So, working inside the firm, the Management Accountant goes about the business of providing the underlying decision support, planning and control to the VALUE CREATING PROCESS of the business. But, how does one know if their particular finance and accounting staff is equipped to be doing such work? The truth is just because one graduates from a 2-year, 4-year or even post-graduate accounting program does NOT infer one is academically prepared to take this role in business. Most of these are preparatory programs for Public Accounting work, but NOT designed to meet the needs of business. Something else is needed and available. One way of being assured the firm has the right people – competent, ethical, professional and capable of being a much valued resource is to demand that CMA holders be present within the finance and accounting staff and staff leadership. The CERTIFIED MANAGEMENT ACCOUNTANT (CMA) and the CERTIFIED FINANCIAL MANAGER (CFM) are designations awarded by the Institute of Certified Management Accountants (ICMA) to anyone who meets the following criteria: Member of the IMA Apply for admission into certification program (thru the ICMA) Register for certification exam Fulfill educational credentials Pass the certification exam (4 parts) Satisfy the experience requirement Comply with the Standards of Ethical Conduct
ess Analysis and includes such topics as Business Economics, Quantitative Methods, Financial Statement Analysis, Global Business, and Internal Controls. Part 2 concentrates on External Financial Reporting, Cost Management, Performance Measurement, Budget Preparation, and Information Management. Part 3 elevates the certification holder to qualify as a strategic business partner by including such topics as Strategic Planning, Strategic Marketing, Corporate Finance, Decision Analysis, and Investment Decisions. Part 4 Caps off the examination by reviewing all previous areas of the examination then covering such areas as Ethics, Organization Management, Organization Communication, and Behavioral Issues. Part 4 is given in essay question format.
Part 1 – Business Analysis questions are broken down into these proportions.
Part 2 – Management Accounting and Reporting questions are broken down into these proportions.
Part 3 – Strategic Management questions are broken down into these proportions.
Part 4 – Business Applications looks like this.
What makes an individual a managerial finance and accounting professional is “what” he or she does - not “where” they do it. A look at the numbers shows there are approximately 6 million members of the profession broken out as depicted here. These numbers are falling and will continue to fall in the US as members of the “baby boomer” generation retire. This means the profession is at a great period for those interested in academic preparation to enter the profession. Indeed, today numbers show there are more students electing to major in accounting than in past years. After graduation they will be found not only in corporations, but privately held businesses, small business, not-for-profit, and government positions. It is important that all sectors of government and commerce be staffed with trained, competent, and ethical professionals, capable of delivering contributions which gain these entities confidence that they are running efficiently, while building quality financial practices, ethical and responsible corporate governance, and operational control from inside the organization. While the academic world cannot deliver students to meet the needs of these entities today, the CMA and CFM certifications can give business, commerce and government leaders confidence that holders of those certifications, INSIDE their organizations, are capable of delivering the underlying decision support, planning, and control needed to efficiently operate business today and compete in the 21 st Century global marketplace. These certified and trained professionals are ready to help answer strategic and management questions regarding where the firm should open that new branch? What new markets would be best for the firm to enter? What new products should be brought online which will generate the greatest return on development investment the earliest? Which promising technologies would be best for the firm to invest in? When and where should we open that new plant and hire more people?
In 2003 the public accounting firm of Ernst & Young partnered with IMA to conduct a survey of the Management Accounting landscape. They surveyed of 20,000 CEO’s, CFO’s, and Controllers and received over 1,200 responses. Responders were identified as either business decision makers, or decision enablers. They tabulated the results of the survey on the financial challenges facing businesses and business decision makers today. The NUMBER ONE financial challenge today, as identified by BOTH decision makers and decision enablers, is getting ACCURATE, ACTIONABLE cost information in a TIMELY manner. What are our academic institutions doing today to help prepare professionals who can step in and immediately help with the NUMBER ONE financial challenge facing business owners today? How does the number financial challenge identified by business owners, decision makers, and decision enablers bring relevance into the classroom today? What more of a “wake up” call do we need that something is terribly wrong?
The E&Y survey had other interesting findings. Decision makers and enablers both agree on the number one and number two financial challenges facing businesses today. Now look at what happens next. CFO’s and Controllers think “Improving Processes” is more important to the business than “Contributing to Core Strategy” BUT their bosses think they have their priorities reversed! Having finance and accounting staff capable of “Contributing to Core Strategy” is more important to business leaders and decision makers in running the business than “Improving Processes.” That is not an insignificant finding. Who is preparing individuals to fill the role in the firm that the business leaders identified as their number three priority in facing the financial challenges businesses face today? The CMA communicates to business leaders that holders of the certification are trained, competent, and capable of delivering professional quality as strategic business partners. The CPA certification examination fails to address these areas identified in the E&Y survey as the highest financial challenges facing business leaders and decision makers today. Yet when business advertise staff opening, what do they invariably state but “CPA preferred” when they really need CMA level professional competence and integrity.
Here are some of the narrative findings of the E&Y Management Accounting Survey:
Today’s Management Accountant need a robust tool box. I divide them into 4 broad categories: Technical, Leadership/Communication, Strategic, and Entrepreneurial I will focus on the last 3 since I assume the competence of everyone’s technical knowledge. The last 3 are what separate technicians fm business partners. CFO Magazine - What CEOs Want Strategic Vision more important than experience or specific expertise Business Partner - Navigator of Business Character Improvement Areas 48% People Development Skills 33% Communication Skills
Accountants have an external perception problem……..we have an image…..it takes a lot to overcome it. It’s not that the stereotype is bad…..these behaviors are vital to much of what we do! It just we have to apply them in private, and convert our conclusions for public consumption. Why? We self limit our contribution, if we don’t apply the new approach. For new professionals, this can be hard……you may be under the tutelage of a stereotype. For experienced professionals this can be harder…….
The business environment is not kind to a desire for stability. We need to contribute to creating more dynamic, flexible organizations…..with appropriate, but not traditional, controls.
Now let’s shift to strategic tools available to the management accountant, and those emerging into the management accountants world. I’m going to quickly review some of the Developed Strategic Cost management applications, so let’s focus for a minute on the issues Emerging into the management accounting space. Things to keep an eye on. ERM: COSO just completed a new study that focuses on reporting risk. Increasingly business need to spend time looking at possible future scenarios and assessing the organization’s ability to operate and survive in a wide range of alternate futures. Closer in you need to look at both disasters and business scenarios and assess your organization’s risk. Performance Measures: Intangible Assets are a greater part of a company’s value today. They aren’t well characterized by the traditional measures of accounting, but they are vital to business decisions. Someone will find a way to monitor and characterize them, I think this is work for management accountants since it deals with critical business resources. Strategy Planning & Execution: Probably always on the table, but today the market is so dynamic, it is often too late if you wait for traditional feedback cycles to occur. Management Accountants need to take the lead in finding leading indicators, creating measurement schemes that allow faster decisions and feedback loops. CLV: Understanding customers has always been the core of business. And traditionally the domain of marketing or sales. But with the accelerating pace of change, the explosion in new channels for customer interaction, and the escalating expectations of customers – there is a clear need to quantify the value proposition on a customer by customer basis – the investment in their satisfaction is becoming so substantial that losses and turnover can be devastating. RCA: Emerging technique that focuses on understanding the Resources of a business. It combines relatively unknown, in the US, German Costing techniques with activity based techniques to provide better information on the nature of costs, a better mirror of operations, and the ability to look at full and incremental costs.
What is the IMA? Founded in 1918, the IMA holds the mission to To provide a dynamic forum for management accountants and finance professionals to develop and advance their careers through certification, thought leadership, research, education, networking, and the advocacy of the highest ethical and professional practices
How does IMA deliver on its mission? Here are just some of the ways.
New and innovative initiatives are being tenaciously pursued by IMA to continue to make huge strides in thought leadership as well professional practice standards.
The biggest challenge facing the local IMA today is best described in the words of Paul Sharman, IMA’s President and CEO: “ Rebalance the accountancy profession by building quality financial practices, ethical and responsible corporate governance, and operational control from inside an organization.” So, the “needs” I identified throughout these past few moments do have a solution to them and that solution is IMA.
Today IMA is meeting the challenge and the mission of the association through a number of strategic initiatives, all designed to “rebalance” at least the message of the profession, if not the academic preparatory programs, as well as the public’s perception of what accounting today truly is.
The prestige and influence of the CMA and CFM designations will only increase during a time when the numbers of professionals in the managerial finance and accounting profession are decreasing. For students and academics that is important for future job security and continuous professional development and preparation to successfully move up business structures.
Today’s business leaders need to be bold, decisive, and act on the best information available to them. The IMA’s two professional designations give confidence to the marketplace that holders are trained, certified, and ready professionals, capable of delivering immediate and sustained high quality work in making organizations more efficient in a marketplace that demands greater and greater efficiencies and integrity. Managerial finance and accounting professionals today bring value to the organization through building quality financial practices, ethical and responsible corporate governance, and operational control from inside the organization. The IMA stands ready to help businesses organizations of all flavors be competitive globally, operate more efficiently, increase value and return to the local economies, create a rising economic tide which “lifts all boats”, increases the number of good paying jobs, reduces unemployment, increases quality of life and health while decreasing heath costs, and even making significant strides toward the elimination of poverty. Today the socially responsible organization needs to view IMA as a valued partner in “rebalancing” the professional message as well as the public’s perception of accounting, too long dominated by the public accounting firms, to the detriment of US business efficiency and competitiveness in the 21 st Century global marketplace. That concludes my talk today. What are your questions?
Current Accounting Information “ In the game of business …[accountants] aspired to be players, or at least umpires, but were relegated to the humble office of scorekeepers. Their revenge for this ignominy was to keep the score in such a way that neither the players nor the umpires could ascertain the state of the game.” R.G.A. Boland. Quoted in the Financial Times June 14, 2003 Accounting Today? “ Accounting systems are based on pre-computer thinking.” (Robert Mednick)
Financial & Analytical Techniques to support the Efficient Employment of Resources
Unprecedented Opportunity Suppliers Auditors Customers Value Creating Processes Decision Support, Planning and Control Inputs Outputs External Reporting External Market & Environment Competition
The CMA adds a broad range of influence in the accountant’s value chain Design Implement Manage Report Audit Professional Management Accounting Public Accounting Accounting Foundation, Commitment to Ethics, Emphasis on Decision Support, Planning and Control Commitment to Ongoing Continuing Professional Development Inside
The CMA adds a broad range of influence in the accountant’s value chain CMA Exam Overview
Part 1: Business Analysis
- 3 hours, 110 multiple choice questions
Part 2: Management Accounting and Reporting
- 4 hours, 140 multiple choice questions
Part 3: Strategic Management
- 3 hours, 110 multiple choice questions
Part 4: Business Applications
- 3 hours, 4 -7 Essay Questions
Exam parts 1, 2, and 3 may be taken in any order but must all be passed before registering for Part 4
The CMA adds a broad range of influence in the accountant’s value chain Part 1 – Business Analysis Quantitative Methods 15% Financial Statement Analysis 25% Business Economics 25% Internal Controls 15% Global Business 20%
The CMA adds a broad range of influence in the accountant’s value chain Part 2 – Management Accounting and Reporting Cost Management 25% External Reporting 25% Performance Measurement 20% Budget Preparation 15% Information Management 15%
The CMA adds a broad range of influence in the accountant’s value chain Part 3 – Strategic Management Decision Analysis 25% Investment Decisions 20% Strategic Marketing 15% Corporate Finance 25% Strategic Planning 15%
The CMA adds a broad range of influence in the accountant’s value chain Part 4 – Business Applications
Must complete Parts 1, 2, and 3 first
3 hours, 4-7 essays/problems
All content from Parts 1, 2, and 3 included
Plus: Ethics, Organization Management, Organization Communication, and Behavioral Issues
Finance professionals “inside ” driving business performance through effective decision support, planning, and control - represent more than 90% of finance function professionals in the U.S. (U.S. Bureau of Labor Statistics)
External audit (“checkers”) - represent less than 10% of professionals
Current imbalance – audit dominates public perception
Sarbanes-Oxley 404 focuses on “inside” financial staff
Management accountants and finance professionals who design, implement, and manage an organization’s control systems to drive business performance
Domain of IMA Members – finance professionals “inside”
“ Building Quality In” vs. “inspecting quality in”
Provide strategic analysis and other highly complex services
Partner with other executives as value creators
Source: Bureau of Labor Statistics website (http://bls.gov/cps/cpsaat11.pdf). US Market opportunity significant IMA present market share is 1% AICPA current market share is 6% 7.9% 19.1% 6.1% 8.4% 2.5% 5.8% 10.0% 6.9% 7.8% 7.4% 8.6% % of Black African American 5.8% 4.5% 9.9% 4.2% 0.7% 4.1% 4.0% 4.7% 4.8% 3.9% 9.5% % of Asian 63.7% 63.6% 63.1% 71.2% 17.7% 26.6% 56.7% 41.8% 56.6% 91.8% 60.5% % of Women 5.9% 81,000 Tax examiners, collectors and revenue agents 7.1% 6,010,000 TOTAL 8.1% 88,000 Tax preparers 49.0% 98,000 Insurance underwriters 4.5% 98,000 Cost estimators 2.9% 331,000 Personal financial advisors 8.2% 425,000 Loan counselors and officers 4.3% 554,000 Management analysts 6.9% 1,045,000 Financial managers 6.9% 1,567,000 Bookkeeping, accounting, and auditing clerks 6.7% 1,723,000 Accountants and auditors Employment in 2004 % of Hispanics Job Description
2003 E&Y Management Accounting Survey Corporate leaders and decision makers said their “Number One” financial challenge today is getting accurate and actionable cost information in a timely manner! Cost Accounting Students – still think boring class lectures lack “real world” relevancy? “ Hey McFly! . . . Hello? . . . is anybody home?”
Mission: To provide a dynamic forum for management accounting and finance professionals to develop and advance their careers through certification, research and practice development, education, networking, and the advocacy of the highest ethical and professional practices.
Vision: The world’s leading association for management accounting and finance professionals.
“ Rebalance the accountancy profession by building quality financial practices, ethical and responsible corporate governance, and operational control from inside an organization.” Paul Sharman, President and CEO, IMA Today’s Challenge
Developing a significant group of professionals inside organizations who are properly qualified to drive ethical and responsible corporate governance, and decision support, planning, and control over value-creating operations
Elevate Public Awareness of Advanced-Level CMA and CFM Credentials within Key Target Markets
CPA is an entry-level designation (according to the website of the AICPA)
As many as 80% of those who enter public accounting eventually leave to work in industry
IMA’s Certified Management Accountant (CMA) certification best supports “inside” management accountants and finance professionals who drive business performance
“ Inside” professionals represent more than 90% of finance function professionals today
Recently completed comprehensive benchmarking analysis of CMA program
Results confirm the program is world class, incorporating advanced management concepts with cutting-edge industry practices and superior ethical standards
No other finance or accounting credential lends itself more directly to today’s complex and changing business environment
CMA as the appropriate worldwide standard for accountants working inside businesses
Certified Management Accountant
“ The CMA has always been the appropriate, worldwide standard for accountants working inside businesses, who represent over 00 percent of all accountants today. This has now been confirmed* for IMA by an independent review.” IMA Press Release March 1, 2005 (*Based on an independent study conducted by Credentialing Services Group of McLean, Virginia) “… accounting is truly the language of business and that of all the accounting certifications available, only the CMA touches every aspect of business and decision making. The CMA is a broad-based, international credential that is uniform across all parts of the globe.” IMA Press Release March 1, 2005 (*Based on independent focus group study conducted by Environics Research) Role of Management Accounting
Management Accounting today exhibits Entrepreneurial Leadership in aggressively leading the way “to advance the management accounting and finance profession, and ultimately achieve our goal of building quality financial and governance practices inside organizations.” IMA Press Release March 1, 2005 Management Accounting demands competent professionals who embrace superior ethical standards. The Institute of Management Accounting is committed to restore confidence in the marketplace, thereby improve the quality of all communities. SUMMARY