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Should a masters business degree holder start with AAT or not?

Should a masters business degree holder start...

Hello,

My question is whether a career-changer, moving into accounting and holding a master’s degree in business, should start at AAT L3 and L4 (assume exempt L2), or should they go straight into ACCA/ ACA/ CIMA professional studies.

If you could suspend judgement and take in a few specific details…

Aims: to secure a finance-related job a.s.a.p. in this tough market, to have a solid grounding in financial accounting and to be a management accountant within 3 yrs.

Background: Nil accounting experience (career change from marketing), investing for 10 yrs (i.e. financial statements and asset/ project valuations) and MBA 5yrs ago.

If you were in this [messy!] position, which path would you consider best?:

1. Self-study CIMA’s foundation certificate and then begin the CIMA professional pathway of exams for Operational F1, P1, F2 etc. and seek no exemptions (except perhaps E1), or

2. Begin the exams for AAT L3 and L4 and then take CIMA’s “CMGA”, where MBA graduates take one exam at Management level and then start Strategic’s P3 etc. afterwards (i.e. exempt from all 3 Operational exams as well as 3 separate Management exams).

(Both paths will take roughly the same amount of time to reach CIMA Strategic.  

Option 2 may seem a little strange, but it would fit the 3 aims mentioned.

Please help- I’m in a real pickle, since studying syllabuses and texts only guides you so far.

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By GR
25th Apr 2012 20:18

Sounds like a win-win situation to me to be honest.

 

What I would do is have a look at the jobs that you see yourself applying for and if they ask for AAT go for AAT, or if they ask for CIMA then just get straight onto CIMA, or if they ask for ACCA then just get straight onto ACCA.

 

From my personal experience, AAT can drag on a bit especially when you do the project at Level 4 and some people still look down on/have not heard of the qualification. Consequently it might be worth just getting on with CIMA or ACCA.

 

However the benefit of doing AAT is that it is a qualification in its own right, which you can obtain relatively quickly, relatively easily, you can get a practising licence and learn about the various areas of accountancy (e.g. financial, management, tax, internal audit).

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By dreamcatcher
26th Apr 2012 09:32

Both AAT and CIMA

If both pathways take roughly the same time why not get 2 professional qualifications, both AAT and CIMA rather then 1.  I am assuming all of this will be self funding so have you checked that the cost is roughly the same too.  

By doing AAT it will give you a good understanding of basic accounting, which employers will be looking for given the career change.  

Can I suggest that if you have the time offer to work for a local firm of accountants free of charge just to get some basic accounts experience, which will help your studies and give you a reference for use in the future.

Good luck with the career change.

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26th Apr 2012 10:04

The qualification does not matter

I am afraid that without the experience to back it up, it does not matter which qualification you undertake. You will not be able to gain membership of any the accounting bodies without the recognised professional experience - time at the coalface.

Unfortunately, you are seeking to enter a profession where the graduates outnumber the training contracts by something like 10-1 or more.

To be honest, studying a course yourself in order to gain employment is a risky investment. It is usually better to be in the job first which will put you through the training.

I would estimate that something like 10% or less of the syllabus of any given qualification will have real world applications for you.

 

 

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By Max T
03rd May 2012 13:17

Thank you very much for your replies.

To keep this thread at a broad level for usefulness to others in such a situation (business Masters, career change, nil accounting experience), the likely path I’ll take is AAT Level 3 (gain a diploma) and Level 4 and then onto CIMA’s CMGA (and for other people, similar exemption routes if offered by ACCA, ACA etc.).

It may sound counter-intuitive to start at the equivalent of A-levels with AAT L3 when you have a Masters.   Why not start at the postgrad’s professional accounting levels of CIMA/ACA/ACCA?

But the rationale for AAT+CIMA’s CMGA is:

It will be easier to secure critical accounting experience with an AAT L3 diploma, than with a postgrad certificate/ diploma from the professional qualifications, given the nil experience, tough economy and far fewer management accounting jobs than accounting technician roles,It avoids the danger of becoming over-qualified and under-experienced,It still leverages the MBA/ Masters degree by benefitting from exemptions with CIMA at a later date,If AAT L4 does “drag on a bit”, there’s the option to only pass the financial accounting-specific modules (and ditch the L4 project and option modules) and go straight into studies for CMGA, having had the AAT financial accounting training to tackle the toughest part of CMGA: studying F1 and F2 to exam competency.   You could always complete the few remaining AAT modules at a later date, to become qualified.    But this may be irrelevant once you’re studying for Strategic CIMA passes.For business Masters and especially MBA’s, CIMA’s syllabus is more familiar to us than AAT’s syllabus.   Some people, inclined to “game” the qualification system, would consider this a good reason to avoid AAT and push through CIMA (and have a career dogged with a shaky understanding of accounting fundamentals!).  Personally prefer to study the less familiar accounting essentials: a hands-on, detailed grounding in drawing up the accounts that AAT better equips the student for (than CIMA Cert and F1).   This is after all a common job remit for management accountants- to draw up monthly accounts that are “roughly right” for internal use.

This “AAT + CIMA’s CMGA” pathway tries to capture the advice of GR, dreamcatcher and Roland195.   Thank you guys.

Please point out if there are any errors in the rationale.

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By GR
03rd May 2012 21:49

I like the plan; now it is all about executing it; good luck with your studies

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By tom123
03rd May 2012 22:23

Where do you see yourself working - practice or industry.

(personally I have an accounting degree, lapsed AAT membership, CIMA membership and now working on tax qualifications.- always worked in industry)

CIMA suits industry, whereas the other institutes are more allied to practice. Did you complete your MBA whilst working? if so, you should have no problem combining CIMA studies with work.

Rather than do AAT, why not start temping in financial admin roles to gain awareness of a wide range of IT systems, start CIMA, and then apply for permanent roles on that basis.

Remember most peoples career paths only look planned with the benefit of hindsight.

 

Good luck.

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04th May 2012 00:14

My views

I would always take what exemptions you can - even if you feel you need to take the courses later.

If you are working I would study as few subjects as possible - two at most, maybe one - that will mean you get a better understanding.

Why are you choosing accounting? What you are taught on an MBA is totally different to accounting in practice. Are you sure you will like it?

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By Max T
04th May 2012 17:45

(warning- a long post but hopefully useful too).

Certainly the outlined "most of AAT + CIMA's CMGA" study plan will likely adapt to circumstance.

Tom123- Regarding working in practice or industry, the aim is solely to work in industry.   So the focus is on management accounting over financial accounting, but we know the former still needs a grasp on some of the latter.

 

Psaxton-“I would always take what exemptions you can”.   Agree, after all, exemptions are awarded because that knowledge should either be present or of no use at that assumed job level (in non-recessionary times!).    Studying AAT for up 1.5yrs has been a source of much hand-wringing, hence the option to ditch it after finishing level 3 (get the Diploma) and only study the ‘core’ part of level 4 and go onto CIMA's CMGA (for the postgrad. Advanced Diploma).   The aim being to gain knowledge to be fit for the desired job (junior accountant first, management accountant after) whilst securing the highest qualification a.s.a.p.   The aim isn’t to collect multiple qualifications as one would stamps.

 

The path of “some AAT and then CIMA” is based on financial accounting seemingly built on a foundation upwards from book-keeping up to the intricacies of arcane accounting rules.   Whilst management accounting seems to crudely be “some financial accounting + costing and budgeting + a diverse number of stand-alone financial analysis tools and general business knowledge”.   Hence studying financial accounting from the bottom up with AAT and then only studying the stand-alone financial analysis tools that the CIMA exam tests for (along with the tools most commonly used in junior-mid level jobs, such as variances).

 

Psaxton-“why are you choosing accounting?”    In changing career from marketing, can you imagine how poor at marketing an accountant or financial analyst would be!    They’re very different personalities and strengths.

Also, if we assume that roughly 3/4s of all companies have virtually nil competitive advantage (so their RoIC is roughly equalling their cost of capital), the only way they can generate shareholder value is by operating as efficiently as possible (or liquidate a.s.a.p. and return capital to the owners… and lose their jobs).   The management accounting role is a key component in that efficiency drive- hence my passion for it.  

Similarly, the shift into accounting is to get away from job roles whose success is basically down to how rational or irrational your rivals are at cutting prices and gaining sales/ how strong a competitive advantage rivals have over you or you over them.   Why have a job whose success is dependent on others beyond your control? (Of course, many marketers and sales people maintain sanity by attributing all success to themselves and all failure to their rivals or other outside forces, the remainder work in competitively advantaged companies).    In that sense, accounting is like stockbroking- come rain or shine in a business, the accountant’s role persists (as do stockbrokers’ during a market crash).

 

A final reason as to “why choose accounting” is that management accounting greatly assists with equity investing (a personal interest) and thereby boosting your net worth.   "Equity investing" as in allocating capital into companies selling below their true (discounted cash flow) value in order to gain annual % returns exceeding your next best available % return i.e. your “cost of capital”.   Likewise, management accounting is advising the allocation of capital into products, product mixes, projects, strategies, short-term liquid assets etc. that promise annual % returns that exceed your company’s cost of capital. 

This chimes with Warren Buffett’s observation- “I’m a better investor for being a businessman and a better businessman for being an investor, when you have the mentality of both, they help you in each camp”.  

On that basis, management accounting seems the closest job inside a business to that of the equity investor outside of the business.   Like equity investing, management accounting works on both the accounting value of the company and the economic (i.e. true) value of the company.   Both parties know that artificially inflating accounting value will hurt the business’ true economic value, and focussing on building long-term economic value will negate the need for any short-term accounting manipulations (which top accountants are ironically often paid so dearly for - “conjure up an accounting profit so I get my stock options, you receive a high fee and we'll ignore the investor”).

 

So to totally derail this thread (!), any CIMAs could do very well for themselves by actively investing in equities on the side (say 5 hrs a week studying and buying cheap FTSE listed companies), by *bolting a bit more learning on company valuation* to your fantastic base of knowledge on accounts and the behaviour of businesses from a financial perspective.   Gain this "bolt-on" by reading anything on “value investing” and specifically read the one main book by each of the following; Rappaport, Pabrai, Greenwald, Buffett and Damodaran (and forget the stuff on CAPM, WACC and diversification taught at CIMA Strategic level, just as 3 of those 4 individuals ignore it (one of whom likely has a greater net worth than all finance and accounting professors combined)).   

To expand on why CIMA's would do well in equities, you make money in equity investing, as in any financial market, by having an informational and analytical advantage over other investors.   Ironically, that advantage in equities is gained with CIMA and its strong focus on business (plus a little bolt-on of learning about company valuations).   The info and analytical advantage is not gained from an investing-oriented qualification like CFA, which teaches you barely anything about equity investing, coupled with barely anything on commodities, barely anything on options, bonds, derivatives, alternative investments, quantitative trading etc. etc.    

So if you’re CIMA qualified, one way to earn >12% p.a. on your savings (and >20% p.a. average return is doable) might be to settle into a couple of years of selective reading on a few evenings a week and slowly ease into equity investing.   It should be of benefit to the day job as well as to investments.

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04th May 2012 15:32

Why do accounting?

I'm not sure your reasons for why you want to do accounting are the best.

I think they should be more personal to your knowledge, abilities and personality.

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By Max T
04th May 2012 17:40

Normal

Perhaps the reasons to enter management accounting differs from person to person, with no ‘best reason(s)’ prevalent across all. 

 

My last post suggests the enthusiasm (instead of knowledge which is lacking), ability and personality of a management accountant.

What drives your passion for either financial or management accounting, Peter?

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04th May 2012 17:48

Entering financial accounting

I entered accounting because I thought I was suited to understanding the fundamental principles that are needed. Once they are learnt you can then use your imagination and knowledge to know how to deal with problems. I think it was important for my confidence to have a good understanding of the basics. I like to make sure the groundwork is well done. Other people are good at making the best of a bad job. I'm not like that so I made sure I had a good understanding and a lot of experience of the basics which now means I can judge how to proceed with very little time spent on understanding what is going on.

When I trained in auditing everybody said that if they knew what they knew at the start of an audit what they knew at the end they could do the job a lot faster. By doing a lot of varied work as an auditor in different companies I understood the principles a lot more. I don't think you get as good a grounding in management accounting.

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NYB
04th May 2012 18:01

>20%?

@MaxT

A bit OT but I can't let pass your comment that equity investment returns of >20% are achievable!

Buffet has managed about that return over a long span of time but you would have to be 1 in a million to achieve it, surely? If you put a lot of conditions around it, perhaps it is possible for a portfolio that is one or more of: high risk, leveraged, over a short time span - but not long term.

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By Max T
04th May 2012 20:27

Hi Red-

Buffett has said before that he knows a handful of people who could compound at 50% p.a. with less than $1m (but obviously they’re so good they’re managing $bns).  

Compounding £100k or less at >20% p.a. for ten years is certainly doable (£620k at yr 10 ignoring tax).  

Compounding £1m capital at 20% p.a. for ten years would personally be incredibly difficult and forget 20% p.a. with >£10m and instead more 15% p.a.... unless you're Buffett with insurance float.   The degree of difficulty greatly ramps up as capital under management grows.

Such returns are not about being smart whatsoever, but instead having the right personality that is patient and thinks for itself after careful analysis.

Anyway, if you're interested, please read the aforementioned books.

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04th May 2012 18:58

Cynic

If people say that something can be done I wait until they do it. Then I believe them.

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05th May 2012 09:07

I really mean this to be helpful and I'm very sorry if it doesn't come across that way Max T but the tone of your posts leads me to believe that you may not be suited to the role of management accountant.

After MANY years in industry in large plc's and smaller limited companies I can honestly say that the role of a management accountant is a strange one (I qualified ACA but worked with mainly CIMA's and CIMA trainees). As a trainee accountant you will, most likely, be sat in a room full of other accountants endlessley crunching numbers, producing manangement accounts, forecasting and doing variance analysis.....much of it "fudged" to fit with management vision of what the numbers should be. Hardly an exact science in sight! One of the main attributes you will need is the ability to "muck in" and go with the flow whilst being able to relate to everyone you meet in the course of your day throughout the business. You will be expected to understand the business at every level - I have spent many days during my time in retail standing on a shop floor selling shoes or bags or computers in order to know the business at its grass roots. Most people on those shop floors cared not a jot for equity investing!

Everything you do will be "derailed" at some point, meetings do not follow a logical format that is useful to others, you will be asked to do a report at 5pm on a Friday only to be told on Monday morning that it wasn't required afterall and nobody will ever answer your exact questions in the format that you require.

That's the life of an accountant in industry (in my view). Some absolutely love it. I'm not sure (from the tone of your posts) that you will.

 

Good luck.

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By Max T
06th May 2012 18:45

Hi Catherine-

Well, I’ve read your post several times, thinking “what is this ‘tone’ she refers to…what is she really saying”.   On the sixth re-read, it clicked.  

Your points about management accounting eerily resonate with me and with friends in other professions.    You list some complaints that *nearly every commercial job encounters*:

“Sat in a room full of others”- … all with roughly the same skillset as you..

“Endless crunching numbers”- your job will have masses of (tactical) minutiae.   For the time being, forget the strategic issues you previously learnt.

“Fudge fit… go with the flow”- deliver what your directors expect, not what you think they need. Beware “tall poppy” syndrome.

“Hardly an exact science”- in every profession (incl. actuarial), it’s better to be roughly right than risk being precisely wrong, so don’t seek false precision.

“You will be expected to understand the business at every level”- else you’re liable to give advice and take actions that cause serious unintended consequences elsewhere in the business.

“Everything you do will be “derailed” at some point”- Senior levels will change what you’ve carefully crafted over the past few days.   Get over it.   Happens in every line of work. 

“Nobody will ever answer your exact questions in the format you require”- but don’t lose heart, because the fault lies with your initial communication.   So things can be improved.

 

Catherine, of course I recognise and accept the very valid points you make above, on the not so pleasant side of (junior) management accounting, because I too have had many years of the same in marketing.   My posts were theoretical and may have come across as over-glamorising management accounting.   Nevertheless, thank you for warding off any misconceptions about the day-to-day role.   In an ideal world, we’d all “shadow work” a list of 5 potential professions, but I’ve worked with management accountants in the past, and all jobs in commerce have similar underlying themes you describe.   Indeed, it’s comforting to know you have the same experiences as myself and others (only at Google are employees treated differently)!

Thanks for the “warts and all”.       Max.

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