Accounting comes in many different functions . Not all of them are legal and mandatory. This is the case of management accounting , also called analytical accounting. This is why a Best ERP System in Saudi Arabia choose not to use it. Very often, we imagine that management accounting brings little added value…
In order to make a more accurate calculation of the benefits of management accounting, we briefly present the three main advantages:
1. Improve enterprise cost management
Analytical accounting makes it possible to better understand the costs of the company, by classifying them according to their nature.
It makes it possible to detail the expenses incurred in an exhaustive manner, in order to improve control and management .
Let’s take the example of a company with a high number of employees making business trips. Financial accounting, which is the only mandatory accounting, will tell us how much employees spend on business trips, in general. At most, this accounting will be able to specify how much they have spent on accommodation, transport, etc. Management accounting goes further and allows you to detail the types of expenses incurred: expenses for taxis, public transport, mileage with a personal car, etc.
So, by following this hypothetical case, we might find out that taxi fares are very high. It will then be possible for us to study alternatives and solutions:
Reaching an agreement with a taxi service provider
Increase the use of public transport for business trips
Buy service cars, motorcycles, even provide bicycles to employees
Thanks to the updated and detailed information provided by management accounting, it will be possible to find relevant solutions in order to adapt the decisions, policies and actions carried out to the reality of the company and the needs of its employees .
Similarly, improving cost management requires better budget control .
Budget management can be monitored in detail, to detect potential problems, deviations, bad practices, unexpected costs, etc. Thus, it becomes possible to have total control of the use made of the company’s economic resources.
To return to the previous example: in the event of an increase in employee travel expenses, it will be much easier to detect the origin of the increase if cost accounting is implemented (increase in taxi fares, fuel, etc).
2. Facilitate the calculation of profitability
We mentioned above the improvement of the classification of expenditure thanks to cost accounting.
In addition, management accounting also allows better allocation of expenses by department , by cost center, and even by customer or by project.
Thus, it becomes possible to study the profitability of the work carried out and to calculate the profit margin obtained with each customer, each order, etc.
You can then improve the efficiency of your business:
Focus your efforts on the most profitable clients or projects
Redirect activity if necessary
Increase profitability with indirect cost analysis
In this way, you can integrate into your analyzes departments or cost centers whose profitability is usually difficult to measure, such as the marketing or finance department.
3. Improve decision-making: knowledge is power
You now have an idea of the main benefits of management accounting.
One of the main difficulties, in order to greatly improve your strategic decision-making, is to collect relevant and up-to-date data for your cost accounting.
For this, there are expense management tools . They make it possible to provide the essential data and they carry out your management accounting plan for you.
This is the case of Captio, our software which allows its users to make a fast, agile and automatic classification of a company’s travel expenses, with a view by nature, but also by department, cost center, employee, method of payment, etc.
All the data can be exported, in order to be analyzed and integrated into any of your tools.
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