One of our Twitter followers Markied85 asked us the following:
How would you suggest getting into cost accounting? it seems like one of those positions you fall into with experience.
Good question! Personally speaking, your humble editor only had a brief stint as a financial analyst that involved compiling internal reporting for a COO and that was after we had done our time in public/Big 4, so your thinking is on the right track.
If you accept an entry-level position with a private company, chances are you wouldn’t be tasked with providing reports to managers. However it is possible that you would be responsible for compiling these reports and depending on how the department is set up, one of your superiors would review and present the reports.
But what do we know? Like we said, our experience is limited so we just took quick shot in the dark. What we do know is if you are an in-house cost accountant, a CMA is good credential to set you apart from the rest in your group (plus, you’ll probably get more money).
If you’ve got good experience with this transition or you’ve been in a cost/managerial accounting role your entire career, let’s hear about it.
More importantly, WHY would one get into cost accounting? (I kid, I kid. I hated those classes in school, and am glad I'm in tax. To each accountant, their own flavor of playing with numbers.)
No no, I agree with the above. Some people like tax, some people like audit, some people like analysis……nobody likes cost accounting.
I ended up in it as my first job out of college and thats my current job title although cost accounting in its true sense does not exist. It is more of financial analyst type job with a focus on operations
Cost accounting is a manufacturing concept….deals with labor costs / material costs / etc.
Managerial accounting is a much global concept…deals with financial planning and analysis…
Don't think one needs a degree in managerial accounting….understanding financial trail and understanding the business is good enough…..good place to start is with a big four audit practice and move on to do an FP&A role….
Cost accounting is more than just a manufacturing concept, although it clearly is most prominent in manufacturing. Accordingly, knowledge of manufacturing theory and processes will give someone wanting to get into this field an edge over someone with more a purely financial accounting background. I agree that cost accounting involves (or at least should involve) as much financial analysis of factory operations as “reporting the numbers.”
Some cost accounting is specialized within an industry, such as construction or aerospace & defense. With respect to the latter, some demonstrable knowlege of the Cost Accounting Standards would also provide an edge.
Dear Colleagues
I am IMA member in Mexico. One of my decisiont to be part of IMA some years ago was precisely because IMA has a great historical contribution and heritage in the field of cost accounting —- National Association of Cost Accountants since 1919 —-. I loved cost accounting since I was aware of the importance of it spec …ially for foreign companies in my country. I have had the opportunity to work as plant controller and therefore be involved in cost accounting issues among others. Additionally I am always investigating issues related to cost accounting and management accounting —traditional and contemporary issues. I have tried to setup a business which I have called Cost Management and ERP Solutions. Nowdays cost accounting and management accounting must be linked to Information Technology, for that reason, additionally to the Cost accounting knowledge it is important to get prepared in some ERP in order to understand the whole company flow process including manufacturing related modules. In fact, I am trying to open the IMA Chapter in Mexico in order to promote Management Accounting among other issues.
Armando Castro
armando.castro@cmerps.com
http://www.cmerps.com
Hi Armando, I've always wondered why there isn't a CMA (IMA) presence in Mexico, especially in the northern territory where all the maquiladora operations reside. For example, Tijuana Mexico has a lot more (in my opinion) manufacturing operations than San Diego, Calif. The CMA for financial professionals in Mexico would be a plus as I don't think there is any other designation available. Good luck with starting the IMA chapter and hope to see it grow big time. It would only benefit the entire maquiladora industry which is huge. Regards.
Having worked in a manufacturing company as a financial analyst, in my opinion, there are two types of cost accountants within an organization: they type that that specialize in setting standard costing, dealing with BOM's (bill of materials), purchasing variances, journal entries, etc., and the type that “step out of the trees to look at the forest.” If you get to be one of the latter, after you conquer the first type, you'll do very good. Too often I encountered cost accountants that just couldn't explain or give you a write up on how the variance affected your P&L and why it happened or didn't happen. If you understand and can explain how cost variances affect the financial statement, you'll be able to move into the FP&A world. In my opinion you'll add more value and be more marketable than a GL accountant. Get the CMA in the process and understand the financial statements really well and people will notice your work.
Armando and Eduardo have hit on some very good points. To address the original question, any company is likely to need cost accounting because managers often don't understand all of the costs of their operations completely. Whether the firm will employ staff in specific cost accounting roles is another matter. Experienced managers usually have a good general feel for it but don't pin it down, so they will sometimes think, for example, that a particular project or product or customer may be profitable when it isn't, or vice versa.
For someone wanting to get into this area, I would say spend as much time and effort as you can understanding your firm's operations, talk to the shop floor staff as well as the operations managers, and begin to conceptualize these operations in terms of transaction flows. If your firm doesn't already have an explicit cost accounting role, it is a good opportunity to sell them on why it's important and what it can do for them. This is a good area to get into, as you can become the “go to” person for managers' questions about their financial reports, especially when the results don't come in as expected.
My own role combines cost accounting and financial analysis in a manufacturing firm, and I have spent the majority of my career in this area. One of my mentors, early in my accounting career, once said to me that all accounting is either cost accounting or stamp collecting. In my experience that has pretty much proven to be true.