Accounting for Marketing

I think that there is a desperate need for marketers to understand accounting. (Indeed, I think a lot of marketing research in the area of Marketing and Finance gets into problems through lack of accounting knowledge). The reverse is almost certainly true too. If accountants don’t understand marketing well they can’t hope to properly report on marketing externally, or supply marketers internally the sort of information that allows for informed marketing decisions, such as what to invest in. As Wilson (1999) says: ” Accountants need to understand the context of marketing if they are to design and operate systems that are useful to marketers, whilst marketers need to be aware of the potential of accounting information to help them in achieving desired marketing outcomes.” (Wilson, 1999, preface).

Richard Wilson did a lot of work in this area and has an interesting book — Accounting for Marketing. A lot of this book is devoted to explaining managerial accounting. For example, there is an extensive section on variance analysis. (Breaking down differences between actual values and budgets etc…) He discusses ratio analysis and why it is important when constructing ratios to compare things that are meaningfully related. (Why work out the ratio of advertising expenditure to miles travelled by salespeople? It isn’t a meaningful ratio.) He also extensively details how to measure performance and the various types of control. Given the largely managerial accounting focus of his book there remains a need for more on the challenges of accounting for marketing. Especially the problems in financial accounting for marketing.

That said I think marketers and accountants would benefit from reading Wilson’s book and understanding a little better how marketing is accounted for.

Read: Richard M S Wilson, 1999, Accounting for Marketing, Thomson Business Press