In 2022 alone, an estimated 97 zettabytes (or 97 billion terabytes) of data is expected to be created or consumed in the world. That mind-boggling figure is expected to nearly double by 2025.
What does this mean for businesses today? In large part, it means there is a massive amount of financial data that can be harnessed and analyzed to help businesses run more smoothly and increase profits.
Financial data has always existed, but the digital age has multiplied exponentially the amount of data that can be sorted. Managerial accountants can use this data to give their company a leg up on the competition. If money makes the world go round, the accountant is the axis, and managerial accounting is the gravity. This article will discuss how managerial accounting adds value to an organization and the role and responsibility of the accountant today.
Why managerial accounting?
Businesses don’t need to choose between financial and managerial accounting. Financial accounting is used to prepare reports and financial statements. It is essential for bookkeeping and reporting on a business’ transactions for external entities such as shareholders.
Adding managerial accounting to the mix allows a business to focus on internal needs, analyzing its financial data in a way that helps management make decisions to improve the company. Managerial accounting provides insights to help managers conduct day-to-day operations and plan for the future.
1. See the future. A key component of managerial accounting is financial forecasting, which gives management insight into the company’s long-term potential. This forecast offers projections for income as well as costs, providing a framework for business decisions to maximize the company’s profitability.
Forecasting is critical for planning, as businesses look to prepare for economic uncertainties, competitive pressures and opportunities that may arise. It helps managers understand a company’s financial health and what can be done to maintain and improve the financial position.
2. Make daily decisions. Managerial accounting can also provide managers with real-time insights to inform daily decision-making. Using cost-benefit analysis, managerial accountants can assist in project management.
From large-scale projects to smaller endeavors, financial data can be used to make wise decisions about what risks to take and how to tackle projects. Using automation, managerial accountants have access to real-time financial data to help managers make well-informed decisions.
3. Keep an eye on the cash. Managerial accountants help businesses keep an eye on the cash they have to keep their world going around. Accountants perform cash flow analysis to ensure the company has the cash on hand that it needs to operate. Analyzing the money going in and out with operational costs, investments and other activities helps managers understand the wiggle room they have as they make short- and long-term decisions for the company. Understanding a business’ cash flow and what money is available allows for confidence when paying debts, making investments and improving operational efficiency.
4. Track performance. As management looks to improve a company’s performance, managerial accountants provide valuable insights into key areas of the business. Accountants can track key performance indicators in every aspect of the business to give management important feedback. With up-to-the minute results on these KPIs, decisions can be made to adjust quickly when needed. With the benefit of automation, managerial accountants can use technology to track KPIs accurately in real time.
Visual reporting and live dashboards allow accountants to present the information in an easy-to-understand format and tailor the information to anybody who needs it. Managers in different areas of the company can get exactly the information they need to improve performance.
Managerial accounting is a valuable tool for businesses to help them take control of their financial data and put it to work. Accountants give management the tools they need to make wise decisions on a daily basis to move their business forward and plan for the future.