Marketing Thought

Management Accounting For Marketers

Marketers often want to make the case that accounting does not treat marketing well. I have good news for marketers, there is a major group of accountants who (should) agree with you. There are accountants who feel that financial accounting standards have subverted their discipline. Managerial accountants, whose job it is to deal with internal reporting, largely lost their struggle with financial accountants. In modern accounting, the needs of financial accounting seem always to come first, next, and last. This is not how it is always was. Looking for an ally, marketers? Study management accounting for marketers.

Management Accounting For Marketers

A generation or more ago H. Thomas Johnson and Robert Kaplan published a major book on management accounting. I think it still holds true. (I have the 1991 paperback edition). This is an important and useful text. The authors argue that management accounting over time came to be seen as a supporting function. Financial accounting was firmly in charge.

This isn’t how it all started. The authors give detail on accounting history. Management accounting functions emerged to help managers (of course). Yet, that purpose has often been somewhat lost.

Their original purpose of providing information to facilitate cost control and performance measurement in hierarchical organizations has been transformed to one of compiling costs for periodic financial statements.

Johnson and Kaplan, 1991, page 253

It is critical to understand that internal accounting really should be about helping managers. Now it is often more focused on providing numbers in acceptable formats for external reports. Numbers in the formats that investors need are likely not useful for managers. Above all, it is important to note that the original functions of management accounting really matter. Managerial decisions help create value; financial accounting merely reports (often not very well) on the value creation that has occurred.

Management Accounting Versus Financial Accounting

For Accountants, By Accountants

For too many firms today, however, the management accounting system is seen as a system designed and run by accountants to satisfy the informational needs of accountants.

Johnson and Kaplan, 1991, page 262

This has got to change. Marketers can help. Indeed, I would say it is in our interests to do so if we want more useful management information systems. When management accounting systems help managers this helps marketers. The book, Relevance Lost, came out in 1987 but I don’t think too much has changed.

How can marketers help things change for the better?

For more on accounting see here.

If you want to know more about marketing accounts — management accounts designed for marketers — see here.

Read: H. Thomas Johnson and Robert Kaplan (1991) Relevance Lost: The Rise And Fall Of Management Accounting, Harvard Business School Press

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