Changing Dimensions of Management Accounting in India and its Relevance for Students

South Asian Federation of Accountants (SAFA)

South Asian Federation of Accountants (SAFA), an IFAC Network Partner, comprises eleven professional accountancy bodies from the South-Asian Region, namely: India, Pakistan, Bangladesh, Sri Lanka, Nepal, Maldives, and Afghanistan. Bhutan, where no accountancy body exists, is an observer. SAFA has undertaken the leadership role in providing a new direction to the accountancy profession within the region and SAFA has over 475,000 members affiliated with its member bodies. The Institute of Chartered Accountants of India (ICAI) hosts SAFA’s Permanent Secretariat at New Delhi. More information on SAFA can be found by visiting the SAFA website.

Cost and Management Accounting

This topic-focused series partners IFAC with the four Cost and Management Accounting-related IFAC members from the South Asia region—Institute of Cost Accountants of India (ICMAI), Institute of Cost and Management Accountants of Bangladesh (ICMAB), Institute of Cost and Management Accountants of Pakistan (ICMAP), and the Institute of Certified Management Accountants Sri Lanka (CMA Sri Lanka)—to produce a series of monthly articles to highlight the importance and impact of these PAOs not only in their jurisdictions but the region they serve. The South Asia region is expanding fast in terms of economic growth and the respective professional bodies have existed for decades to serve the needs of their constituents and growth.

Starting July 2024 until October 2024, each of the professional accounting organizations (PAOs) will prepare an article sharing best practices of their experiences. This will culminate in a final article written in collaboration with all four under the umbrella of the South Asian Federation of Accountants (SAFA).

The first article below is produced by ICMAI India.

The Institute of Cost Accountants of India (ICMAI) (erstwhile The Institute of Cost and Works Accountants of India) was first registered as “Indian Institute of Cost and Works Accountants” on the 14th June 1944 under the Indian Companies Act, 1913. On 28th May 1959, the Institute was established by a special Act of Parliament, namely, the Cost Accountants Act, 1959, as a statutory professional body for the regulation and development of the profession of Cost and Management accountants in India. ICMAI is under the administrative control of the Ministry of Corporate Affairs, Government of India. ICMAI is the largest Cost & Management Accounting body in the world with about 100,000 qualified CMAs and over 600,000 students pursuing the CMA Course. ICMAI is the only recognized statutory professional organization and licensing body in India specializing exclusively in Cost and Management Accountancy. Membership is required for individuals who wish to perform cost accountancy work in India. ICMAI is required to (i) maintain and publish a register of persons qualified to practice as Cost and Management Accountants; (ii) issue certificates of practice; (iii) prescribe IPD and CPD requirements for its members; (iv) establish ethical, professional and technical standards; (v) monitor the performance of its members; and (vi) investigate and discipline members for misconduct. In addition to being an IFAC member, ICMAI is also a member of CAPA and SAFA. For more information on ICMAI, visit: www.icmai.in.

Changing dimensions of management accounting in India and its relevance for students

The Perspective

Business organizations in India are increasingly becoming more complex due to a rapidly changing, uncertain and highly competitive business environment. Businesses face more complex challenges than ever before – including the swift development of new technologies, regulatory and compliance complexity, increasing demands from investors and customers, and geopolitical risks in an increasingly interconnected global economy. India is undergoing a momentous transformation. Indian companies are entering an exciting new world characterized by quick economic, social, and political change. This transformation will provide significant opportunities and challenges for Indian businesses. The changing environment demands dynamic and competent management accountants to lead businesses in this highly volatile and ambiguous business world.

Management accounting plays a critical role in helping Indian organizations across different sectors to navigate in a changing business environment. By providing timely and accurate financial information, budgeting and forecasting support, and cost analysis, management accounting helps decision-makers make informed choices about resource allocation and helps organizations adapt to changing market conditions. Management accounting also facilitates strategy development by analysing industry trends and identifying emerging risks and opportunities. Additionally, management accounting empowers managers to monitor and optimize business performance, identify areas for improvement, and make data-driven decisions that can enhance organizational efficiency and profitability in a rapidly changing business environment.

Evolving dimensions of Management Accounting

Changes in management accounting have radically transformed the role of management accountants. Conventionally, management accountants were important to score keeping, attention directing and problem solving. However, with time, the role of management accountant has transformed to meet the information requirements of the uncertain business environment. Management accountants have now adopted the role of business partners and information analysts, enabling them to upgrade from a centralized accounting function to a partnership with managers in business units.

Conventionally, management accountants were concerned with formal, financial and historical information obtained from a financial accounting system. Management accounting had a short-term outlook as it facilitated information for internal happenings of the company without any strategic intentions. The present-day management accountant explores and supplies informal, non-financial and proactive information. Apart from internal aspects, management accountants consider and analyse external factors like customer information, supplier information, competition analysis and society as a whole. They work on a broader perspective with a strategic base.

Management Accounting in India

The landscape of management accounting in India has undergone significant transformations over the past decades, in line with broader changes in business dynamics and organizational needs. The increasing complexity of business environments, characterized by rapid technological advancements and globalization, has necessitated more dynamic and versatile management accounting practices. These practices are now expected to provide deeper insights into not just financial metrics but also non-financial indicators that are crucial for strategic decision-making. In more recent times, the focus of management accounting has shifted towards addressing the strategic needs of businesses.

Indian companies are entering an exciting new world characterized by rapid economic, social, and political change, with new opportunities but also greater risks. In the era of fast-track metamorphosis of the business landscape, the role of management accountants appears to be more crucial in handling information that contributes to strategic decision-making. From the perspective of cost accounting and bookkeeping, management accounting is evolving towards having a more impact on the decision-making abilities of a company’s sustainable growth. By helping their organizations develop and implement effective strategic performance management systems, management accountants can and are contributing to the success of their organizations.

Management accountants in India are experiencing an evolutionary change in almost all dimensions of their professional work environment. Management accounting is indispensable in the contemporary business world. It acts as a guiding compass for organizations, navigating the intricacies of finance, and empowering them to make well-informed decisions that foster competitiveness. Nevertheless, like other domains, management accounting is not immune to change. It metamorphoses, aligning itself with shifting business dynamics and technological innovations.  In this rapidly evolving landscape, the role of management accountants extends beyond traditional financial analysis. They are emerging as strategic partners, harnessing the power of technology, sustainability accounting, agile budgeting, and cyber security. Management accountants have a crucial role in Sustainable Value Creation, contributing to the development of business strategies and decision-making processes. As businesses face increasing complexities and uncertainties, keeping abreast of the latest trends in management accounting has never been more critical.

The evolution of management accounting is a tapestry woven by different generations. Each cohort brought its unique lens, shaping the field's trajectory. From cost-centric beginnings to data-driven innovations, management accounting continues to adapt. As we look ahead, we anticipate further shifts driven by Gen Z's influence. The challenge lies in balancing tradition with transformation, ensuring management accounting remains relevant in an ever-changing business landscape. There is also a need to update academic curricula to include modern management accounting tools and methodologies, preparing graduates for the evolving demands of the profession. Collaborative research between academia and industry is encouraged to address practical challenges and innovate management accounting practices.

The integration of managerial accounting with enterprise and corporate performance management (EPM/CPM) methods along with a shift towards predictive accounting, driver-based budgeting, financial forecasts, and incorporation of analytics into managerial accounting practices signifies a move towards data-driven decision-making. Practitioners should remain vigilant and adaptable to economic and regulatory shifts to maintain compliance and relevance.

Key dimensions of evolving role of management accountants

Globalization

To access useful information from anywhere in the world and seize the opportunities to offer services in multiple economies.

To analyse and address the inherent risks involved in multiple economies.

To develop and use globally competitive costing techniques for the products and services.

To identify the ways to reduce costs and a culture of innovation.

To develop new strategies and structures to realize opportunities and prevent threats.

Information technology

To move from the periodicity of reporting MA information to real-time reporting.

To develop customized financial information reporting and integrate the concepts of internal and external reporting.

To accommodate new business needs and develop core competencies in the profession.

Knowledge economy

To convert information into knowledge in a cost-effective manner.

To increase outsourcing, improve efficiency, and reduce costs.

To take advantage of growing opportunities.

To offer specialized information and create value.

Relevance of MA for students

In emerging India, awareness of the growing body of knowledge of management accounting, and developing accounting and finance professionals with this important skill set, is becoming essential for companies that want to develop successful strategies and manage their organizations’ performance effectively. Management accountants should actively pursue solutions, question established norms and maintain a mind, towards fresh ideas. By doing so, they become drivers of progress, guiding their organizations toward greater financial stability and strategic excellence in an ever-changing business world. In this era of transformation, the role of management accountants is more crucial than ever, with their ability to shape the future of their field and their organizations. The competence in the MA function is underpinned by management accountants' roles and capabilities that are, in turn, associated with individual attributes. IFAC classifies the individual skills and knowledge critical to an MA professional's success into cognitive and behavioural skills. ICMAI is keeping pace with the changing business environment in India with competitive and relevant adaptations to make a competent and future-proof management accountant who can amalgamate the accounting skill and related technologies to make strategic financial decisions.

Conclusion

In conclusion, management accounting is amid a dynamic shift marked by key trends such as technology integration, sustainability accounting, agile budgeting, and cyber security. These trends redefine the profession and its impact on organizations. To thrive in this evolving landscape, management accountants must prioritize continuous learning to ensure their valuable contributions to Indian organizations. The effect of globalization and the customer-driven business environment demand dynamic and competent management accountants with cognitive and behavioural skills to adapt to the changing phenomenon. The effect of globalization and the customer driven business environment demand dynamic and competent management accountants with cognitive and behavioural skills to adapt to the changing phenomenon. They are expected to be more strategic and not just static information providers.

CMA (Dr.) Ashish Thatte

Cost and Management Accountant

CMA Dr. Ashish Thatte is a renowned Cost and Management Accountant (CMA) in the Country. He started his career as a CMA in a leading pharmaceutical manufacturing company, Abbott India Limited. After winning the First Managing Director’s Award in the hands of Managing Director of the company for exceptional performance, he decided to find himself in the big world as a teaching professional.

He worked as a Professor in leading management institutions like the Chetana and Indira group of Institutions. He was associated with the visiting faculty in management colleges like ITM, ICFAI, IFEEL etc. He was also a leading faculty member in the Institute of Cost Accountants of India's Oral Coaching and Campus Orientation Program. He pioneered the Soft Skill Development Program for budding and upcoming CMA professionals during his tenure at Mumbai.

He has conducted numerous webinars, seminars and workshops for all 3 professional institutions at various locations across the country. He has conducted a number of webinars and corporate trainings for quite a few companies in and around India. He has also given professional talks in countries outside of India.

CMA Dr. Ashish Thatte completed his M.Com and Cost Accounting degrees before he joined the corporate world. After stepping into a teacher’s role, he successfully completed his studies for Doctor of Philosophy (PhD) from the prestigious Symbiosis International Deemed University and never looked back. He is presently a Partner in the leading Cost and Management Accounting firm Joshi Apte and Associates where he specializes in Cost Audits, Cost Management, Internal Audits, Designing MIS, ERP Implementation and Valuations, etc. He is also an Insolvency Professional and an Independent Director.

He is popular for appearing on national and local television channels expressing his views on income tax, GST, and economic matters. He also writes articles for local newspapers which are quite popular. His scholarly articles are published by magazines across the country and world. He is also the youngest Chairman of Western India's Regional Council for the Institute of Cost Accountants of India (ICMAI). Presently he is Member of Central Council of The Institute of Cost Accountants of India 2023-27. Currently, he is also Chairman of Sustainability Standards Board and International Affairs Committee of ICMAI. He is a member of Member’s Development Committee (MDC) of Confederation of Asia Pacific Accountants (CAPA) from 2020-2024.

Besides all his activities he is a national- and international-level chess player and has won many medals as an individual, and on teams. He is an internationally rated chess player in India.