International accountancy: Peter Fleming asks Charles Tilley, CEO of CIMA; Steve Vieweg, CEO and president of CMA Canada; and Barry Melancon, CEO and president of AICPA, about the state of the financial management profession around the world

Financial Management (UK), March, 2006 by Peter Fleming

Can you give a broad definition of management accounting?

Steve Vieweg: Management accounting began by looking at and controlling costs. Now we have a much wider field that includes things such as risk analysis and supply chain, as well as management concepts that help with decision-making, such as the balanced scorecard.

Charles Tilley: Management accounting is the language of business. If somebody asks about your inventory and you have ten computers worth $1,000 each, the inventory figure is $10,000. That's a useless piece of information. If you sell ten computers a day and there isn't a lorry coming into the warehouse unloading more, you're going to run out of stock. What you need to know is how many computers to order to meet demand. Management accounting is about transforming information into something useful. It tells a company where it is today and helps the directors to plan where it's going.

Barry Melancon: Management accounting is also about developing a system that measures performance and provides information that allows a company to formulate strategy, make decisions and maintain control. It's the nerve centre of an organisation.

What benefits do businesses get from employing management accountants?

SV: CMA Canada is introducing a competency map focusing on performance responsibilities, which include being able to work in a team and having good judgment skills, and on conformance responsibilities, such as making sure you understand inventory practices and Gaap. Management accountants are increasingly seen as the people who drive change.

CT: All businesses are out to create value. Management accountants are critical partners in this because they ensure that the correct financial decisions are made and provide the structure for financial decisions about where the company is and where it's going.

BM: In addition to reliable decision-making, accountants who work in business and industry also bring a combination of integrity, confidence and ethical conduct to the table.

How have the contributions of management accountants changed?

SV: Management used to have a command-and-control structure in which almost every decision was made at the top. What's evolved is a more decentralised reporting and decision structure. Organisations today need management accountants to step in and work at any level as part of a team.

CT: When I talk to our retired members, what they were doing before World War II and what we're doing today are not that different. What's changed is issues such as the environment or technology. The ability to make decisions quickly and be an effective partner has also changed dramatically. Ethics couldn't be more important. You have to be an "honest Joe". Being a very good communicator is critical as well.

BM: Some functions have remained the same, but now they're perceived as having moved from a functional responsibility to a professional one. Today more than 50 per cent of US CPAs work in business and industry. The need for a high level of competency and professionalism has driven companies to meet their needs at a professional level.

What do you see ahead for management accounting?

SV: The future has never looked brighter. Management accountants must have roots in financial accounting - specifically Gaap. Beyond that, the required skills evolve daily. In general, management accountants need judgment, analytical skills and an ability to work well with colleagues.

CT: For the profession to flourish it is crucial to keep on top of technology, to identify critical issues and to be part of the management team. You've got to be a team player and that includes being a good communicator.

BM: Management accountants must be at the leading edge of issues such as globalisation. US CPAs will be key players in corporations that engage in cross-border activities. Conversely, management accountants in the UK and Canada will be key players for businesses that focus on the US.

What advice can you give someone who wants to pursue a career in management accounting?

SV: Management accounting is not for everyone. We tell students to look at their own needs and where they see themselves down the road. Just as important is your potential employer. Students should have a desire to contribute to the growth of an enterprise and to be involved in teamwork. The bottom line is communication. You have to be able to communicate with colleagues, subordinates, management and shareholders.

CT: You have to choose the right organisation to train with--one that offers a broad foundation of experience. Your employer is the link between the qualification and the academic and practical experience that ensures you'll become a good management accountant.

BM: It's a great time to move into management accounting. Business changes around the world, led by the Sarbanes-Oxley Act, are greater than ever before. The qualification is a key starting point. It's important that you are motivated by, responsive to and confident in, the broad responsibilities of being a senior-level thought leader.