Why management accounting needs to change

In this extract from her Executive Field Guide, “Becoming a Best of Breed Organisation”, Leslie L Kossoff says it’s time to overhaul the management accounting agenda.

Smart, successful companies are filled with smart, successful people. And one of the smartest things anyone in any organisation needs to do to create success is understand how the numbers work.

Organisations operate based on metrics. The old adage, “You manage what you measure” is absolutely true. But the reason that what is measured is managed is because that’s what’s visible.

That’s why the skills that come with a background in management accounting are so important when applied throughout the enterprise. Especially now.

If everyone in every area knew and understood what it costs to run their area – in effect, if they were thinking as mini-CFOs or business owners responsible for making sure that every penny in every currency is wisely spent – they’d look at what they do and how they do it far differently than they do now.

They’d be finding profit and market opportunities. Seeing how staff could be better utilised or training targeted for better results. Creating innovations in how they do business and what the business offers.

They’d be changing their worlds – which means they’d be helping you and the rest of the executives change the world in which your organisation resides.

And it’s not as if those skills aren’t already resident in every employee to a greater or lesser extent. They are. Every person in the organisation – before they walk in the door and immediately after they walk out – is dealing with his or her own finances. What to invest. What to spend. What to buy. What to sell. How to pay the least taxes – and still be legal. How to send their kids to college. Whether they can pay for their next family vacation.

The predisposition to think in terms of finance is part of everyone’s life. It has to be. It’s a money-based, global economy.

The trick is to engage all those minds in thinking about the finances of the organisation.

And that takes it back to you.

It doesn’t matter in which function you reside. You have the ability to bring a level of understanding – and, by extension, commitment and improvement – to the organisation simply based on your ability to communicate what they need to know.

Because the other outcome is that the more information you share, the more they will feel part of the enterprise and in control of their own destinies.

You will be empowering them to do more and to be more. And that makes you more.

About the author
Executive advisor Leslie Kossoff is the author of a series of Executive Field Guides. This article is an extract from The Management Accounting Special Edition Executive Field Guide “Becoming a Best of Breed Organisation” published in association with CIMA.

Continued...