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Digging deep into business

Management accounting is booming as more companies seek to enhance their analysis and communication to drive better business decisions. Andrew Harding, Chief Executive of Management Accounting, at the Association of International Certified Professional Accountants, explains to George W. Russell how the newly formed organization is empowering accountants globally with the tools and learning resources they need to enhance their relevance and employability.

It took a trip into pitch darkness for Andrew Harding to see the bright light of management accounting. The Chief Executive, Management Accounting, at the Association of International Certified Professional Accountants was on a business trip to South Africa when he was invited to meet with finance leaders and executives from a local platinum mine.

While at the mine, he met a management accountant whose role was to track the efficiency of the shaft minute by minute and to deliver real-time analysis.
To Harding, the South African accountant was an example of the growing importance of management accountants to businesses around the world, including in Hong Kong. “At one point, you could have described management accountants as all about cost management,” he says. “But it’s about far more than that now.”

Management accounting, he adds, is about driving value creation and value preservation in organizations. “If we look back 40 years, we’ll see that 80 percent of a business’ value was represented on its balance sheet,” he says. “Today we see 20 percent of value represented on the balance sheet.”
Increasingly, says Harding, business is about far more than just financial results. “We need to be accounting for – and measuring – both the tangible and intangible assets of an organization in order to make the right business decisions.”

Harding sees management accounting as an exercise in problem solving. “Many successful management accountants started off as engineers and then moved within the business to finance and discovered that the problem solving that they did as an engineer is very much attuned to the kind of work they do as a management accountant.” It might not necessarily be a mineshaft, but, as he notes, “Management accountants are often times embedded directly within other cross-functional business units. For example, a management accountant could be positioned within the marketing or HR business units to help that partner drive maximum value.”

This process of analysis and decision making, Harding explains, requires access to the latest tools, insights and research to support continuous learning. That, he says, is where the Association of International Certified Professional Accountants, formed last year, can help.

Historic specialty

On a recent visit to Hong Kong, Harding notes that good CPAs – with their “inquisitiveness, integrity and critical thinking” – also tend to make good management accountants.

Management accounting first emerged in the United Kingdom about a century ago. “A lot of the work we’ve done was originally started by what is now known as Unilever, which wanted a new discipline of accounting working inside the business.” Lever Brothers had employed a form of cost accounting since the 1880s and codified the system in the second decade of the 20th century. The Institute of Cost and Works Accountants was established in 1919 which later evolved to become Chartered Institute of Management Accountants.

The most recent page of management accounting history was turned in January, with the launch of the Association of International Certified Professional Accountants, a joint initiative between CIMA and the American Institute of CPAs.

The relationship between AICPA and CIMA first began in 2011 when the two organizations formed a joint venture to elevate the role of management accounting globally. In 2012, they introduced the Chartered Global Management Accountant designation to distinguish those professionals who had reached the required quality and competence. Today, CGMA is a widely held management accounting designation in the world with more than 150,000 designees.

Expanding on this success, members of both organizations formed the new association to advance the accounting profession globally. CIMA and AICPA remain as member bodies supporting the U.S. CPAs, CGMAs and other speciality credentials.

“What we are doing with the new association – which has more than 650,000 members and students around the world – is driving relevance and opportunity for the accounting profession. This includes making management accounting a genuinely global profession,” says Harding.

Hong Kong accountants traditionally obtain a CPA designation first, then go into business and then go into management accounting, he adds. “It’s not necessarily an easy step to make,” says Harding. “The environment is very different, the ways of working are very different, and what’s required is very different.”

New horizons

Harding, a Londoner who began his career as an audit junior at what is now Deloitte, had an extensive career as an accountant before he found his true calling in professional accounting bodies. He joined CIMA in 2009 as executive director for global markets and was appointed managing director in 2011. Last year, he was named chief executive of management accounting for the new association.

“I started my career with an economics and MBA degree,” Harding, a University of Bristol graduate, recalls. “When I qualified I began working in training and development for the firm I was with. I wanted to help people and businesses to succeed.” He later obtained a master’s degree in business administration from Henley Management College.

Harding’s passion for business steered him towards the management accounting profession. “Management accounting is all about being inside the business,” he says. “It’s about finding data and using that data to make the right decisions for that business going forward.”

Moreover, while at CIMA, Harding saw the potential of the rapidly expanding needs of the China market. He became a frequent visitor to the Mainland and served as non-executive chairman of GTS Chemicals, a Chinese company listed in London, from 2014 to 2016. “In terms of the opportunities for management accountants here in this region, I think they’re fantastic.”

It helps that the government has thrown its weight behind improving the country’s management accounting practices. “We see China’s Ministry of Finance driving programmes to ensure that state-owned enterprises and wider Chinese business have good management accounting,” he says. “They see that as essential to being competitive in the global economy.”

The association has recently been running a joint programme with the Shanghai National Accounting Institute. “That involves inviting chief financial officers from state-owned enterprises, giving them a really deep immersion into management accounting, and they come out of that with their CGMA qualification.”

The achievements of the programme are palpable, he adds. “Last December I was sitting next to one of our members who came through the top CFO programme and I asked how the last year had been. He said: “Really busy. My company has just bought the holiday and leisure company Club Med and Wolverhampton Wanderers football club.”

Harding says there are many similar, if lower-profile, success stories. “You hear the most amazing stories about what they’re doing,” he says. “We have some talented people who have been through our programme. They’re doing big deals and we’re seeing some dynamic young management accountants really grasping the opportunities.”

Onward and upward

Harding believes lifelong education is essential to maintain that dynamism. “Skill learning is a constant for us and continuous professional development isn’t just a burden and a requirement,” he says. “It’s an absolute necessity that individuals have the skills to remain relevant.”

Management accounting does not have its own standards but its principles have been codified since 2014, when CIMA and AICPA developed and launched the Global Management Accounting Principles. Also known as the GMAPs, these principles set a universal standard of quality for management accounting. They were designed from feedback from employers worldwide to help management accountants and their employers understand knowledge requirements and assess skills.

“What those principles were able to do for the first time was to set down what ‘good’ looks like,” says Harding. “We developed those through working with about 3,000 businesses and individuals across the world talking to them about what they did and what they needed.”

Harding says the GMAPs provide the foundation for the CGMA Competency Framework. This assessment tool defines and articulates the specific competencies required of management accountants and helps support their role as a trusted steward of the business. “Management accounting does involve developing efficiencies so things can be managed day-to-day, but far more it’s about looking into the future and advising on the big strategic decisions that will affect the future success of an organization.”

The swiftness of modern commerce and finance is a particular challenge, says Harding. “We’re seeing, like in any business or any discipline, things developing and probably changing faster now than ever before,” he says. “What we’re able to do through our membership is get the input from individuals, explore the way they work, the results they achieve, and build a picture of what ‘good’ looks like in any point in time.”

Harding sees data as a particular challenge. “Two years ago the conversations were all about big data – now they’re about data science and the skills that you need to interpret that data. If you think about data, most businesses say they have too much of it and they’re swamped.”

He envisages management accounting evolving towards deeper data analysis. “It’s about how to make sense of all that data,” he says. “Which parts are irrelevant, which parts are critical, and how can that be condensed, communicated and used effectively?”

Closer to home, Harding sees China’s Belt and Road initiative as a catalyst to further develop management accounting. “That’s going to be a huge opportunity and if Hong Kong is going to fulfil its potential, then it’s got to be best in class when measured alongside New York, London, and other great financial centres.”

This article was originally published in the July 2017 issue of A Plus. You can also read the digital edition.