CPA vs. CMA: And Why Our Team’s Getting CMA Certified

As accountants, we’re subject to a wide array of stereotypes – everything from bean counters, to hermits, to number crunchers. In reality, we’re so much more!

Let’s explore two prevalent credentials in the industry: Certified Public Accountant (CPA) and Certified Management Accountant (CMA). Both the CPA and CMA designations are valuable in the profession, but there are some important distinctions between the two.

Certified Public Accountant (CPA)

In my experience, most business professionals are familiar with the CPA designation. Typically, a CPA is seen as synonymous with “tax person.” And that is often true! But there is much more to the designation.

CPA candidates must pass the Uniform CPA Examination, which tests general accounting competence in the areas of auditing and attestation, business environments, financial accounting and reporting, and regulation. It’s known to be difficult (I can personally attest to that!), as it covers a variety of topics at different skill levels, with pass rates hovering slightly below 50%. Along with passing the exam, candidates must meet a state’s education and experience requirements to be licensed by a state’s Board of Accountancy.

A CPA designation is most beneficial in public accounting, as it’s geared toward auditing and tax. I typically think of CPAs as doing more regulatory and compliance-based work, like preparing GAAP financial statements and tax returns.

Certified Management Accountant (CMA)

I’ve found that business professionals are often less familiar with the CMA designation. The CMA is a globally recognized certification that establishes someone as an expert in both financial accounting and strategic business management.

CMA candidates must pass the CMA Exam, which tests mastery of the most critical practice areas of management accounting, including financial planning, analysis, risk management, and performance management. Similar to the CPA exam, it’s very challenging, with pass rates for both parts around 45%. In addition to successful exam completion, candidates must have an accounting degree or certification and work experience to be licensed by the Institute of Management Accountants (IMA).

The CMA designation is geared more toward management and strategic business decisions based on financial analysis. I think of CMAs as more forward-thinking partners in business.

Isn’t that SmartBooks’ role in my business?

It sure is! And that’s why our team of accountants is actively pursuing CMA certification. The CMA designation is particularly relevant and valuable to our role as trusted advisors in helping you to run a healthy business. I myself came to SmartBooks as a CPA, and am currently studying for the CMA. While the CPA certification provided me with strong accounting and compliance knowledge, I’ve found the CMA certification to be more applicable in my role as a partner and consultant to SmartBooks clients.

Management accounting involves providing financial information about a company’s operations to its internal managers. Such information assists with decision making and problem solving. CMAs possess the skills required to make financial decisions for a company, and can actually identify the strategy behind business decisions based on financial analysis.

What types of financial analysis can a CMA provide?

Businesses rely on accurate forecasting and data-driven decision making to drive strategy and future profits. CMAs are skilled to provide financial information to assist with this decision making. Here are some examples of how a CMA (and the SmartBooks team) can help guide a business.

Budgeting, Forecasting, and Performance Management

CMAs can lead budgeting and forecasting, which is important for both planning and analysis purposes. Budgeting helps a business in planning capital expenditures and understanding related cash requirements. In addition, having a budget allows for more effective variance analysis and performance evaluation. Analysis can include revenue variances, related direct and overhead costs variances, and product and customer profitability. Often such financial analysis can highlight what’s working and what’s not – such things as cost management, capacity management, and business process improvement strategies can then be implemented.

Financial Statement Analysis

CMAs can lead financial statement analysis, including financial ratio and profitability analysis. Financial statement analysis shows changes in a company’s financial statements over time, and can be used to compare them to other companies or across an industry. For example, line items on a P&L statement can be compared to a base figure, such as sales, to see how changes are contributing to profit margin and analyze profit trends over time. These ratios and trends could also be compared to peers or the industry to see how the company is trending in comparison.

Marginal Analysis

CMAs can help with marginal analysis and its use in decisions related to prioritizing products or business divisions to improve overall company profitability and growth. Marginal analysis involves identifying marginal costs and revenues, also known as incremental costs and revenues, and using such information to make decisions on where to prioritize or focus efforts. While a company may be profitable overall, a profit analysis helps identify over- or under-performing divisions or products. The company can then focus on those that will maximize overall profitability and consider eliminating those that are unprofitable.

Why is someone certified as a CMA important to my business?

There’s a significant difference between someone who can maintain your financial records and someone who can perform financial planning and analysis to drive strategic thinking. Running a healthy business is more than just coding transactions properly; it’s understanding systems, processes, and reporting to support business goals. CMAs are trained to look at a business holistically, understanding both accounting knowledge and skills, but also business management knowledge and skills.

Is the CMA designation only applicable to large businesses?

Absolutely not! Any business can benefit from the knowledge and skills that a CMA brings to the table. Many small to medium-sized businesses lack sufficient management accounting functions, which can lead to internal problems. CMAs provide applied analytics, strategic thinking, and are trained to be forward-looking, which can provide real value to any size organization.

I’ve really valued the knowledge I’ve gained thus far in pursuing my CMA, especially enhancing my strategic analysis and decision-making abilities. I look forward to finishing my certification and utilizing my new skills in servicing our clients (and being done studying!). While I still leverage my background as a CPA, I see the CMA as helpful in bridging the transition into private or management accounting. After all, I’m an avid skier, so I’d pick working with SmartBooks clients over grinding out a public accounting busy season any day.