As a writer and online business owner since 2006, it has been very beneficial to my bottom line for me to fully understand managerial accounting. Discovering these five key features to managerial accounting has saved me time and money. I first discovered these keys in an accounting course while attending Kaplan University online. If you are a manager of a small business the odds are that you are a non-financial manager. As manager there are typically several routine accounting activities that will fall onto your shoulders to complete. In order to do these activities successfully it will be helpful for you to know the five key features of managerial accounting and how each element of these key features can assist you in managing your successful business.
The first key feature can be found in the basic language of business itself. Accounting has been said to be the language of business because every company in one way or another needs to complete basic accounting activities in the daily running of the business. When you think about it every function of your company is impacted by one or more accounting principals and you and your staff will be using these principals and the accounting terms that describe them on a regular basis when completing tasks. As a manager if you are aware of basic accounting terms and principals it will help you to manage and communicate those ideas that impact finance within your company better.
The next key feature of managerial accounting that has an impact on your small business is recording your financial history. Every company has to measure financial performance in order to determine how well the company generates, uses, and manages the funds that come into the business. It is vital that you as a manager establishes an accounting routine that will allow you to capture, and report financial information that is not only accurate but timely and reliable as well. The tools a company uses to measure financial performance include financial reports, general accounting journals and general accounting ledgers. It is these tools that you and your staff will use to carry out your accounting routine that records your financial history.
The third key is reflection. As your business grows it will be vitally important to reflect upon the progress shown in financial reports so that you can use the information to continue the growth pattern. There are three main reports that are used by businesses to reflect financial progression and they are the Balance Sheet, the Income Statement and the Statement of Cash Flows. Once you have read these reports you can then more accurately gauge your company’s performance and determine what actions to take that will help your company improve any weak areas and capitalize on company strengths.
The fourth key is decision making. Accounting tools inform and report they cannot make decisions. They can however help you to identify new opportunities for growth, help you to identify proactive changes that can be made to improve performance, and allow you as manager to prepare a budget that will result in an accurate financial picture for your company’s future. Managing the accounting aspects of your business is key to making good decisions.
The last key to managerial accounting in any small business is perhaps the one that many managers overlook. Managing the company requires a careful monitoring of all company resources including the skill and effort personnel bring to the company and the time all company personnel spend working. It is important that the manager be able to identify inefficiencies and waste within the company so that eliminating these will allow the company to increase the bottom line which will show the company in a better financial position.
All five of the above key features contain important elements that must be managed appropriately if the company is to be successful. The task of managing these elements falls squarely on the shoulders of the manager. Understanding how managerial accounting impacts the small business can lead to a better implementation of these key features and the success you will achieve as a manager.