A management accountant is one of those multifaceted, modern day heroes who is able to combine the leadership of a business manager and the expertise of a first class accountant. Management accountants have become very popular as business owners are seeing many benefits from the work they provide.
Management accountants add a lot of value for a business owner since they are able to wear multiple hats. They can help you navigate both the management and accounting waters of your business efficiently, effectively and with great value.
So, how do you measure the value of such a beneficial resource?
Gross Value Added
This is the value that is added to your company by a single factor. It helps you estimate your company’s value and how it has been beneficial for you in monetary terms. So, a GVA can be easily calculated using the VAS or Value-Added System. Net value added is found by subtracting the value of depreciation from the GVA.
Economic Value Added
The increase in the company’s return as compared to the cost or investment in capital. You can understand it as the value that the company has created with the funds that were invested into it.
Economic Value added(EVA) = NOPAT – (CExWACC)
NOPAT – is the Net Operating Profit After Tax, the profi that is made by the company through its day-to-day activities, once the cost after taxes have been deducted. You can use this to see figure how much value your Management Accountant adds to the business.
Capital employed or CE is the amount of money that was invested into the business.
Weighted Average Cost of Capital or WACC – it is the minimum expected rate of return by the those investing in the business.
EVA helps to quantify every aspect of investing and how your time or money has been utilised. You can easily get a return on investment in an easily quantifiable metric here.
Market Value Added
As your business grows, so will your team. As these new faces join your business, your company also will also see a boost or fall in the area’s rankings. It is best described as the difference in the current market value of the business and the capital that was invested by the investors.
Market Value Added (MVA) = Market Value – Capital Employed
These are some of the ways that you can measure as to how the management accountant is adding value to your company. Also, you can monitor whether their predictions and risk management skills are doing are on point. This is a really telling way to see if they are adding to your business or not.
A management accountant has a lot of responsibilities within a business and one can expect a number of different things from them. You can rest in the knowledge that everything they touch will be of benefit to you.
So, when it comes to your all accounting requirements for your business, Ainsworth Accounting Solutions are here to help.