So, you want a career in accounting but you’re stuck between management accounting and financial accounting. There can be lots of confusion around these two career paths and disciplines so we’ve broken down everything you need to know to help you make your choice when it comes to financial accounting vs management accounting. Although both involve working with financial information, they have different goals, audiences and can often lead to different career paths.
The simplest way to understand management accounting vs financial accounting is this:
- Financial accounting focuses on reporting a company’s financial performance to external stakeholders in a business, such as investors, lenders, regulatory bodies and tax authorities
- Management accounting (or managerial accounting) focuses on helping internal staff (managers, executives etc.) make informed decisions around budgets, costs, performance and future growth
It’s important to understand these differences so you can choose an accounting specialisation or course that matches your interests and career goals. It can be daunting choosing something so early on that might define your path, but remember you can always talk to advisors during the course if you think that maybe another course might be right for you. And, figuring out the essential differences now will help you make an informed decision.
What’s great is that, whichever route you choose, both types of accounting offer excellent opportunities across industries worldwide.
Management accounting vs financial accounting: the headlines
Financial accounting | Management accounting |
Reports financial performance to external stakeholders | Supports internal business decisions |
Focuses on past financial performance | Focuses on current performance and future planning |
Must follow accounting standards and regulations | Flexible reporting based on business needs and stakeholder expectations |
Careers include financial account, auditor and tax accountant | Careers include management accountant, business analyst and finance manager |
Success measured through accuracy and compliance | Success is measured through strategy delivery and improved business performance |
What is financial accounting?
Financial accounting is the process of recording, organising and reporting a company’s financial activities. Its main function is providing accurate financial information to people outside of an organisation.
A financial accountant helps investors evaluate companies, banks assess lending decisions, governments collect taxes and means oversight bodies can ensure businesses are meeting legal reporting requirements.
A day in the life of a financial accountant looks like:
- Preparing and reviewing financial statements
- Recording business transactions
- Assessing accuracy of financial records
- Ensuring compliance with accounting standards
- Preparing information for tax reporting
You’re always working towards external, industry-wide and government-enforced standards so being aware of up-to-date legislation is important. While you’re employed by an individual business, you’re also accountable to auditors and governments. Transparency, accuracy and consistency are essential so that investors and external organisations can understand the workings of your business.
Financial accounting is ideal for you if you:
- Are meticulous when it come to detail
- Enjoy working within established guidelines
- Gain fulfilment from structured work
- Don’t mind repetitive formulas and presentation styles
What is management accounting?
Sometimes called managerial accounting, management accounting looks at financial information to improve business performance. Instead of reporting being the main priority, management accountants look to the future to address strategy and growth.
You’ll be looking where a company should invest, reduce costs, how it might generate more profit, budget allocation and potential risks. Management accountant reports are (usually) for internal circulation, posing theoreticals and tying back to strategy and annual plans for the trustee board, executives and other staff.
Responsibilities of a management accountant include:
- Creating and monitoring budgets
- Forecasting revenue, costs and loss
- Analysing business performance
- Advising on financial decisions
- Identifying areas to improve efficiency
A management accountant works closely with other teams in companies to understand area needs so budget allocations are fair and informed. They also sometimes are relied upon in executive and board meetings to present financial reports in support of strategy and budget planning.
The big differences between management and financial accounting
Put simply, financial accounting explains what already happened and management accounting helps businesses decide what to do next.
Financial accounting | Management accounting |
External | Internal |
Using past information | Future-focused planning |
Standardised reports, fitting industry requirements | Custom reports, designed for internal colleagues |
Legal compliance | Business growth |
Annual/quarterly reporting | Reporting decided by individual business |
Information for investors, auditors and regulatory bodies | Information for managers, executives, trustees |
While both roles look at and use financial data, management accountants are planning and projecting, and financial accountants are reporting and complying.
Reporting styles and responsibilities
Reports are a big part of both roles, but the style of report reflects the different decisions each role is influencing:
Financial accounting | Management accounting |
Income statements | Budget reports |
Balance sheets | Sales forecasts |
Cash flow statements | Cost analysis |
Annual reports | Performance dashboards |
Audit documents | Department reports |
Tax information | Investment analysis |
A financial accountant needs their reports to be:
- Compliant with regulations
- Accurate
- Exact and actual
A management accountant can be more theoretical and interpretive so their reports might be:
- Identifying trends
- Recommending actions
- Accurate
- Projecting potential profits based on different options
A clear example of where the roles differ is when it comes to a decline in profits. For a financial accountant, they’d be recording the accounts and reporting the numbers succinctly. On the other hand, a management accountant would create a narrative for the numbers and suggest practical improvements to reduce the loss and manage potential risk.
Skills needed for financial accounting vs management accounting
There’s a lot of crossover when it comes to skills required for these two accounting disciplines. Obviously you’ll need to be maths-savvy and have a high attention to detail, as well as the usual skills any job will look for (think team player, highly organised etc.) but, it might be that you’re more suited to one than the other because of the other skills needed.
Financial accounting | Management accounting |
Formulaic mind | Analytical thinking |
Accuracy | Problem-solving |
Knowledge of accounting standards | Business competence |
Organisation | Strategic thinking |
Ethical judgement | Communication and presentation skills |
Time management | Data interpretation |
What you’ll need for both is:
- Confidence with large amounts of numbers
- Spreadsheet experience
- Accounting software competence
Salary and career opportunities
Everyone needs an accountant. It’s a stable graduate choice as there’ll always be figures to report on and budgets to give out. All organisations need to comply with regulatory bodies and prepare strategies for their trustee boards, informed by financial reporting. It’s a safe bet but also means it can be a competitive and oversaturated industry.
Luckily though, the two disciplines lead to many different opportunities:
Financial accounting | Management accounting |
Senior financial accountant | Senior management accountant |
Audit manager | Finance business partner |
Tax specialist | Commercial finance manager |
Financial officer | Finance director |
Chief Financial Officer (CFO) | Chief Financial Officer (CFO) |
Obviously, experience and competence influence the roles you’ll land with either of these degrees. To work at an executive/C-suite level (CFO) companies will expect you to have (at the very minimum) a few years of experience in similarly sized and orientated businesses. C-suite roles also come with the highest salary.
Other roles for accountants have varying salaries depending on country, industry, employer and experience. It is typical for managing accountants to earn slightly more than financial accountants, as the strategy and planning aspect of the role is considered valuable. However, on the flip, the risk and accountability taken on by financial accountants is sometimes recognised with a higher salary.
The globally recognised Association of Chartered Certified Accountants (ACCA) recognise the US, UK and UAE as the highest-paid countries for accountants. We’ve compared salaries across countries to give you an understanding of potential earnings as a financial or management accountant graduate:
Country | Entry level | Mid career | Senior/Manager |
United States of America | $60,000 - 78,000 | $85,000 - 120,000 | $130,000 - 200,000+ |
United Kingdom | $40,000 - 55,000 | $63,000 - 88,000 | $94,000 - 150,000+ |
UAE (Dubai & Abu Dhabi) | $19,600 - 29,400 | $36,000 - 59,000 | $65,000 - 114,000+ |
Australia | $42,000 - 55,000 | $61,000 - 90,000 | $97,000 - 148,000+ |
Canada | $40,000 - 55,000 | $59,000 - 85,000 | $88,000 - 132,000+ |
Singapore | $33,000 - 48,000 | $59,000 - 96,000 | $103,000 - 176,000+ |
India | $6,000 - 9,600 | $12,000 - 21,600 | $24,000 - 48,000+ |
$USD conversions are approximate with conversion rates.
Which is better for you?
There’s never a good or bad choice when it comes to choosing your discipline. It’s always going to be personal and it’s also important to remember that you can change your mind. Making the right choice for you is about considering what work you might find the most interesting.
Choose financial accounting if you:
- Enjoy structured, detail-focused work
- Like working with established rules and regulations
- Want a career in auditing, taxation or compliance
- Prefer producing formal financial reports
- Enjoy ensuring accuracy and consistency
Choose management accounting if you:
- Like solving business problems
- Enjoy analysing data and spotting trends
- Want to make an impact on company decisions
- Prefer working with different departments
- Are interested in planning, forecasting and strategy
Don’t forget, it’s common that accounting disciplines will cover the core principles of each branch before you specialise and that, as you progress through your career, professionals move between the two disciplines.
Long story short… financial accounting and management accounting work within the same remit (financial data) to produce different outputs (reports vs projections) for different people (internal vs external stakeholders). Which one you fit into best depends on your goals, interests and skillsets. But you can always change your mind and explore the other one!
Whichever route you choose, both specialisations provide transferable skills, global opportunities, competitive salaries and industry diversity. Choosing accounting is a clear investment in your own future!
FAQ
Is management accounting harder than financial accounting?
Different strengths are required for each role but that doesn’t necessarily mean one is harder. Financial accounting is all about accuracy and standardisation while management accounting relies on analysis, decision-making and communication.
Which pays more?
Entry-level salaries are often similar and, once you reach C-suite, they level out again. Sometimes management accounting allows for greater wriggle room and therefore broader roles, with higher salaries, than financial accounting but financial accountants are still essential for management and director roles so it balances out.
Can I switch between the two?
Definitely! Both disciplines share key accounting principles and it’s typical for professionals to move between the two as they come to understand their interests and competencies more in the workplace.
Which discipline has the best job opportunities?
Both financial accounting and management accounting are in demand across all industries and countries, as all companies require reporting and budgets.
Is managerial accounting the same as management accounting?
Yes! It’s just a different term preferred by some countries and industries but they perform the same functions.
