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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 datagathering 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 selfassess 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.

Shape of the things to come


Effect of LPG Liberalisation, Privatisation, and Globalisation Global competition, Fittest will survive, sub optimal units have to die. Size, strong balance sheets and a history of achievements are no longer guarantees of continued success.

Global competition strategic alliance networks and massive engineering efforts place new demand on all professionals. Many of old hierarchies will be replaced by flat structures. Every organisation is undergoing a process of internal churning. Employees will be judged by their delivery of agreed output and level of services, not on spending 8 hours a day attending their place of work. Financial information will be considered as only one portion of the balanced scorecard of measures used in organisational decision making. Knowledge will replace physical and financial capital as an organisations primary resource. Knowledge and application of knowledge will create competitive advantage. People will have to be accustomed to work in permanent stage of emergency. More empowerment at the individual level. Adoption of team based organisation. Internet is rapidly transitioning businesses into real time.

Present role of Management Accountants Conceptions & Misconceptions

Cost and Management accounting system had often become of little importance to managers. Many regarded them as minor routine belonging to the accountants, used to evaluate stocks and prepare monthly results speedily. There are all the obvious things to do: Statutory and Financial accounting, Taxation compliance, Funding, Management reporting and so on. All of this tends to be in the background; it just has to happen in any event. Management Accountants have not yet progressed more towards bridging the gap between managers and accountants and they have yet to concern more with looking towards the future at where business is going and what is going to happen. Very few conceptual modifications have been brought in, in the cost and management accounting in the last 40 years. Cost is too important to be left to the cost and management accountant.

Futuristic role of Management Accountants

Most of us will be doing the job, which we have never learnt and quite different from what we have been doing so far

The illiterate of the 21st century will not be those who cannot read and write, but those who cannot learn, unlearn and relearn. We have to undergo the process of Learning, Un-learning and re-learning more frequently. Industry will be requiring learning professional rather than learned professional. Future will be knowledge era. So obsolesce of knowledge will be very fast and more visible among accounting professionals. Management Accountant must re-orient its capabilities, otherwise he will be overtaken by other professionals. Management Accountant has to be futuristic instead of provider of historic or current information. He should ask how better and help management in decision-making level and for performance improvement. Imagination is more important than knowledge. Albert Einstein. The responsibility of the management accountant is less on forecasting the future and more on contributing to its creation. Management Accountant will more often play the role of a catalyst / changing agent rather than an accountant. Management accountant will have to be more adaptable to be a versatile professional rather than an accounting specialist. Quality of leadership will be more in demand than that of a manager or an accountant. Out cost ascertainment, product costing and cost control. In cost management, activity-costing etc. Re-positioning of the management accountant make it more relevant and useful to the organisation. Management accountant to change the Accountant from their name to information manager/Cost manager. Shift from informational role to an influential role. To develop alliance with- finance, MIS/IT, industrial engineering, corporate planning. To actively participate along with managers in decision making and strategy implementation. Change in mind-set from product profitability to customer profitability analysis. No more a scorer of the cricket match but to be manager advisor to develop appropriate strategy to win the match. Management accountant needs to lead the effort in training managers to use accounting information along with balancing it with other key data sources

FOREX and Treasury function will be important profit centres.

Training needs

If you want to remain employed, you have to remain employable Jack Welch, CEO-GE. Dilemma for the management accountant will be to either change or cease to exist. Management accountant must learn fast, forget even faster and focus on winning. Management accountant requires very different skills from those that accountants needed to fill the narrow role that has been adopted by many finance professionals over the last three decades. Continuing Professional Education (CPE) programme be made compulsory by the institute for skill upgradation and aquiring the latest technology. Able to work well under pressure. Development of multi-disciplinary skill. Good communication skill oral, written and presentation and a team player. Ability and drive to work against strict deadlines and targets. Ability to work with minimum supervision and a busy and dynamic work environment. Ability to prioritise multiple urgent tasks. Possessing good public relations skill. Adding a new skill to executive skill-set, every few years. To develop expertise in new Green Field projects like

Infrastructure sector (Energy, Transport etc.) Information and Communication sector Service sector Agro based industries

Changes in tools and techniques

Target costing v/s. Historical costing.

Life cycle costing. Activity Based Costing (ABC) ABM. Total Cost Management (TCM) Business Process Re-engineering (BPR) Benchmarking. Kaizen costing. EVA / CVA Total Quality Management / ISO. Cycle time reduction (time compression). Supply chain management (SCM). Just in time (JIT). Elimination of dysfunctional activities. Out sourcing and co-sourcing activities. Defect prevention v/s. fault rectification. Zero Based budgeting. Traditional budgeting v/s. New budgeting (comparative Table enclosed). Full year budget exercise v/s reactive rolling forecast (computer generated budgets are obsolete the minute they are printed). Dis-continuity of time cycle month end and year end- and to invent information system to handle multiple time horizons simultaneously. Radical change in IT/MIS e.g. Integrated database that meet the total business requirements (like ERP Software MIS that is accessible and easy to use by all staff. Rich supply of information in the form of a variety of report. MIS for decision-making.