As a business owner, you’re constantly jugging a host of decisions. Is it time to move your business to a new location? Do you need to expand your staff? Is it time to increase your advertising budget? Is it time to add a new product or service to your business’ offerings? These are not easy decisions. Fortunately, business owners can rely on financial and managerial accounting to help make them.
These two accounting methods are quite different. When you hire an accountant to perform managerial accounting tasks, that accountant will report directly to you and the other managers in your business. The goal here, is for accountants to study your business’ financial health and prepare a report that summarizes the findings in language that is easy to understand. You can then study this report to help decide if moving to a new location will boost your company’s bottom line or place undue financial stress on it.
Financial accounting is a different entity, but one that is just as important. This time, you’ll hire a certified public accountant to again study your business’ finances. This time, though, the accountant will make sure that you are correctly filing your taxes, are properly balancing your books and have a cash-flow projection that is accurate and realistic.
In short, managerial accounting helps you make the big decisions for your business. Financial accounting helps you make sure that your small business is operating in a fiscally sound way on a day-to-day basis.
The difference may sound minor, but it’s actually not. Financial and managerial accountants have vastly different jobs to perform. The end result of their reports, too, is extremely different.
If you’re debating whether it’s time to expand your business, you might consider hiring an accountant to perform some managerial accounting for you. If you’re just hoping that your books are balanced and that your expenses are totaled correctly, you’ll be fine hiring an accountant to concentrate on financial accounting instead.
James enjoys helping new accountants make decisions about their careers. He believes that managerial accounting provides accountants with a rewarding career where they get to use some of the skills that not ordinarily associated with accountants. Management accountants get to offer consulting advice and be involved in the strategic decisions of a company.
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