Now is the Time to Change
In January, I participated in the annual American Accounting Association mid-year conference of the Management Accounting Profession in Dallas (AAA MAS). About 350 Management Accounting Professors, Ph.D. students and authors were in attendance. The purpose of the meeting was to provide researchers an opportunity to present their papers, receive feedback and to meet other researchers and teachers to discuss ways to improve the profession.
I participated in a panel discussion asking the question “Is Cost Accounting Still Management Accounting?” with four of the leading management accounting professors in the world.
In the past, cost accounting was designed around manufacturing control systems and the need to deliver corporate ROI. That was when there was a balance sheet that consisted of hard assets and manufacturing businesses dominated the global economy. Today 84% of the global economy is driven by service industries, intellectual property/capital, computing, and telecommunications, where ROI is no longer a relevant measurement but discounted future cash flow is. The session speakers all pointed to the way in which technology, globalization and the shift towards service industry domination of the economy have changed the need for advancements in accounting and accounting research. One speaker made the point that many academic papers cannot be understood by business practitioners even if the nature of the subject is of practical value, so the need to evolve is quite profound.
The other members of my panel, Professors Jan Bouwens, Christopher D. Ittner and Dan Weiss, agreed that since about 50% of the management accounting curriculum is dedicated to manufacturing based cost accounting, it is quite out of step with the times.
I specifically addressed how the change in the economy and current management methods not only demand change, but the industry needs practical and economical software tools, rather than spreadsheets. Accountants will be able to make a significantly greater contribution to the performance of their organization. This can be accomplished through the automation of traditional financial reporting and at the same time provide the base data necessary to track both financial and non-financial performance as it happens, in real time.
The implication of these two facts is profoundly relevant to finance and accounting departments in every organization:
1) By dramatically reducing the amount of time and effort required to “close the books” monthly, quarterly and annually, finance and accounting staff can leverage the significant time savings to do more financial planning and analysis (FP&A) work.
2) With historical accounting and operational data available to FP&A staff, and coupled with real-time performance data to alert management to significant variances and opportunities, new software solutions permit on-the-fly what-if analysis and forecast updates. This allows for crisis avoidance and fuels strategic business changes.
The evidence is clear, accounting departments have both the reason and the tools to change how they work. Continuing to rely on inefficient spreadsheets to perform analytical and decision work is both a wasteful and a risky for their corporations. Now is the time to change.