The Boundaries And Challenges Of Management Accounting

As for the boundary of management accounting, there are many discussions in practice and academia, such as what is management accounting, what is financial management, what is cost accounting, and what is financial accounting. My personal view is that accounting for helping enterprises create value is management accounting. Accounting for the creation of value of enterprises is based on established rules (accounting standards), accounting is financial accounting. To put it more plainly, the accountant who helps enterprises make money is management accounting. The accounting of the amount of money that enterprises earn after making money is financial accounting, and the rule of counting money is the accounting standard of enterprises. How to help enterprises make money? Enterprises make money is a process to carry out activities to bring value to customers. Therefore, the process related accounting is management accounting. In practice, it is meaningless for entrepreneurs and chief financial officers to distinguish between what is financial management, what is cost accounting and what is financial accounting. That is the question that professors consider for teaching convenience and for everyone to have a bowl of rice. What businesses need is value.

The process of creating value is to say that the process of R & D, design, procurement, production, sale and service of enterprises is to start from the strategic planning of enterprises, and to the investment and financing decisions, operation management and performance evaluation of enterprises. Strategy and investment and financing are considered to earn future money. Operation management is to earn the money that can be earned now. Therefore, to help enterprises make money, finance needs to participate in the above process and help enterprises improve the above process, provide service and guidance for business departments, and achieve "industry finance integration", which is the logic of financial integration of management accounting. According to the big process, management accounting includes four functions: planning, decision making, execution and evaluation. The function of management accounting is integrated with the process of enterprise management.

A question that many people will continue to raise is: management accounting The four functions of the company are consistent with the management of enterprises, and everything can be done by management accounting of enterprise management. Is it not that what has become the category of management accounting? Has management accounting become imperialism? No need to worry, the most basic characteristic of accounting is to be able to measure. Management accounting requires measuring strategies, decisions, innovations, customers, processes, and performance. If we lose the measurement, it is not the category of accounting. For example, investment, strategic planning departments can think from macro environment and industry trend which project is good, but to finance here, we must be able to quantify, such as net present value, internal rate of return and so on. An enterprise needs to ask if it is worth doing, and finance helps you to measure these things. Therefore, there is no need to worry about the imperialism of management accounting.

There are still many people asking about the relationship between management accounting and financial accounting. This is also a question of no value. Management accounting is an accountant who participates in the process to help enterprises make money. Financial accounting is the accounting of several money. How much money did you earn in the preceding process? How much is the result of the latter? The process determines the result, the process and the result must be consistent, if not, that is to make false accounts. In order for enterprises to have good financial results, there must be a good process. The relationship between process and result is self-evident, and the relationship between them should be integrated and unified. Therefore, management accounting and financial accounting are also the relationship of integration and unification. Only management accounting has the characteristics of flexibility and individuality, and financial accounting must be in accordance with accounting standards. Therefore, the data of management accounting and financial accounting are essentially integrated and unified, but financial accounting is only listed in accordance with accounting standards.

In management accounting, value is measured on the basis of cash. The value of a business is the discount of its future cash flow. The value of a company is the discount of its future free cash flow. In terms of financial language, whether it is Ali Yun or AVIC, regardless of any business mode, its goal of creating value is to invest cash and recover more cash on the premise of principal safety. The startup enterprises burn money today to recover more money tomorrow. Therefore, there are tools and methods of present value, terminal value and cash flow discount model in management accounting. Why should we save cost, less cost, more cash inflows, higher current value? Why should we reduce inventories? Fewer stocks, less inventory, less storage management expenses, less inventory scrap, more cash inflows and higher current value; why invest in new businesses? The management problems of all companies can be returned to the most essential issue of value.

Budgetary management is an important tool and method in management accounting. Therefore, budgeting has become the pursuit of many financial personnel, and some people have created "HU's theory". In fact, the accuracy of budgeting is a false proposition. Budget management is a tool that helps us allocate resources according to company strategy and create value. It helps us to improve management. What's more funny is that many enterprises use the budget objectives to complete the examination, and fail to meet the targets of the budget targets. They are too unqualified for the budget targets and fail to pass the examination. The result can only be a lie for everyone to report a goal that they can ensure that they can accomplish, rather than the goal that they can do best. With regard to this discussion, I suggest that we read carefully the contents of the twelfth chapters of the book written by Jack and Welch, explaining the correct budget and performance appraisal very well.

GE still uses budget management, but people have long ago decoupled budgeting and performance appraisal. Maybe a lot of financial personnel would say, no budget objective to assess, no one cares about the budget, I want to say is: if all the other people outside you can make good use of the budget management tool, then you will fall behind in the competition. Budget management tools are like machine guns during the war. Everyone will use machine guns and you will not use only big guns and spears. You will be defeated. Therefore, budget management should be the internal demand of every professional manager, rather than by external pressure. The eight character truth of performance appraisal is: "surpass history and surpass benchmarking". If we can not create value or even hamper the creation of value, what is the accuracy of budgeting? To achieve effective management accounting, we must not forget our original mind, but always have it, and this initial value is value.

The biggest challenge facing management accounting is human challenge. Traditional financial personnel are accustomed to dealing with fool's business according to accounting standards, but they can't think with commercial thinking or even communicate with other departments. In today's society, there is no lack of data and no lack of technical means. Financial staff It is impossible to clarify the relationship between the value drivers of a company, the company's business and its financial results, and therefore do not know how to use data and various technical means. The establishment of a causal relationship model between business models, business operations and financial results is the only challenge to the development of management accounting. Here, it does not mean that financial personnel need to master the programming of information systems and the principles of servers. This is just like Alibaba, Ma Yun does not know the engineer's programming, but Ma Yun has business ideas.

In traditional accounting teaching, many concepts are wrong in today's real business society, and many financial staff still think about it. A simple example will tell you in the textbook that the ideal value of the mobile ratio is 2:1, but you can see that the ratio of the competitive enterprises in the real business community is far below 2. Why? A competitive enterprise has a large number of accounts receivable and a large number of accounts receivable. Its inventory is close to zero inventory, suppliers are large and accounts payable are large, and cash rolling operations bring more benefits. At this time, there are not many liquid assets and more current liabilities, so the current ratio will be far less than 2. Supply chain finance We should make full use of competitive advantage to use upstream and downstream funds.

In traditional accounting teaching, we will tell us many models, the net present value model, the rolling capital prediction model and the quantity profit model, and then there are lots of calculation exercises, but never teach students how to calculate these figures. Where do these figures come from? The business activities of enterprises in the dynamic commercial society from reality. Because of the lack of these necessary training, many college students have achieved good results, but basically they have not used these models after working in enterprises. The net present value model is the most perfect theoretical model in all decision making. The model is very simple, but the data behind it is very complicated. It needs a lot of data to support the application of the model -- Analysis of historical data and prediction of future situation. If the analysis of historical data is full and accurate, the future assumptions are reasonable, and the logic of measurement process is rigorous, then the conclusion of analysis will be of decision value. From this point of view, collecting information, sorting out information, analyzing information and clarifying causality has become the basic skill of management accounting, and the development of accounting in management department just lacks such talents.

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