Professional Accountants and the Development of a Management Accounting Service for the Small Firm: Barriers and Possibilities
Posted: 21 Nov 2000
This paper reports the results of a qualitative study examining the potential for the provision of a management accounting service for smaller companies by accountants in professional practice. The study aimed to determined the management information needs of owner-managers, the type and frequency of information preferred and the capacity of professional accountants to contribute to these needs. The owner-managers of 15 smaller companies were asked to participate in semi-structured interviews during which their use of computers to provide management accounts, their relationship with their accountant and their financial skills were discussed. The respondents were presented with a range of management information including statutory final accounts, interim accounts, cash statements, ratios and graphical comparisons of monthly turnover figures in order to assess their financial information skills and needs.
The study found that companies used computers for the preparation of management accounting information, but usually not to their full potential. The financial awareness of owner-managers varied considerably. There was a favourable response to the presentation of ratios and graphs, however, it was felt that an explanation or interpretation of financial information by their accountant would be a useful addition to improve their understanding and therefore aid their business.
The study concludes that there appears to be significant potential for accountants to expand the management accounting services they provide to smaller companies, especially where information is presented as ratios or graphs and accompanied with an appropriate narrative interpretation. This would also increase the financial skills of their clients and result in an increased demand for management accounting services.
Key Words: Management accounting services; Smaller companies
JEL Classification: M40, M46
Suggested Citation: Suggested Citation