Most people associate the word “accountant” with a financial accountant. The truth, however, is that financial accountants make up only one of the many kinds of accountants that exist in the UK. These professionals work with managerial accountants. Managerial accountant gathers and processes data that an entire business organization needs so that it can operate in the most cost-efficient manner. Critical business decisions are made because of the work of managerial accountants.
What makes a managerial accountant different from a financial accountant?
A financial accountant is responsible for coming up with an analysis that would show how the company’s finances are faring as a whole. The limitation of a financial accountant is that they are often swamped with too much data to make an in-depth analysis of each aspect of a company’s financials. This is the position where a professional accountant lay.
They can make a focused analysis of the financials of specific items such as budget, cost, product, and performance of a department within an organization.
Another essential difference between a financial accountant and a managerial accountant is that the latter is recording and analyzing financial information for use within those in the organization. In this respect, a financial accountant can do what a managerial accountant does. However, a financial accountant’s primary task is to produce a financial report that will be used by other parties such as government regulators, prospective investors, and the general public.
It would be difficult, but not impossible. For a financial accountant to write separate reports and statements for internal and external users at the same time. Thus, companies have a managerial accountant alongside a financial accountant. Because of their different target audiences, financial accountants and managerial accountants follow different rules and formats.
The impact that a managerial accountants makes on a business
Managerial accountants can make a comparative cost-benefit analysis across a line of proposed and existing products. Decision-makers in a company can use the report that managerial accountants have prepared to decide if they want to pursue a proposed product, phase out an existing product, or keep production as is.
A managerial accountant also provides company decision-makers with the information. That they need to forecast market conditions and plan their marketing and production strategies. Although business owners and decision-makers want to know what product or service has popular demand. They also know that market behavior can change anytime without notice.
This is why they want to know which products or services could become popular in the future. A managerial accountant is able to give them an idea of what might sell to people. Enabling business owners and executives can prepare a plan to corner that market.
Product development, phase-out, launch, and maintenance of market share all rely upon the existing resources that a company has. To describe the company’s existing resources quantitatively, a managerial accountant creates a budget report. The budget report would also contain a proposed allocation of resources across different departments in the company.
A managerial accountant does this by comparing the needs that each department is asking with that of the existing resources. These professionals are also tasked with prioritizing budget recipients within the company and keeping costly allocations at the least.