Why Cost & Management Accountant(CMA)
CMA is strategic management accounting professional who combine accounting expertise with professional management skills to provide leadership, innovation and an integrating perspective to organizational decision-making. CMAs apply advanced management practices in a wide array of business functions including strategic planning, Cost Reduction, Cost Controlling, finance, human resources, marketing, operations, information technology and corporate accountability.
CMAs have unique competencies in cost management, strategic performance measurement, process management, risk management, assurance services and stakeholder reporting, coupled with the ability to connect strategy with operations and anticipate customer and supplier needs.
Working in organizations of all sizes, CMAs provide an integrating perspective to business decision-making, applying best management practices in wide areas of business including strategic planning, finance, human resources, marketing, operations, information technology and corporate accountability, to identify new market opportunities and help organizations to maintain a sustainable long-term competitive advantage.
How CMA is different
Unlike other accounting professionals who specialize in financial and tax auditing or after-the-fact verification, the CMA provides real-world strategic direction, business management, leadership and a collaborative approach to help grow successful businesses.
CMA creates value instead of just measuring it. CMAs go beyond accountancy by using strategic financial management skills to focus on future success rather than past performance.
CMA understand the business formula for delivering value to the customer, arriving at strategies for identifying, developing, marketing and evaluating a product or service throughout its entire life cycle. CMAs are able to assess all aspects of a product or service, its quality, performance, cost, and responsiveness to customer needs and expectations
What is Cost Accountancy?
Cost Accountancy is a term used to mean a profession as well as the course (field of study).
Cost Accountancy – a Profession
Lawyers are engaged in the legal profession, doctors in the medical profession. Similarly cost accountants are engaged in the cost accountancy profession.
Cost and Management Accounting, Cost Audit (verification of cost accounting record), are the core areas dealt with by cost accountants. They area also capable of expert level services in the areas of General Management, Personnel Management, Operations Management, Production Management.
Cost Accountancy – a course
Law is a course that candidates pursue to become lawyers. Medicine is a course that aspirants to the medical profession pursue. Similarly, prospective cost accountants pursue the cost accountancy course.
The cost Accountancy course is designed and conducted by the body that regulates the profession. The course generally consists of a mix of theoretical study and practical training.
Who is a Cost Accountant?
I am not Book-Keeper – I am Custodian of facts
I do not Follow paper trail – I Lead the trail
I Evolve and Generate – not only Verify
I think Strategically – not Historically
I act Pro-actively – not Re-actively
I get Strong with movement – not stagnation
I am on Front-lines – not on Side-lines
I am Vigilant – not Ignorant
I believe in Risks and its Management – not Conservatism
I am Agent to change – not Resistant to change
I believe in Creativity – not only Consistency
I work in Team – not Alone
I am a Specialist – not a Jack-of-all
I belong to a noble profession – I am a Cost & Management Accountant
A Cost Accountant (CMA/CWA) is a professional accountant by virtue of his/her being a member of the professional body of accountants conducting the cost accountancy course.
Cost Accountants carry on professional practice as Cost Accountants either individually or as a firm (in partnership with other cost accountants). They are mostly found working as employees/consultants in organisations. Some carry on professional practice and work as employees/consultants in organisations part time.
Cost Accounting Field
To have an understanding on what a cost accountant does, we have to understand some relevant aspects which are explained below.
Motive of a business
Profit is the basic motive for any business. Organisations work towards achieving their objectives in an efficient manner. Efficiency in earning profits implies maximising profits with the least possible use of resources.
Earning More Profit
Consider a company manufacturing a product at Rs 150 per piece and selling it at Rs 230 per piece. It is making a profit of Rs 80 a piece. It is at present selling 10,000 units and thereby making a profit of Rs 8,00,000.
The company is now wanting to earn greater profits. It has set itself a target of Rs. 10,00,000. It has identified that it cannot immediately increase the quantity of sale.
By increasing Sale Price
For achieving its objective the company may increase the selling price to Rs 250 and earn a profit of Rs 100 a piece. The company would be able to earn the targeted profit of Rs. 10,00,000, if it can maintain the quantity of sales at its earlier figure of 10,000.
However in this competitive market, there is no guarantee that the sales would not go down if the price is increased. The basic economic principle says demand decreases as price increases.
By increasing the price the company is meddling with factors relating to the external environment which inevitably may have other implications also.
By controlling costs
The company can target achieving the same amount of profit by using an alternative route i.e. cost control.
If the company is able to manufacture the same product (at the same or even better quality) at a lesser cost say Rs. 130 a piece, the company would be able to reach the targeted profit figure without having to lose customers as it is only handling the internal factors i.e. factors in its own hands.
If by controlling cost the same product can be manufactured at the same quality or even better quality at Rs 130 a piece, the company would be making a profit of Rs. 100 per piece at the same selling price of Rs. 230 and thereby reach the targeted profit figure of Rs. 10,00,000 by selling the same quantity of 10,000 units as earlier. If it is able to achieve better quality at that price, the quantity of sale may also exceed the present figure, thereby generating profit in excess of the target.
This process of controlling/reducing costs involves using the accounting and quantitative techniques to take decisions which would ultimately result in cost reduction.
Wastages in raw materials used, labour, less productive manufacturing methodologies etc., will be identified and corrective steps taken to benefit the organization.
Objective with which a cost accountant works
This is what a cost accountant is supposed to do. This will also benefit the society at large by conserving precious resources used in manufacturing..
In such industries as the governments feel appropriate, maintenance of cost accounting records is made mandatory and all such organisations have to get their records certified by a practicing cost accountant.
This is generally done in industries which use precious natural resources whose conservative and efficient use is a requirement for the society as a whole.
Cost Control/Reduction, is not the only function performed by cost accountants.
Becoming a Cost Accountant - Course Structure
There are two entry levels for this course.
- A student pursuing the course after 10 + 2/Senior Secondary/intermediate has to start at the Foundation level.
- A student starting the pursuit after graduation (10 + 2 + 3) can start at the Intermediate Level directly.
Prospects, Special Government Services for Cost Accountants
Cost Accountants, on account of their having completed the Cost Accountancy(CMA) course are considered to be candidates with knowledge, ability and intelligence. For this reason, they are the preferred lot for a lot of accounting , Cost Accounting and managerial jobs.
Financial Manager, Finance Director, Financial Controller, Chief Accountant, Cost Controller, Marketing Manager, Chief Internal Auditor, Managing Director etc., are some such jobs where people with professional Accounting & Cost Accounting knowledge are sought after.
With the growing trend of back office operations, many multi national organisations having their back offices in india employ professional accountants.
A qualified professional can set up his/her own private practice as a practicing cost accountant. Apart from the statutory opportunities that would be available to a cost accountant, one can play the role of a consultant for any organisation relating to the functions of accounting, taxation, auditing, cost management etc.
However a cost accountant as a consultant would be preferred in areas of costing and management accounting rather than taxation, financial accounting and auditing functions.
Special Government Services
Realising the importance of the profession of Cost and Management Accountancy, the central government has constituted an all India cadre known as Indian Cost Accounts Service (ICAS) at par with other Class – I services such as IAS, IFS etc., to advise the government in cost and pricing and in framing the appropriate fiscal and tax policies.
As per the decision of the AICTE (All India Council for Technical Education), Fellow members of ICAI are treated at par with Ph. D candidates in so far as appointment in the post of Professor, Associate Professor, Reader, Assistant Professor and Lecturer in professional/ Management Institutes.
About the Institute ICAI - Institute of Cost Accountants of India?
The Indian institute of Cost and Works Accountant was first established in 1944 as a registered company under the Companies Act with the objects of promoting, regulating and developing the profession of Cost Accountancy. It specializes in the field of Cost and Management Accountancy.
The ICAI came into being by “The Cost and Works Accountants Act” a special act passed by the parliament in 1959 on 28th May 1959.
The Cost Accountancy profession is regulated by a council in accordance with the provisions of “The Cost and Works Accountants Act”.
The council consists of 12 elected members and 4 nominees of the central Government.