The Role of Accounting Management in Decision Making

by Lindsay Kramer - Updated June 27, 2018
Businessman analyzing investment charts with laptop. Accounting

In any company, growth and profitability are two primary goals. Every role in the company contributes to the effort to reach these goals in some way, with some roles performing more aggressive duties than others. Accounting managers play one of the more profit- and growth-focused roles in a company. Persons in this position, also known as managerial accounting, help companies make internal decisions that lead to profitability and growth. An accounting manager performs a few distinct duties to play this important role.

Analyzing Expenses and Revenue

Revenue is the money a company earns. In other words, the business' income is its revenue. Its expenses, on the other hand, are the money it pays to remain operational. A company’s expenses can include salaries and benefits for employees, rent or mortgage payments for its locations and the costs it incurs for the manufacture, packaging, marketing and distribution of its product.

Profitability is a simple formula: Reduce expenses while increasing revenue. Getting exact figures for revenue and expenses can be complicated, and working through large swaths of raw financial data to find useful figures is a time-consuming process. Calculating profitability based on these figures requires the accounting manager to work closely with the company’s financial accounting team and the accountants who handle the company’s day-to-day finances. He also needs to act as a liaison between the company and its investors, stockholders and other outside sources.

Creating Budgets and Forecasting Ideas for Growth

Once a managerial accountant has workable financial data about the company’s revenue and expenses, she creates realistic budgets for specific projects and operations within the company. With these budgets, she drafts long-term profitability and growth forecasts, often providing ideas upper management can implement to promote continued, sustainable growth and increased profitability. These forecasts are more detailed than the ones produced by financial accounting, which are typically big-picture forecasts. The forecasts a managerial accountant produces, in contrast, may be broken down by department, product line or market segment.

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Providing Financial Information to Steer Company Decisions

Accounting managers give advice to decision-makers, who then implement changes at the company with this advice in mind. Often, accounting managers’ analyses lead to raw data and numbers. Essentially an accounting manager has to speak two languages – accounting jargon and management dialect. In this role, the accounting manager translates the raw data he finds into actionable advice. Managerial accounting’s role really comes down to helping a company’s upper management team take the company in profitable, pro-growth directions by providing key financial insights.

About the Author

Lindsay Kramer has been a full-time writer since 2014. As a small business owner, one of her favorite parts about writing about business is helping other small business owners and aspiring entrepreneurs become more fluent in business topics, equipping them for greater success.

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