Management accounting is usually referred to as the operational system for the collection and analysis of data required to implement management decisions.
The management accounting system (MIS) is designed to ensure that the management of various companies can promptly receive the necessary and sufficient amount of information in the sections that are required at any given time, taking into account all the parameters necessary for a quality decision-making process when submitting information.
The establishment of management accounting in organizations allows for continuous accounting of income and expenses in detail in the internal processes of the company, with the mandatory allocation of responsibility centers. Management accounting is needed for those companies that have reached such a stage that the management can control the activity of the organization only indirectly, by delegating their powers to managers at a lower rank. In order not to lose control and timely carry out administrative interventions, any manager needs to receive complete and reliable information about the activities of the organization in an easy-to-understand view that can highlight the possible vulnerabilities of the business model. Management accounting is designed to collect and display such information.
The methodology of setting up a management system in an organization implies a mandatory analysis of the existing management system, followed by the formulation of requirements for a new management system by means of management accounting, as well as the establishment and construction of the management accounting system itself.
Usually, management accounting is set up to obtain the following benefits:
- Possibility to correctly calculate the cost of products, which are produced by the company;
- access of managers to actual and qualitative information, which is necessary for making correct administrative decisions;
- Identification of those responsible for various business processes and business locations.
In addition, accounting should meet the following requirements:
- ensure cost accounting with a flexible level of detail for the presentation of data for different structural units of accounting;
- Support various options for cost sharing/re-distribution between the company's units;
- Possibility of choosing the accounting period;
- Automation of information input and processing
- Ensure that costs are tied to specific accounting items;
- maintain the ability to define KPIs for all levels of the organization's role model and all organizational units;
- setting up the structure of the main financial documents (profit and loss statement, balance sheet and cash flow statement);
- configuration of the chart of accounts;
- selection of system owners and support of their requirements to information representations.
International practices of setting up and maintaining management accounting are currently moving towards the selection of qualitative indicators, and the concept of management accounting is also being improved: now the parameters of decision-making are the market in which the company operates, relations with customers and counter parties, the way the processes in the company are built, etc.
Nevertheless, the most frequently used indicators of management accounting, as well as many fundamental principles of its formulation and maintenance are reflected in the International Financial Reporting Standards (IFRS) and management accounting. In turn, in the Russian Federation, the practice of management accounting differs from the international practice, and this is primarily due to the existing difference between Western and Russian approaches to the causes of the need for management accounting. In Western companies, management accounting is used to analyze data, financial and business planning and to make accurate decisions, and in companies established in our country - primarily to provide managers with reliable and objective data relevant to the tasks of business (in the West, financial (accounting) accounting copes with these tasks).
In Russian organizations - first, the system for collecting and analyzing information about the life of the company, which fully and accurately reflects the results of its business operations and is aimed at meeting the needs of the board and owners of the organization. The second goal of this system in Russian companies is cost management at the level of the Central Federal District or at the level of activities, for strategic planning and correct from the business side of accounting.