What is the difference between financial accounting and management accounting?
If you’re new to the world of finance, you’d be forgiven for assuming that all accountants do the same job – but that’s not the case at all. There are a multitude of different accounting roles out there, and for today’s blog post we’re examining the differences between two of the most well-known: financial and management accountants.
What do financial accountants do?
A financial accountant’s role is to accurately keep track of a company’s financial affairs. Carefully and meticulously recording income and outgoings, they then present this information to the external organisations and individuals that need to see it.
In addition to submitting records to HMRC, it’s their job to pass on records to other external stakeholders, including investors and potential investors.
What do management accountants do?
Management accountants differ from financial accountants in that their work is purely for internal company use. Instead of keeping records for future reference, their job is to look at current and emerging trends and predict how things are likely to change in the coming months. Their findings are then presented to higher-ups within the organisation, such as directors and managers.
The work of a management accountant is used to inform vital business decisions, and ensures that directors and managers aren’t taking a shot in the dark when they’re committing to additional investment or pricing a new product. Management accountants provide these decision makers with the information they need to make business-critical choices, so have a considerable amount of responsibility, even though their work isn’t seen by external organisations or shareholders.
Which do you need?
In general, most businesses start out by hiring a financial accountant to ensure that they’re meeting legal requirements and that they have accurate records to rely on. Taking on this task yourself, as a business owner, can prove to be overwhelming – especially as your company grows.
Management accountants, meanwhile, are ideal for businesses looking to elevate their position in the market and get ahead of the competition.
This is why it is important to have both types so that you are on top of both areas. However, hiring both could prove a costly exercise, which is why businesses look to outsource for a cost-effective solution.
Outsourced accounting services
Here at Ratiobox, we provide outsourced financial accounting and management accounting services for businesses of varying sizes. If you’re unsure as to which type of accountant your business needs, give us a call today or contact a member of our team via email. We’re more than happy to offer advice and ensure that you make the right choice for your business.