Accounting has a flexibility adaptive to company’s nature and to the activity practiced in a quasi-chameleonic way ad is through this that we obtain the necessary information for its management. Its main function is the preparation of all corporate information documents, mandatory and statutory documents (financial statements) or management and information reports for the operational directors.
Why do you need a management accounting system tailored to your needs?
Currently there is an urgency of information in real time, this way, financial and management accounting are key in supporting decision making and future development of the company.
Financial accounting is known as general accounting, and reports company’s financial position through financial statements and past performance as if it were a business photography.
This information is useful for shareholders, investors, clients, government, suppliers and others. Having this information a fundamental role in communicating with all the company stakeholders ,this is much more aimed at the interested public outside the company. Financial accounting is compulsory in Portugal, it is currently standardized by the SNC , and its accounting principles are generally accepted and standardized. The frequency of these reports depends mainly on the company's needs or legal requirements, and can be monthly, quarterly, half-yearly or annual. These features transform this information making accounting comparable to other companies, reliable, objective, accurate, consistent and useful.
The management accounting, arises from the need for an analytical accounting and has as main goal the management of the costs of the products / services sold or rendered.
Usually this information is of internal utility, for the directors and managers. There is no obligation by law, nor have accounting principles for it being developed depending on the needs of the organization and its managers. This is a way of communicating company status to its internal stakeholders. Being focused on their managers, any prior study should be preceded by in-depth knowledge about the day-to-day reality of the organization, its managers, the information they need and their business environment as a whole. One of the most internationally used systems for the hotel and lodging industry is USALI and for food and beverage companies -USAR, these are nothing more than the standardization of management accounting systems for types of establishments with very specific needs, responding to the need for information for management and much more towards the future of the organization.
In this way, for example, a hotel manager knows in what department there are wastage of resources, whether or not to increase a certain operational area or proceed to its implementation plan. The same goes for directors or owners of restaurants, tour operators and travel agencies. In travel agencies this is crucial in making decisions among market segments, package providers, or even franchising decisions.
Management accounting is the main source of decision support information for all managers who perform planning, direction, motivation and control of all company’s activity.
Planning is directly related to how we choose the course to take and the choice of the way to achieve our goals, as well as the entire implementation process. The direction and motivation consists in the mobilization of all the personnel around the plans for the accomplishment of the operations towards the traced goals. The business management control ensures the fulfillment of the plan in pursuit of the goals and ensure as well the respective corrections in a timely manner according to performance and circumstances. Management accounting plays a key role in these and other management activities, however their need is most noticeable in planning and control functions. Often companies find it difficult to achieve their goals due to a lack of planning and control of results due to multiple factors such as; poor system configuration; lack of integration between systems (i.e. PMS and ERPs ), management accounting system inadequate to the sector where it operates, etc.
Summary of the main differences between financial accounting and management accounting.
Financial or General Accounting:
1- Information for people outside the organization
2- The focus is on the consequences of past activities
3- Data objectivity and consistency
4- Information must be accurate
5- Summary information about the organization as a whole
6- Based on generally accepted accounting principles
7- The publication of the financial statements is legally mandatory.
Management Accounting or Analytics:
1- It is directed for people within the organization and is intended for planning, direction, motivation, control and performance evaluation.
2- The focus is on decisions that affect the organization future.
3- Data relevance and flexibility.
4- The information should be timely and useful
5- Elaboration and comparison with detailed sectoral reports on departments, products, customers or employees.
6- It is not mandatory to observe the generally accepted accounting principles
7- Not mandatory
In general we can say that the obligation of financial accounting from the legal point of view, makes this type of accounting the most used. However, if an organization aspires to have the best performance possible and optimize all its resources, we can even say that the management accounting system has a vital preponderance to its objectives, providing answers in which the general accounting system is inefficient or limited.
Accounting Normalization System ↩︎