Management accounting means looking forward

Management accounting and the Theory of Constraints can help streamline your maintenance operation.

By Russ Kratowicz

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Financial accounting is different from management accounting. Financial accounting uses generally accepted rules to document for third parties everything that can be seen in the rear-view mirror. Management accounting is forward-looking in the sense it tries to lead us to better business decisions. Ken Delaney-Moore from Sheffield Hallam University put it nicely when he wrote “management accounting is done by the managers, for the managers, for the purposes of planning and control.” The approaches used in management accounting also can evolve freely to accommodate plant-specific matters of interest. It’s a case of sanctioned creative accounting.

Because accounting is written in the language of upper management cash—I invite you to join me on another dive into that mile-deep morass we call the Web in search of a few practical, zero-cost, noncommercial, registration-free Web resources that can help you make better money plans for your department and snag some continuous improvement ideas on the way back to the surface. Remember, we search the Web so you don’t have to.

A survey
The life of a manager always includes pressure to make decisions that improve corporate financial performance. It’s a distraction that comes with the territory and large paycheck. These executives generally use management accounting as a tool to achieve the expectation. But, Ernst & Young, the accounting firm, in partnership with the Institute of Management Accountants, noticed the lack of research or surveys that address the fundamental changes in the role of management accounting, the tools and methods (new or traditional) that are in play, the role new technologies have played in the diffusion of common management accounting and the factors that constrain or accelerate adoption of these tools and methods. So, these good folks conducted their own survey and posted the 24-page report of the findings for your edification. Because fully 40% of the respondents were upper-level executives in manufacturing plants, the results are relevant. You’ll be able to access the 2003 Survey of Management Accounting if your mouse points a sharpened pencil at$file/2003_Survey_Management_Accounting.pdf

Management accounting portal
This particular version of accounting science uses a range of tools, most of which focus on manufacturing a product. Some of them, however, address services, which sounds a lot like what your maintenance department furnishes each day. The research for this column uncovered a site that is gathering information about the whole field and packing it into one place. A prodigious effort, the “Management Accounting Information Center” is brought to you by Richard Torian from Walkersville, Md. His repository of free information bills itself as “an Internet site for researching management, accounting and business information.” There’s really too much material here to make encapsulating it in one or two paragraphs very easy. I’d recommend that you toss that mouse of yours in the general direction of so it can get a grounding in the many facets of the discipline.

The unofficial graduate
A few years ago, MIT began its Open Coursework initiative, a program under which the school posts actual class materials to the Web for all to see. As it’s envisioned, those with an academic bent or curiosity about what goes on in an Ivy League classroom can access the syllabi, lecture notes and exams used in Cambridge. Listed among the multitudes of educators is Joseph Weber, who teaches “Management Accounting and Control,” a course that deals with accounting methodologies and costing, budgetary control, performance evaluation systems plus quite a bit more. Weber’s lecture notes aren’t so much straightforward, plain-vanilla notes but more a series of probing questions that require some mental exertion to answer. Of course, the class uses a prescribed text and, no doubt, it would be better if you had it at hand. Unfortunately, I couldn’t locate an online edition for you. The final exam is a real mind-bender, as is the URL. So, climb the Ivory Tower located at to gather the pearls of wisdom about this month’s topic.

Free education
Biz/ed is a free online service that covers business, economics and accounting from the Institute for Learning and Research Technology at the University of Bristol in the U.K. Launched in early 1996, the site bills itself as the primary provider of Internet-based learning materials for the economics and business education community. You be the judge of that. The site,, is richly linked internally and externally. If you’re even a little curious about a topic, you can lose track of time quite easily exploring the site. For example, clicking “Reference” near the top right corner of the screen links you to a business acronym finder and glossary; a collection of diagrams, charts and graphs that illustrate economic and financial principles; and 4,000 Web sites with business, management and economics content. But, we’re discussing management accounting here, so click on “Accounting” at the center of the screen to reach that corner of the business world. Then, click on “Management Accounting” to access the links. Investigate the link to “Investment Appraisal,” which shows how to evaluate the economic wisdom of purchasing that new maintenance gizmo you read about elsewhere in this magazine.

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