessors, and often their work becomes integrated with other managerial information systems, dashboards and products like that. The managerial accountant therefore needs to understand the types of information that will benefit the managers, and be able to deliver that information quickly.

One of the biggest ways in which a managerial accountant helps the organization is by understanding cost and revenue drivers. This type of analysis is particular can help the company to channel its scarce resources in the most effective and efficient manner possible. As a result of that, the company will be able to focus on its energy on the most profitable markets, products and customers, based on in-depth analysis. Thus, while the basic function of the managerial accountant has changed little over the years, the job has become more complex, more important, and more oriented towards integration with information technology and managerial and strategic decision-making.

2. An activity cost driver is "a factor that influences or contributes to the expense of certain business operations."

What drives consumption of costs are two factors. The first factor is demand. The amount of goods that are required will obviously dictate the level of costs. But it also needs to be considered the level of costs relative to the unit of production. Thus, another driver of consumption of costs is the efficiency of production. The more efficient the production, the slower the rate of consumption. Thus, consumption of costs is relative to total demand and efficiency in production.

There are different methods of costing, such as contribution margin costing and activity-based costing (YouTube, 2012). However, the drivers are the same, but they are accounted for differently. With activity-based costing, the drivers are on an activity basis. Thus, if a firm produces three products, the costs for each will be analyzed, individually. This allows the firm to better identify which products are more profitable. A breakdown by customer, which is another adaptation of activity-based costing, can allow the firm to better understand which customers are the most profitable.

Where a managerial accountant really comes in handy is in finding ways to measure each activity as it pertains to a specific product or customers. Traditional accounting can be clumsy, talking about "indirect materials" and "indirect labor," whereas with activity-based costing the company needs to know precisely how much of each input goes into the product. This allows the firm to better understand the drivers of costs, because it allows the firm to better understand its costs by product.

One of the most important contributions that activity-based costing makes to the company is that it provides management with the information needed to make better decisions about allocations. In any company, resources are scarce. Therefore, in order to improve efficiency, managers need to allocate those resources in the most efficient manner. With activity-based costing, the manager knows what the cost drivers of each product are. This allows the manager to focus on the product that has the best revenue per cost driver. In addition, this information can also be used to help make decisions about future production, knowing what the incremental cost of each new unit of output will be for each product.