Managerial accounting provides small business owners with data-driven insights to help make informed decisions. It allows owners to analyze costs related to different marketing or product options through relevant cost analysis. Activity-based costing techniques help determine the most profitable customers to target. Make or buy analyses aid decisions on whether to produce or outsource components. Overall, managerial accounting equips owners with financial information to guide strategic planning and justify decisions objectively.

1. Why Accounting Is Important in Decision-Making
Small business owners are faced with countless decisions every business day. Managerial
accounting information provides data-driven input to these decisions, which can improve
decision-making over the long term. Small business managers can leverage this powerful tool to
help make their business more successful by understanding how management accounting
benefits common business decision contexts.
Relevant Cost Analysis
Managerial accounting information is used by company management to determine what should
be sold and how to sell it. For example, a small business owner may be unsure where he should
focus his marketing efforts. To evaluate this decision, an accounting manager could examine the
costs that differ between advertising alternatives for each product, ignoring common costs. This
process is known as relevant cost analysis and is a technique that is taught in basic managerial
accounting courses. The same process can be used to determine whether to add product lines or
discontinue operations.
Activity-based Costing Techniques
Once the company has determined what products to sell, the business needs to determine to
whom they should sell the products. By using activity-based costing techniques, small business
management can determine the activities required to produce and service a product line.
Embedded in this information is the cost of customers. Deciding which customers are more or
less profitable allows the business owner to focus advertising toward the consumers who are the
most profitable.
Make or Buy Analysis
A primary use of managerial accounting information is to provide information used in
manufacturing. For example, a small business owner may be considering whether to make or buy
a component needed to manufacture the company's primary product. By completing a make or
buy analysis, she can determine which choice is more profitable. While this technique is
certainly useful, small business owners should only use these analyses as a factor in the decision.
There could be other non-financial metrics that are important to consider that would not be part
of the analysis.
Utilizing the Data
Managerial accounting information provides a data-driven look at how to grow a small business.
Budgeting, financial statement projections and balanced scorecards are just a few examples of
how managerial accounting information is used to provide information to help management
guide the future of a company. By focusing on this data, managers can make decisions that aim

2. for continuous improvement and are justifiable based on intelligent analysis of the company data, as
opposed to gut feelings.
Interst of stake holders
Accounting department tells about the profit and loss of the company. On the basis of which the
share price of companies increases or decreases and stake holder intrest increases or decreease.
Helpful information providing
Accounting is very important in companies when it is realted to infromation. If the infromation
provide by the account department is not reliable the results will be wrong. So there should be
integrity in the information because all the decision making is depending on the result provide by
the marketing department.
Market segmentation
Companies are doing diferent businesis so they have to take care of each single business unit
their requirments. For this purpose companies have different account managers for their each
different single business unit these managers calculate their sales and expenditure and give their
reports to the top management on thes basis of these reports which are provide by these
managers the resources are allocated to each single business.
Procurement
During purchasing the account department of a company tells that how much a company can
purchase raw material and what type of quality it should be depending on the finance avaliable
for purchasing. Account department has record of inventory that how much inventory is avliable
and what sort of amount is required to complete that inventory.
Business Decisions
Outside parties may decided to invest in a company based on its economic performance as
shown on the financial statements, but there are other ways to use the financials statements to
make business decisions. By carefully reviewing the financial statements companies can make
best use of their assets.

3. Companies can use the statement of cash flows to make sure they are collecting all the cash they
are due. Companies can also choose to delay major purchases or the retirement of equipment
based on the affect that transaction would have on the financial statements.
References
http://smallbusiness.chron.com/management-accounting-important-decisionmaking-53947.html
www.principlesofaccounting.com