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August 31, 2010

Sandra Richtermeyer interview: Reaching full potential

A lack of understanding from the wider business community and inefficient use of technology is preventing the management accounting profession from reaching its full potential. Institute of Management Accountants chair Sandra Richtermeyer tells Carolyn Canham about ways the profession can move forward.

Sandra Richtermeyer

Management accountants are being prevented from focusing on some of the ways they can fulfil management’s needs for decision support, planning and control because they are too worried about external facing activities.

So says the new Institute of Management Accountants (IMA) chair Sandra Richtermeyer and there are few better placed to discuss management accounting and its role in business.

Richtermeyer has worked in business and public practice and now chairs the accountancy department at Xavier University in Ohio. She is a certified management accountant and a CPA, with academic qualifications, including a PhD and an MBA.

Lack of understanding

The management accounting profession is gaining momentum around the world, with internationally focused organisations such as the IMA and national bodies growing in popularity among people wanting to pursue a business accounting career. But holding the profession back is the fact that non-accounting professionals in the wider business community often underestimate the complexity of the management accounting role, Richtermeyer says.

“Management accounting professionals may spend about 75% of their time on activities related to external reporting or compliance-type issues, which means they can be left with little time to really focus on accounting issues that help their internal customers with their needs in decision support, planning and control,” Richtermeyer says.

“This can leave the management accountant quite stressed as they may strive to play a more strategic role in organisation-wide initiatives, but run short on time and then consequently cannot be as thorough or complete as they would like.”

Richtermeyer has also observed that management accounting may not be given enough “face time” in governance-related activities.

“When we examine boards of publicly-traded companies, we commonly see separate board committees that are charged with oversight regarding the external audit, investments or financial disclosures,” she explains.

“It seems that many boards do not have a governance structure that recognises the importance of how and when to focus on internal accounting analysis– the side of the equation that can really help them monitor and provide oversight on the company’s strategic performance.

“This can contribute to less than optimal decision-making or misdirection by the board.”

Quote from Sandra Richtermeyer, IMATechnical challenges

Richtermeyer also believes management accounting best practices are often missed because of a lack of understanding about how to deploy these practices using existing technology.

“Many organisations have up-to-date enterprise systems or emerging technologies already in use, but they resort to familiar techniques such as spreadsheets to do a great deal of the analysis needed to produce management accounting information,” Richtermeyer explains.

“This leaves us with challenges in information flow, information integration and internal control. It also leaves the management accountant with more time-consuming tasks as they work around the challenges and spend a great deal of their time in information gathering mode

“There are many well-documented best practices in management accounting and some great case studies on emerging trends, but frequently the technology we have in place makes it very difficult to support them or integrate them properly. This may be due to a lack of understanding on how to use the technology, a lack of time to get proper technology training or just the use of outdated technology.”

Richtermeyer believes that finding new ways to collaborate and share accounting information, and learning how to empower users more, are key ways for management accountants’ roles to become more strategic, allowing them to operate at a higher level of sophistication.

Coping with upheavals

Richtermeyer also believes the role of accounting associations such as the IMA is to help professionals respond in a healthy way to dramatic changes in the business landscape.

When dramatic regulatory or compliance requirements, such as the Sarbanes-Oxley Act, are introduced, the accounting tends to go into upheaval for one or more operating cycles, Richtermeyer explains.

“Our professional development models in accounting may not focus as much on process change or continuous learning as they do on just learning new rules,” she adds.

“Any new regulatory or compliance process brings about new rules, but with a continuous process-improvement philosophy, the changes can be less dramatic.

“Those types of challenges are going to happen all the time so it is important we look at how we build it into our model of continuous adaptation and continuous improvement.”

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