Managerial accounting is the use of financial information to provide company management with a basis for making effective decisions. Some of the reasons companies install management accounting systems are to assist in reducing operational costs, improve customer service levels, make smarter purchasing decisions, improve control of funds and get better results from their marketing. Setting up an effective managerial accounting system requires the full support of all members of senior management, a well-thought-out implementation plan and determining a management accounting method.
Introduction and Orientation
When a management accounting system is being introduced into a company for the first time, senior management should hold a meeting of all managers and explain the concept, how it will help everyone perform their jobs better and what types of information it will provide.
Management should agree on key performance areas it wants to measure. One example is contribution to overhead and profit. Revenues less variable costs provides the contribution to overhead and profit. This information, segmented by such areas of the business as regions and product lines, allows managers to analyze the impact on profits from adding or dropping different business segments.
To capture the areas management wants to report on, current systems must be reviewed to determine if the underlying data is available at the level of detail management needs. If this information is not available, systems should be updated to provide the managerial information needed.
At least one individual with cost accounting experience should be assigned managerial accounting responsibility -- either from internal staff or by recruiting someone with a cost and managerial accounting background. Such an individual plays a key role in implementing and maintaining a managerial cost accounting system. He adapts the system as management needs change because the requirements of a managerial cost accounting system are not static. To assist in the initial implementation of a managerial accounting system, a company may want to consider hiring a cost accounting specialist to advise the implementation team and oversee activities.
Managerial accounting techniques that best suit a company's needs should be selected. One example is the balanced scorecard method, a strategic tool that management uses to keep track of management activities and to monitor those activities from both a cost and activity management perspective.
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