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What's Ahead For Management Accountants?

By Debra Kerby Associate Professor
and
Jeff Romine Associate Professor


What's Ahead For Management Accountants?


Traditionally, management accountants have focused on the tasks of counting, comparing, recording, and reporting financial information. To remain vital members of their organizations, management accountants must develop more breadth. It is imperative that management accountants become knowledgeable about trends affecting business and finance, prepared to change the types of tasks they perform, and willing to acquire the necessary knowledge and skills to function as full-fledged business partners.


Trends Impacting Management Accounting

Management accountants are experiencing evolutionary change in almost all dimensions of their professional work environment. Increasingly, management accountants are being asked to become business partners and change agents. Computer technology and intense business competition are propelling this change in role from transaction processor to business partner. Will management accountants be prepared for their changing role in business?

The introduction of the desktop computer enabled accountants to gather data, perform analyses, and report information in real time. In many organizations, the accounting department now serves as the information and computer service provider. The availability of user-friendly financial and analytical software now allows many routine accounting functions (bookkeeping, financial statement preparation, etc.) to be maintained by computer. This frees the management accountant to perform more sophisticated analysis and decision support activities. Technological tools, such as e-mail, the Internet, electronic data interchange (EDI), new groups, and Intranets, will shape how information is reported and exchanged. The implications for management accountants are tremendous.

As competition has increased, businesses have responded by emphasizing two new priorities, improving the quality of products and services and increasing productivity. Many companies have adopted the concept of re-engineering to achieve these priorities. In many organizations the finance function has been the first process to be re-engineered, and a common result of the re-engineering has been downsizing. According to a study commissioned by the American Institute of Certified Public Accountants (AICPA), the average cost of the finance function has dropped from 2.2 percent of revenues in 1988 to 1.4 percent of revenues in 1996. The study further projects that costs may be reduced by as much as 50 percent in the next few years and that the number of people employed in finance should drop by one-third. Those accountants trimmed from finance will likely be individuals who are unwilling or unable to switch their focus from historical-based data-gathering activities to future-oriented, decision-focused activities.

Also as a result of increased competition, cost management is growing in importance. Although cost management is closely related to management accounting, it is an entirely different field of knowledge. Cost management techniques, such as activity-based costing, target costing, value-chain analysis, economic value-added measurement, and life cycle costing, can be completely separated from the financial reporting system. In addition, cost management requires in-depth knowledge of an organization's strategy and production or service delivery systems. It is the user or functional specialist who is in the best position to collect data and develop cost management practices. Therefore, growth in cost management jobs will occur in functional areas and not in management accounting. However, the management accountant can play an important role in cost management by developing certain skills. Every management accountant should self-assess his portfolio of skills and ask if these are talents that he possesses:

  1. Expertise in systems design;
  2. Expertise in change management;
  3. Ability to relate strategy to cost management; and
  4. Increased expertise in functional areas.

In an effort to assist AICPA management accounting members with the adjustments necessary during these evolving times, the AICPA has established the Center for Excellence in Financial Management. One of the purposes of this organization is to help CPAs in business and industry prepare for the future.
Changing Role of the Management Accountant
In this age of technology and competition, current and useful information is the key to business access. By positioning themselves as information specialists, management accountants can ensure that they will continue to be involved in management decision making. In addition, management accountants must develop a thorough understanding of all aspects of a business, apply analytical skills to the detection of trends and the development of forecasts, provide insightful advice to top management, and serve as change agents. Accountants who view their jobs as historical data gatherers and reporters of financial information may find themselves victims of re-engineering.


Preparing For the Future

Following are a few tips for students preparing for the changing role of the management accountant.

  1. Develop competence in systems analysis and computer technology;
  2. Develop facilitation skills, such as persuasion and communication skills;
  3. Acquire a broad business knowledge in strategy, operations, human resources, marketing, finance, and economics;
  4. Develop analytical skills;
  5. Learn to the future;
  6. Develop a willingness to embrace change and assume risk;
  7. Complete an internship in business and/or public accounting; and, of course,
  8. Master accounting and tax issues.


Flexibility and a willingness to learn are essential ingredients for continued success as a management accountant.

Conclusion

Now is the time to begin preparing for an exciting and rapidly evolving management accounting career. The era calls for professionals with an appropriate balance between technical skills and breadth of knowledge. This balanced preparation can be accomplished only through a carefully structured educational program and continuing professional development. Those who are prepared to meet the challenges of a management accounting career will be valued members of their organizations.

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