In Hungary, every company is required by law to have an accountant who will prepare financial statements for them. Financial statements can be accessed by the owners and stakeholders of the company, but, as it is public data, also by people outside the company, including the authorities. The purpose of the financial statements is to provide essential information about the result of the activity of the companies.
Managing directors can feel sometimes that the only purpose of financial accounting is to fulfil the requirements of the Tax Authorities and the government institutes. However, transparent and faithful representation is useful, as it is essential for informed decision making. At the same time, managers also need additional information which is not included in the financial statements.
Management accounting is another branch of accounting beside financial accounting. While financial accounting is based on past performance, management accounting focuses on the current and future processes, making predictions based on the past performance of the company. This information can help managers make proper decisions; hence the name management accounting.
A well-structured management accounting system and regular management reports provide up-to-date information about the financial status of the company. Based on that, either the manager or an accountant with the necessary expertise can prepare forecasts, which in turn can be used when allocating budgets. Management accounting systems may be tailored to the needs of your company, so managers can decide how to structure the management report and they can define what information they require. With the help of an accounting professional, a management report structure may be created which, beside a proper and accurate financial accounting system, can help the manager in planning and decision making.
Your accountant does not only help you fulfil your financial reporting obligations, but they can be your valuable ally in creating your business strategy. For more information, contact your accountant.
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