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A New Managerial Accounting Model

Accounting information processing is quickly changing with the cloud-based software solutions that streamline accounting processes and allow integration of accounting data into multiple platforms that can serve operation managers and owners in powerful and efficient ways in their daily decisions. Accounting functions can centrally be managed offsite, which frees up both time and space for a greater focus on revenue generating activities.

Similar to the advancement in accounting cloud-based systems, business operation platforms within industry sectors have also advanced in their cloud-based software capabilities and often have their own cost accounting and reporting tools within the system that give operation managers financial data at their fingertips to make instant decisions from these robust operating platforms.

Thus, management accounting has shifted from detailed cost accounting and business function processing (e.g. invoicing customers) that now resides in operational systems and integrates with flexible and dynamic accounting registers, to focusing on financial analysis to accurately project and forecast the financial results from operations depending on strategic initiatives. In essence, historical reporting of accounting information is automated, and the managerial focus is now pointed on forward-looking accounting results.

With that shift, the skills of a managerial accountant have also shifted from being detail oriented, patient, and diligent number crunching, to being strategic financial forecasters that looks ahead to identify the obstacles and identify multiple solutions to the obstacles. The skills turn more to critical thinking, communication, and collaboration, which takes situation experience to build expertise as opposed to technical accounting skills being learned and applied.

That said, cash flow focus and analysis will always be a core expertise element for managerial accountants. Management and timing of cash flows plays a greater role as production and operational efficiencies and shifts can be implemented much quicker. Cash flow can shift daily depending on timing of payments and changes in costs related to services or products being produced as consumer demands shift.

Besides cash flow, the other critical element to managerial accounting becomes leadership. Leadership is the all-encompassing accumulation of knowledge, expertise, and communication to lead operations, owners, and lenders in working together to achieve the desired business results. Situational leadership becomes critical as qualitative and emotional elements can sometimes override the quantitative analysis provided by the managerial accountant at times.

With these two critical elements being the foundation, a new managerial accounting model emerges with the technological advancements in accounting: a Virtual Accounting Department. A Virtual Accounting Department pulls together the automated resources within a structured environment of integrated software solutions and is led by a Fractional CFO for many of the managerial accounting elements. An effective Fractional CFO will have a strong experience record within numerous industries where the situational experiences have been built over time.

Although the new managerial accounting model is developing, this will be a challenging transition for the accounting industry as accountants either have heavy public accounting experience and miss the situational leadership elements or have a strong industry background, but have worked within a few businesses, focused on historical cost accounting and business function accounting. Thus, there is a great opportunity for hybrid accountants that can bring each of these elements together into the Fractional CFO role and provide that knowledge to businesses and accounting firms by growing leaders within this new managerial accounting model.