Why Do Management Accountants Need to Understand Company Strategies?

Understanding company strategies is fundamental to how management accountants work. A management accountant acts as a trusted adviser, taking on a valuable role in supporting a company’s leadership team.

Company strategies involve making key decisions. The information and analysis a management accountant provide help to ensure these are informed decisions.

What are Management Accounts?

Unlike regular, financial accounts, management accounts are tailored to the needs of a particular business.

They help manage a business by providing important information, including:

  • Profit and loss statements
  • Cash flow positions
  • Balance sheets
  • Key performance indicators (KPIs)

Management accounts will also interrogate and analyse this information, putting it into context so that business owners, leaders, and senior managers can use it for strategic purposes.

This analysis can identify patterns and trends, break down profitability by department or activity, and compare actual with forecast income.

These accounts have become practical tools in enabling companies to accomplish certain tasks, measure performance, and make operational decisions.

How Strategic Management Accounting Adds Value

Knowledge is power. Any company wishing to create, and carry out, effective business strategies must base them on sound knowledge.

In occupying a strategic role that supports a company, the management accountant provides the necessary knowledge to support strategic decision-making.

However, to do this, the management accountant must understand the company’s strategic objectives in the first place.

Management accounting doesn’t sit outside the management of a company and should be integral to it.

By aligning this professional insight and analysis with company objectives, the management accountant can then:

  • Analyse current performance against KPIs
  • Review and refine existing strategies for creating long-term value
  • Support the development of strategies for growth and innovation
  • Evaluate opportunities and risks
  • Assess strategic risks
  • Supporting pricing and marketing strategies

While helping a company plan for the future and refine its strategies, the management accountant can also help consolidate its existing processes and ensure that it is following best practices.

These include:

  • Ensuring disciplined financial control
  • Managing the cost of overheads
  • Managing the capital working cycle involving debtors, creditors and stock
  • Setting break-even profitability points
  • Exposing and eliminating bad practices

Some of this is fine-tuning for business, ensuring everything runs much better and is more streamlined.

Aligning Performance with Strategy

By close examination and understanding of figures, a management accountant can get a clear picture of a company’s financial performance.

The greater this knowledge, the more realistic and attainable a company’s strategic objectives can become.

Comparing management accounts on a monthly or quarterly basis will provide an ongoing supply of useful data. But the thing that adds extra value to this is the credibility and authority a management accountant brings. It’s not simply a case of having the information but interpreting it to understand what it means.

To find out more about management accounting and how it can support your business, please contact Venn Accounts on 020 8088 2590, email enquiries@venn.dawncreativehosting.co.uk

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Operating from our London head office, Venn Accounts a traditional accounting firm. We are committed to ensuring all our clients are completely clear about what we can do for them, while fully supporting them every step of the way.

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