Key Managerial Accounting Skills and Techniques

Managerial accountants use a wide variety of technical skills and analysis

techniques to create accurate financial statements, forecast future expenses and
identify cost-saving opportunities. Using key performance indicators as
benchmarks, they conduct in-depth financial investigations into every facet of
their company’s operations, from the costs of goods sold to its net present value.

Since every business has different operational needs and financial constraints, no
two managerial accounting positions will be completely identical. For example,
professionals working for a manufacturing firm may focus on supply chain costs
and production expenses, while those in the retail industry are more concerned
with inventory valuation. Regardless of their employer, managerial accountants
rely on similar skills and techniques, including:

 Margin analysis: Even when internal and external factors are known,

companies’ gross margins will fluctuate over time. Margin analysis helps
business leaders understand what’s driving profitability and where
inefficiencies may be leading to wasted spending. This technique can also
provide actionable insights into how small changes in product pricing,
production workflows and staffing can influence a business’s overall
profitability, according to Investopedia. By analyzing the projected costs
and estimated benefits of specific investments, managerial accountants can
formulate financial strategies that align with their company’s long-term
goals.
 Capital budgeting: Before companies undertake a new investment or
project, they first need to ensure that it will deliver profitable results.
Managerial accountants use capital budgeting to assess the potential cash
inflows and outflows of specific business decisions. For example, if a
manufacturer was planning to open a new production facility, they would
first need to determine the total cost of the project and the expected ROI.
According to Investopedia, common metrics used in capital budgeting
include discounted cash flow, net present value and internal rate of return.
 Trend analysis: Forecasting revenue, profits and capital expenditures is a
core part of managing a business’s financial operations, which is why
managerial accountants keep a close watch on market conditions and cost-
related trends. As noted by the CFA Institute, the goal of this accounting
technique is to track companies’ historical performance and growth over a
specific period of time to help inform future decisions. Without a forward-
looking financial management framework, businesses would struggle to
adapt to new opportunities and constraints in their market.