Accounting for marketing deserves more consideration. Neither accountants nor marketers seem to give it much thought. That is a shame. It is a key area for understanding business. Yet, few are experts in it.
Accounting For Marketing
I think that there is a desperate need for marketers to understand accounting. Indeed, I think a lot of research in the area of Marketing/Finance gets into problems through lack of accounting knowledge. I don’t think you should get through marketing training without knowing budgeting at a minimum. Marketers should know why brands are treated as they are. (Not saying it is right).
The reverse is almost certainly true too. If accountants don’t understand marketing well, then they can’t hope to properly report on marketing externally. Neither can they supply managers the sort of information that allows for informed marketing decisions. For example, what brands 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.”
Richard Wilson did a lot of work in this area and has an interesting book on the topic. A lot of this book is devoted to explaining managerial accounting. For example, there is an extensive section on variance analysis. This is breaking down differences between actual values and budgets etc… Where are costs too high? Where are revenues too low? Which areas are performing well? Which poorly?
Wilson discusses ratio analysis. He notes why it is important when constructing ratios to compare things that are meaningfully related. Why work out the ratio of advertising expenditure to miles traveled by salespeople? It isn’t a meaningful ratio.
He also extensively details how to measure performance. The book examines various types of managerial control. The largely managerial accounting focus leaves a need for more on other challenges. Especially the problems in financial accounting for marketing.
That said, I think marketers and accountants would benefit from reading Wilson’s book. We should all understand a little better how marketing is accounted for.
If you want to read about marketing metrics I have a suggestion.
Read: Richard M S Wilson, 1999, Accounting for Marketing, Thomson Business Press