What’s the difference between Financial Accounting and Management Accounting?

As they say, behind every successful business is a successful management accountant. So if you want to scale your small business, you will get along with management accounting like a house on fire.

Every aspect of your business requires management, and accounting is no exception. If the word accounting is synonymous with producing accounts and submitting an accurate tax return in your book, stop putting your business at a disadvantage and consider purchasing a new dictionary.

If this hits too close to home and you haven’t the foggiest what a management accountant is, let alone if you have one on board, your accounting Mythbusters are here to save the day.

Orbit Small Business Accountants At Sydney Reception

The accounting checklist. 

Accountants are not all cut from the same cloth. Not every accountant will help you meet your legal requirements, stay on top of your cash flow, and reach your financial goals. So how do you know if they’re the right one for you? Here are three areas of accounting that will pique your interest.

Compliance work.

This one should come as no surprise (if it does, please get in touch with us urgently). Compliance accounting, AKA ensuring you are a law-abiding citizen, is all the financial accounting, bookkeeping, and tax work you are legally obligated to complete. All in all, compliance work is a quick snapshot of your past, only providing you with the knowledge you need to be Captain Retrospective.

Financial performance work.

The next type of accounting to add to your tool kit is financial performance work. Falling under this umbrella is your cash flow, cost management and any funding work that plays a role in improving your balance sheet, stabilising your financial position or managing your working capital. Think of your financial performance work as a supplement that can improve the financial health of your business. While there is a dash of forecasting and projection in the mix, your past data is the primary ingredient.

Advisory accounting work.

Now take note because number 3 is your advisory accounting work, and you’ll want to get familiar with this one. As business advisory accountants, we utilise your data and your numbers to provide high-level strategic business advice that will help your business achieve long term success. It can cover everything from defining your business’ specific goals to ensuring you are on track to reach them. With the power of foresight, you’ll never say “Could Have, Would Have, and Should Have” ever again.

Orbit Management Accountants Brainstorming Strategies In Sydney Office

What’s the difference between a financial accountant and a management accountant?  

The financial accountant. 

In the left-hand corner, we have the financial accountant who typically specialises in compliance work with a sprinkle of some financial performance if they are feeling generous. As a typical bean counter, they are here to help you complete your legal obligations, wrap your bookkeeping up in a neat little bow, submit your tax returns and use your previous figures for statutory accounts.

The management accountant. 

In the right-hand corner, we have the management accountant. In addition to completing all the compliance and financial performance work, management accountants place great importance on the future of a business. Looking forward rather than backwards, management accountants provide high-level advice based on informed predictions and assessments. Instead of simply counting your beans, they’ll tell you how to increase your harvest by analysing the most fertile land.

And the winner is… 

Down to their unmatched ability to think a step ahead and plan for any blows to the business, ding, ding, the winner is the Management Accountant. Rather than winging your way through, a Management Accountant will provide the tools and information you need to make informed and calculated business decisions – and the perks don’t stop there.

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The benefits of management accounting. 

Look ahead.

Instead of noting down your past transactions, a management accountant will shift your attention to the future and examine all the positive changes you can make.

Know your numbers like the back of your hand.

You can rest assured with a clear understanding of your numbers, all thanks to your regular accounting checkups.

Take the wheel.

You will be able to improve both your cash flow and liquid capital once your management accountant runs a fine-tooth comb through all your cash inflows and outflows.

Smooth sailing ahead with automation.

Using accounting technology and software like Xero, management accounts can refine and upgrade your financial processes to make your small business run smoother and more efficiently.

Shake up your pricing structure.

By delving into your pricing model, we can discover areas where you can improve your profit margins and increase your revenue to make your business work at peak performance.

Patch up the leaks.

When taking a good hard look at your expenditures, you can identify any unnecessary overheads, expenses and costs that are pouring out of your business.

Show me the money.

Extensive accounts and projections make a fantastic first impression when searching for investors and fundings, resulting in more opportunities to bring money into your business.

A firm grasp on your data.

Make evidence-based decisions anytime, anywhere with your real-time business metrics on hand via a cloud accounting platform.

Lean on me.

Expert accounting advice will be at your fingertips with regular contact with an adviser that knows your business inside and out.

Make more possible.

Whatever you more is, we are here to make it possible by empowering you with good numbers and smart, specific advice. We meet with you every month or quarter to go over your budget, numbers, and financial management, ensuring you are on track to reach your specific goals.

Ready to sign on up to management accounting? Book a chat or get in touch today with our friendly team of Sydney-based tax accountants.