Financial Accountant vs Management Accountant

Although they both fall under the umbrella of “accountants,” there are several key differences between financial accountants and management accountants, including work scope, data usage, and their function within any business. Because an accounting department is often seen as a single unit within an organisation, it is important to clarify the different duties that each type of accounting encompasses.

In the following article, we will explore the duties of management accountants vs. financial accountants and the different roles each position would hold within a company.

Key Takeaways

• A financial accountant is a person who keeps track of a company’s financial operations and generates detailed reports intended for both an internal and an external audience.
• To become a financial accountant, you must get a Chartered Accountancy qualification.
• Management accountants are in charge of analysing a company’s performance to help make important business decisions.
• To become a management accountant, you need at least an AAT Level 2 certificate, along with business and financial experience.
• Financial accountants act as record keepers who can provide financial snapshots of a business in the form of reports.
• The role of management accountants is to aid in improving cash flow, strategising, and forecasting for future planning.

In this article, we’ll cover:

• What is a Financial Accountant?
• What is a Management Accountant?
• Financial Accountant vs Management Accountant: Key Differences
• Conclusion
• Frequently Asked Questions

What is a Financial Accountant?

Financial accounting involves recording and reporting on the financial transactions of a business. Financial accountants prepare reports and summaries that help business owners understand the financial health of their company and keep track of the performance of a business. 

They are the record keeper of the organisation and create detailed reports that track business performance through income statements, balance sheets, cash flow statements, and more.

Becoming a Financial Accountant

Financial accountants in the UK must get a Chartered Accountancy qualification. The most commonly taken route is the AAT Professional Qualification, or you may choose to take the ACCA Foundation Diploma program. 

The most successful financial accountants will have strong organisational skills and excellent attention to detail.

Once you have completed your program, you can gain experience working in an accounts department or go on to study for the professional ACA or ACCA qualifications. 

Financial Accountant Duties

The main duties in financial accounting involve overseeing payroll, taxes, and spending and maintaining the organisation’s financial accountability. They will also generate reports as requested by management and look into any financial discrepancies that may arise. 

Through simple online templates and an easy-to-use interface, FreshBooks streamlines financial accounting processes, making it easier for financial accountants to track financial transactions, generate financial statements, and manage cash flow. 

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What is a Management Accountant?

Management accounting professionals work alongside management, offering support in the form of financial statements, reports, and documents, to help company owners make better business decisions. 

A management accountant is an internal position found within a company, with the accountant working to provide and analyse financial data to forecast business growth and aid in creating strategies that will help the business grow. 

Management accounting uses both quantitative (numerical) financial data and qualitative information (personal accounts, financial records, market trends, etc.) as they make decisions and recommendations.

Becoming a Management Accountant

In the UK, becoming a management accountant requires at least an AAT Level 2 certificate, as well as a wide range of experience, both in accounting and business. 

Those who are excellent with maths, with high ambition, an understanding of economics, and analytical thinking skills will do well in management accounting. 

Management Accountant Duties

Common duties in management accounting include preparing financial statements and reports regarding financial data, overseeing bookkeeping systems and payroll, and even managing a team of accountants. 

They take part in big company-wide decisions, auditing the company’s departments and recommending ways to reduce costs or increase profits, and they play an integral role in budget preparation and variance analysis.

They also use their analysis skills to make forecasts and plan future spending. 

Financial Accountant vs. Management Accountant: Key Differences

Financial accountants may be looked at as the people who produce reports for internal and external audiences, whereas management accountants generate reports and data that are intended for internal use only. 

A financial accountant will create statements and financial records that are intended for people outside of the organisation. These detailed reports include balance sheets, profit and loss statements, and cash flow statements. They do the public reporting of an organisation’s financial status and typically have to follow a specific regulatory framework such as IFRS or GAAP. 

You would likely utilise financial accounting services when looking to see if you are meeting your goals and remaining profitable or when you want to report your business performance to external parties. 

A person in management accounting, on the other hand, may work on budgetary planning, cost finding, forecasting, cost and profit analysis, and performance reports. The accounting information provided by management accountants is not based on past performance but rather on future forecasting and market trends. Typically, management accountants will have more flexibility in their reporting formats and internal analysis than a financial accountant.

You would use management accounting services when you want financial and strategic guidance. They are highly skilled and can save your company money while helping you set long- and short-term goals.

Conclusion

Business owners may want to hire someone in financial accounting to keep track of finances and create reports for both external parties and stakeholders like stockholders, giving them information about the financial health of a company. This information is also useful to potential investors, creditors, and the board of directors, and if the company is publicly traded, then the information must appear in the public record.

On the other hand, they may want somebody in management accounting to provide professional, astute assistance in making current and future financial decisions for the company. 

A business can benefit from each type of financial accounting. Many organisations benefit from having both on staff, as they can work together to create a comprehensive plan that will maximise efficiency and help the company thrive and grow. Mazuma has excellent reviews from happy customers in a variety of industries who can’t recommend our services enough. Learn more about Mazuma’s hassle-free online accountancy services and find out how we take the stress out of accounting for your business.

FAQs on Management Accountant vs. Financial Accountant

What are some common misconceptions about the differences between financial accounting vs management accounting?

The most common misconception is that there is no difference between these two complementary branches. This comes from a lack of understanding of the complexity of business finance and strategy. Other common misconceptions include: it is boring and that technological advances will wipe out the field of accounting completely.

Is management accounting harder than financial accounting?

It is hard to say, as everybody has their own strengths. Management accounting requires sharp analytical and forecasting skills and is a lot of responsibility, whereas financial accounting requires good attention to detail and strong maths skills, financial knowledge, and a good understanding of regulatory requirements.

Is a financial accountant a chartered accountant?

Yes. To start a career in financial accounting in the UK, you must get a Chartered Accountancy qualification, with, at minimum, the AAT Professional Qualification, or you can take the ACCA Foundation Diploma program.

What are the types of financial accounting?

Three types of accounting are vital to the functioning of a healthy business: cost accounting (recording costs incurred), management accounting (identifying, measuring, and interpreting financial information), and financial accounting (recording, summarising, and reporting transactions). Each of these three types of accounting is important to a healthy business, and each achieves unique goals.

Are management accountants in demand?

Yes, management accountants are in demand throughout the UK. They play an important role when it comes to decision-making in most big commercial businesses, so there is little to no chance that their importance will wane anytime soon. 

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