About two weeks ago, one of our Twitter followers was curious about how someone might land a cost accounting position. We put the question to the group and there was a little discussion but something told us that our inquisitor wa
We recently spoke with Sandra Richtemeyer, Ph.D., CMA, CPA, the Chair of the Institute of Management Accountants for 2010-2011 to discuss cost accounting careers in more detail. In addition to her role at the IMA, Dr. Richtermeyer is chair of the Department of Accountancy in the Williams College of Business at Xavier University in Cincinnati, Ohio.
Going Concern: We’ll just start off by getting your reaction to our reader’s question – “How would you suggest getting into a cost accounting position?” And the previous post’s comments “WHY would one get into cost accounting?”; “[N]obody likes cost accounting.” and “[I]n its true sense does not exist.”
Dr. Sandra Richtermeyer: We represent the Institute of Management Accountants so we usually place the focus on management accounting versus cost accounting. Cost accounting is one aspect of managerial accounting and when we say “management accounting,” that’s another term that many people don’t resonate with, as there aren’t a lot of positions out there called “management accountant.” You do hear job titles like “cost analyst” and “financial analyst,” so sometimes it is easier to explain these roles.
At the IMA, we like to take a look at the focus inside the organization and really try to look at the broad perspective of management accounting – which includes cost accounting – where people are really more involved with strategic decisions that influence business actions and activities and in much more significant ways than just what people would ordinarily perceive.
The last thing that you said, “does cost accounting really exist?” We certainly see positions called “cost accountant” but they are so narrow in scope and it’s not really reflective of what’s happening with the people that are charged with that important element or aspect of accounting.
GC: So it sounds like cost accounting is a red-headed step-child of sorts – why do you think there are so many misconceptions about cost accounting jobs?
SR: I think because people don’t see the big picture and how information produced in cost accounting and related activities plays a role in many business processes. They typically think of a very narrow scope that’s part of a costing decision or the actual calculation of cost of goods sold, budget variances or manufacturing costs. I don’t think that it is clear how accountants who have costing responsibilities are often working with key leaders in the organization who are determining product or service mix and making critical strategic decisions. They often need to spend a lot of one-on-one time with decision makers or teams to consider different analyses and work through various scenarios to help guide the right outcomes. All too often, cost accounting is perceived to be a stand-alone activity. Rather, it plays a really important role in an organization’s value chain.
GC: That takes me back to the financial analyst job I had and how many different people I worked with providing them with various data and analysis. Communication was a big part of that job.
SR: I think the biggest misnomer is that people don’t realize how important communication skills are for accountants in general and that they are critical for these types of roles. They picture people working independently in an office by themselves perhaps creating spreadsheets or entering information in an enterprise system but there’s so much interaction and people don’t seem to understand that. The concept of a cost or financial analyst being in an internal customer service role is often overlooked as well. It can very much be an internal customer facing role and even extend outside the organization with vendors or players in the supply chain.
GC: Is there traditional path into a “cost accounting” career?
SR: Well, I think there’s a few we can cover:
1) A typical starting point is to get an accounting or finance degree. A few years ago when the economy was stronger, a lot of cost accounting positions were filled by people with finance degrees while the accounting majors were frequently starting in public accounting. In a large company, someone might start in an entry-level position where they work in a more narrow accounting role where they do cost accounting. Alternatively, they may start at a smaller company and have a broad set of accounting responsibilities, with cost accounting being one of those. Smaller companies most likely don’t have job titles like cost accounting or financial analyst, because accountants have to do a lot more. We certainly hope that people who choose this path understand the importance of becoming a Certified Management Accountant because it’s a great credential for someone entering those types of jobs.
2) Many people might start out in public accounting as auditors and they may work with clients that have very specific product and service costing needs. After a few years of working as an external auditor, they might step out of that role and go work for a client and have responsibility that entails cost accounting. That’s not uncommon for someone with 2 to 5 years of public accounting experience. Someone with more experience than that would likely step into a broader role that is closer to a controller or CFO role, depending on the size of the company.
3) People unexpectedly find themselves providing these services. They might have started out as a business analyst and then they might find themselves providing a lot of costing information for people within the organization. The next thing they know, they are a cost accountant – either in title or in substance!
4) It’s surprising to me how many MBAs end up in controller-type positions and sometimes the path to controller, depending on the organization, is through a business or financial analyst position. I talk with a lot of MBAs that want to learn more about accounting because they find themselves essentially doing more and more cost analysis in their roles. The cost accounting piece may not be their entire set of responsibilities but it’s something they have significant responsibility for and they see it providing them with a lot more career advancement opportunities down the road.
GC: So what are some examples of some jobs for those that are interested in cost accounting? Or titles that people can look for when they’re job hunting.
SR: Well, we need to think about job titles and also the words used in a job description because in accounting, the title varies widely depending on the size of the organization. Larger companies have more specific titles and smaller companies tend to have more general titles. Some common titles are: General Accountant; Staff Accountant; Financial Analyst; Cost Analyst; Cost Accountant, to name a few.
Job descriptions likely list responsibilities such as: cost and profitability analysis, maintenance of costing systems, budgeting, interim or internal financial reporting. Often times they are a bit more specific and may include activities related to customer profitability analysis, product and service costing support, or variance analysis. Those are some key words that are going to pop out.
GC: What resources does the IMA provide that are useful?
SR: We have an amazing social network site, LinkUp IMA, for accounting professionals where our members discuss all kinds of accounting topics. This provides a great networking platform for professionals in specific roles to connect with each other and share ideas in an online forum.
We also have many chapters all over the world that allow accounting professionals to meet face-to-face and discuss trends and issues or concerns they deal with in their roles. We also have a strong certification program, the CMA. When someone makes the investment in themselves to obtain their CMA certification, they demonstrate that they are prepared not only for cost accounting, but for the many strategic roles that accountants are involved in. The CMA can provide the basis to launch them into a career path that will help them gain more experience and move into financial leadership roles. Our certification program provides a lifetime of value.
One of our Twitter followers Markied85 asked us the following:
How would you suggest getting into cost accounting? it seems like one of those positions you fall into with experience.
Good question! Personally speaking, your humble editor only had a brief stint as a financial analyst that involved compiling internal reporting for a COO and that was after we had done our time in public/Big 4, so your thinking is on the right track.
If you accept an entry-level position with a private company, chances are you wouldn’t be tasked with providing reports to managers. However it is possible that you would be responsible for compiling these reports and depending on how the department is set up, one of your superiors would review and present the reports.
But what do we know? Like we said, our experience is limited so we just took quick shot in the dark. What we do know is if you are an in-house cost accountant, a CMA is good credential to set you apart from the rest in your group (plus, you’ll probably get more money).
If you’ve got good experience with this transition or you’ve been in a cost/managerial accounting role your entire career, let’s hear about it.