Everybody makes mistakes. Nothing bad about that in general, as long as we learn from it and improve in the future. However, there are some common professional pitfalls that you can avoid. This article helps you avoid four common mistakes made by management accountants.
1st mistake to avoid: forget to align budget to strategy
This one is classical. It happens all the time, again and again. The company you work for should have a strategy. It is likely management is reviewing this paper yearly or by some other rhythm, so it stays up to date. When you start the budgeting process you need to make sure that everything you plan is in line with that strategy. Why else would there be a strategy?
Unfortunately, it is very common that a strategy exists but all planning guidelines and thus all financial plans are not fully interrelated with it. Avoid that situation! If the strategy is not clear, ask management to provide it before you start budgeting. Read more about budgeting here.
2: Make statements without underlying facts
As a management accountant, you are a person of high interest. You have a certain level of understanding of the business and its figures. So, it is common to engage in talks with other people, managers, directors and so on. Often information or advice is sought. Take a moment there not to make any statement you are not sure of. Make sure you have analyzed properly before pretending to know some facts.
If needed, take your time to answer. Say “I look up the figures and gladly come back to you with a profound answer. Statements without knowing the facts put you in a really bad light. Avoid it.
3rd mistake management accountants do: Get blended by managers
If we are already dealing with the management accountant as a dialog partner to management, we should also note a certain danger of blending. Managers may have their own agenda, priorities and thinking, so you could easily end up being (well not lied to but…) blended. Do not take any offense, it is just a “business process”.
What you can and should do though is asking questions, challenge and demand explanations. Write those things down or save relevant e-mails. Next time hold them accountable for what they said earlier. If deviations occur, ask again for reasons. Managers working with you will realize that you do not get blended easily and will open up to you. Well, of course, you also need to offer open communication.
#4: Not consulting past years performance
Is last year’s performance really only a past? Don’t fall into the trap here. Of course, it is past, it is done, it is a fixed figure. However, some underlying logics don’t just change.
One example, if your company had a production of roughly 12’000 units in the last years and for the coming year forecasts 14’000 units. That is 16.7% more. There must be some fundamental changes, right? Say market demand highly increased and production capabilities grew. Is that visible in your budget?
The story here is simple, not consulting the past to challenge any forecasts or future plans is a mistake. Take the past into consideration, challenge and help to build a successful future based on solid financial plans.