Management accounting necessary, but underappreciated
When I was growing up, I always wanted to be an accountant. I guess I thought my math interests and skills were a good fit for that profession. When I was in college, I quickly found out that math skills were certainly a help, but analytical skills and basic understanding of a process and logical structure were extremely important. After undergraduate school, I contemplated the CPA route, as that was the thing to do, right?
But, after checking more, I felt the CPA or “financial accounting” route was a little too much like memorizing the phonebook for me. I wanted to explore getting more involved in business decisions.
After meeting with my mentor at my first management job, I decided to play out my career a bit, not get embroiled in the CPA study and exam process, and focus on the MBA route, which I did at the University of Akron, whose program embraced management accounting in a big way.
Numbers driving decisions
So, what is management accounting? You can look up the definition for yourself, but in my words, it is putting emphasis on the numbers that impact management decisions, and is not related to debits and credits and financial statements and balance sheets. This became perfectly clear to me when I was named controller for a new environmental division of Babcock & Wilcox. We had plenty of financial “numbers” to deal with, but my boss and the new team needed to know what impact various product decisions would have and were having on the business. The models my team and I built helped drive business decisions and reports that helped keep us all on track for success. Oh, our debits and credits were all good too, don’t get me wrong, but we took that for granted.
The role of financial models
This focus on reporting and modeling continued through my career, as CFO at Carnegie Group, CFO and CEO at Best NOMOS and even recently at PLSG in our efforts to raise our own funding and plan investments, and with our portfolio companies, where we needed an accurate portrayal of the decision process and cash needs.
This is even following me into my new venture with Manzetti Group, where clients are looking for accounting accuracy to keep their books clean. In a recent call with a new client, they need “management accounting” information. The CEO is in the dark with his growth plans and a tough capital market is making him rethink his product line expansion plans and look for an alternative. Financial models will play a big role in this process for him as he weighs one pathway against another, looking for the best for his shareholders and the paths he can afford to take.
So, for all my CPA buddies, chill out. I am not tossing you under the bus. I am merely saying that management accounting is underappreciated, and when business leaders are making tough decisions, they demand and need this information.