Management accounting involves preparing and providing timely financial and statistical information to business managers so that they can make day-to-day and short-term managerial decisions.The result of management accounting is periodic reports for the company’s department managers and CEO, for example.Management accounting reports often include details of the company’s available cash, recent generation of sales revenues, the current state of the organisation’s accounts payable and receivable, and more. following are benefits of it.
Increase Efficiency :
Management accounting increases the efficiency of operation of company. Everything is done in management accounting with a scientific system for evaluating and comparing the performance. With this, we find deviations. We will take promotional decisions on this basis. Other employees will also be motivated with this because if their performance will be favourable, they get reward of this. Thus management accounting increases efficiency.
Maximizing the Profitability :
Using of management accounting’s budgetary control and capital budgeting tool, company can easily succeed to reduce both operating and capital expenditures. After this, company can reduce its price and then company will receive super profits.
Simplify the Financial Statements
For taking different managerial decisions, management accountant provides deep technical reports with simple interpretations in which he mentions the facts of financial statements, after this, company’s management officers understand what is in financial statement and how will they use this for company’s progress.
Control of Business’s Cash Flow :
It is one of important advantage of management accounting that it can be used for controlling of business’s cash flow. We all know that cash in hand is better than in fixed properties if there is emergency to pay our loan or debt. So, management accountant deeply studies from where is money coming and where is it going. To check on misuse of money will surely control of business’s cash flow.
To take business – critical decisions, now management accounting will become more powerful. Global management accountants are coming for join on one plate-form for taking all business critical decisions.
The management can prepare the plan and execute the same for effective operation of business. In this context, various functional budgets are prepared and accounting information are rearranged in department wise, product wise, section wise and the like for proper planning.
The actual performance of every business activity is measured and compared with the standard fixed or planned one. If the deviations are found that are controllable, the management can decide the course of action to exercise control. Both standard costing and budgetary control system are highly help the management in this aspect.
Service to Customers:
Better and improved services by management to customers are assured by this system of accounting.
The scope of authority and responsibility of key executives are properly defined and explained under management accounting system. Hence, everyone knows who is responsible for what and to whom? It helps for proper organizing the work in an organization.
It is the process of integrating the various work performed in an organization to achieve the objectives effectively. Thus, perfect coordination is required for among production, purchase, finance, personnel, sales and the like departments. This is achieved through preparing budgets and reports of performance.
Improvement of Efficiency:
The management accounting system may eliminate various types of wastage, production, defectives and other work thereby the workers efficiency may be improved.
It helps to maintain high degree of morale among the employees. The reports of business operation are periodically prepared and submitted before the top management periodically. Based on the report, the management can find out whom to demote or promote or to reward or penalize. In this way, the employees are motivated.
Two way communication is followed in an organization if management accounting system is followed. Modified accounting information and reports regarding performance are sent to top management for decision making. In another way, assignment of work and responsibilities over employees are communicated to lower level executives.
Regulation of Business Activities:
Proper planning, organizing, coordination and motivation can bring systematic regularity in the business activities.
Maximization of Profit:
There is a morale among the employees. Standards are fixed and measure the actual performance to find the deviations. If the causes for deviations are reasonable and controllable, proper action may be taken by the management. In this way, profit is maximized.