A Chartered Management Accountant is a crucial player in businesses and company growth. It is a level up from basic accounting as it provides strategic recommendations to an organization, working in tandem with a financial accountant.
Chartered Management Accountant is a professional certification credential in the management accounting and financial management fields.
The CMA certificate indicates that you possess the necessary knowledge in the domains of financial planning, data analysis, cost controls, decision-making, and professional ethics.
Specifically, the Chartered Management Accountant qualification is issued by the Institute of Cost Accountants of India. The certification is recognized globally and can thus expand your career opportunities significantly.
A CMA, along with a Certified Financial Analyst, forms the core of any company. While the latter provides the financial statements, the former uses the data from these reports to make recommendations to top management executives regarding the future of business.
Role of a Management Accountant
Also known as managerial accountants, a CMA role encompasses a variety of responsibilities. It is important to do your due diligence before taking up the course.
Typically, management accountants work for a single company and prepare and analyze financial data for that company. Basis of the insights that a management accountant provides regarding costs, expenses, equity, and performance controls, help company managers make well-informed and rationalized business decisions.
Some typical activities that a management accountant may perform on a daily basis include:
- Analyze financial statements for a company, using various costing techniques, and working closely with the financial accountant.
- Prepare cash statements to indicate the financial well-being of the business.
- Budget analysis that is binding on performance control decisions like increments or lay-offs.
- Disseminate financial information and its implications across departments to ensure budget compliance and monitoring.
Note that the role of a management accountant is different from other types of accounting roles, such as that of an auditor. An auditor’s job, for example, is to review a company’s accounts to assess a number of things, including capital assets, liabilities, cash flows, investor equity, and also whether they are materially correct and not materially misstated. Having said this, it must also be stated that the basic accounting principles used by an accountant, managerial, or financial or auditor, are based on the Generally Accepted Accounting Principles (GAAP), India.
There are other positions as well, who appoint accountants who are CMA qualified, such as:
- Financial controllers.
- Cost accountants.
- Financial analysts.
- Chief Financial Officers.
- Cost Management Accountants.
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All You Need to Know About the CMA Exam
In order to get CMA certified, you can follow some simple steps and start your preparation in time. Here is a checklist for getting ready for the CMA exam:
- A completed Bachelor's degree from any recognized University.
- Sign up for an IMA(Institute of Management Accountants) membership.
- Meet the relevant professional experience requirements.
- Take the two-part CMA exam.
There is a common misconception that becoming a Chartered Management Accountant is incredibly difficult.
The CMA exam is broken down into two separate parts. Both parts are a mix of multiple-choice questions and essay-type long answers. You have to qualify for the first part in order to move to the next. Each is a 4-hour long exam, with 3 hours dedicated to 100 MCQ's and 1 hour for 2 long questions.
Part One tests your skills and understanding of financial reporting, planning, performance, and control.
Part Two assesses your skills as a manager. This includes testing your interpersonal skills, decision-making skills, profit management, understanding of a product, and strategic thinking.
You are allowed up to 3 years to complete the two parts. Typically, if you study sincerely, it should take around a year to a year and a half to complete both parts of the CMA. This is so designed to account for the fact that this certification is an add-on for many accounting professionals. This helps them fit the study demands of the CMA around their work and social life.
The IMA reports a 50% pass rate worldwide, which means that the exams are passable, provided you put in the time to study, develop good exam technique and have the aptitude for the materials taught.
How is the CMA Qualification Helpful?
In the accounting and auditing domain, there are a number of different qualifications, each of which brings its own benefits. Like there is cost management accounting that specifically deals with the profitability of an organization.
The importance of management accounting lies in the fact that they are the drivers of critical business decisions that affect the future of a company, decide which production lines to curb, which activity to scale, and which internal process to improve or do away with.
Job Opportunities and Growth Potential
A CMA adds value to a company by virtue of his soft skills, more than his domain or technical skills. Over a period of time, a managerial accountant builds trust with company executives and align with their vision to help the business soar to new heights. This, of course, opens up many doors for professional enhancement.
A CMA can grow in a company to become the Chief Financial Officer or any other top boss. A CMA earns anywhere between INR 9,00,000 to 20,00,000 in a year. That should be incentive enough for you to explore this qualification further, in case you are still in two minds.
What Other Qualifications Exist for A Management Accountant?
A management accountant can use her skills easily to grow up the leadership ladder. And if you are someone who is hungry for learning, there are plenty of accountancy or business qualifications out there for you to explore:
- Certified Public Accountant.
- Associate Chartered Accountant.
- Association of Chartered Certified Accountants.
All of these qualifications can add to your skillsets. Remember, that no matter which accounting course you choose, your primary job at the end of the day is to increase sales and bring in business for the company you end up working for.
Difference Between Financial Accounting and Management Accounting
The primary difference between financial accounting and management accounting is that financial accounting is the process of collecting accounting data to create financial statements, while managerial accounting is the internal processing used to account for business transactions.
It is worthwhile to note certain major categorical differences between financial and managerial accounting processes:
- Purpose: While financial accounting concerns itself with ensuring net profits from sales are intact, managerial accounting encompasses overall business bottleneck identification, while providing recommendations to fix the same.
- Reporting: Financial account statements garner a larger audience, most important being the company's external stakeholders like investors, shareholders, and tax regulatory authorities. Management accounting reports, on the other hand, are prepared for presentation to an internal committee, usually comprising of management executives in-charge of organizational decision-making.
- An Eye for Detail: While financial accountants account for an overview of the financial well-being of the business, managerial accountants scrutinize every detail in business transactions. Herein lies the primary importance of management accounting.
- Cause and Effect: Finacial accounting reports and statements reflect the outcomes and effects of business decisions. Managerial accounting, on the other hand, looks for root causes of such decisions, draws insights from them, and recommends necessary course corrections.
- Reporting Intervals: A huge advantage of management accounting is that it furnishes reports at regular intervals of time, throughout the year. This enables strategies to be changed and replaced with new ones, wherever there is a need. This is in contrast to financial accounting reports, that are due only at the end of a fiscal year, or every quarter, or sometimes every six months.
- Interdependence: Management accounting goes hand in hand with financial accounting. While financial reports and numbers form the basis of managerial accounting analyses and insights, these, in turn, supplement financial statements at the end of the year.
- Statutory Compliance: Since managerial accounting is an internal process, it is not mandated by laws, unlike financial accounting, which is regulated by standard applicable laws and statutes in the concerned nation.
- Data Validity: Financial reports are dependent on past records, and thus may be challenged on grounds of inaccuracy. Management accounting, on the other hand, deals mostly with forecasting outcomes for businesses.
A management accountant thus functions as a guide to any business, taking into account the facts around the current performance of the company. This makes it a highly desirable profile and designation to associate yourself with since it contributes directly to taking a business and its product to new heights in terms of scale and innovation.