Stockholders, creditors, and private investors often need assurance that the financial statements accurately represent the true financial position of a company.

Business owners often use management accounting to track, record and report financial information for managerial review. Management accounting does not usually follow any national accounting standards.

Business owners can design management accounting systems according to their business operations or need for business information. Management accounting has several advantages. These advantages usually coincide with the ability for companies to improve operations and overall profitability.

Business owners can also create a competitive advantage by developing cost allocation processes in their management accounting function.

Reduce Expenses: Management accounting can help companies lower their operational expenses. Business owners often use management accounting information to review the cost of economic resources and other business operations. This information allows owners to better understand how much money it costs to run the business.

Improve Cash Flow: Budgets are a major part of management accounting. Business owners often use budgets so they have a financial road map for future business expenditures. Many budgets are based on historical financial information. Management accountants will comb through this information and create a master budget for the entire company. Larger business organizations may use several smaller budgets for divisions or departments.

These individual budgets usually roll up into the overall master budget. The main purpose of budgets is to save the company money through careful analysis of necessary and unnecessary cash expenditures.

Business Decisions: Management accounting often improves the business decision-making process. Rather than making business decisions based solely on qualitative analysis, business owners or managers can use management accounting information as a decision-making tool. Management accounting usually provides a quantitative analysis for various decision opportunities. Business owners can review each opportunity through the prism of quantitative analysis to assure they have a clear understanding relating to business decisions.

Increase Financial Returns: Business owners can also use management accounting to increase their financial returns. Management accountants can prepare financial forecasts relating to consumer demand, potential sales or the effects of consumer price changes in the economic marketplace. Business owners will often use this information to ensure they can produce enough goods or services to meet consumer demand at current prices. Companies also pay close attention to the amount of competition in the economic marketplace. Competition can reduce the returns from business operations.