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Managerial and financial accounting play pivotal but notably distinct roles in your startup’s financial success.
Managerial accounting helps internal leaders make informed business decisions, while financial accounting is primarily about compliance with external reporting requirements, such as a prospective investor’s.
Understanding managerial accounting vs financial accounting is critical for startup founders as your business grows.
For example, when new challenges arise, you must be able to articulate what they are and how they differ to hire the right kind of expert accounting help.
Let’s explore the meaning and significance of these two types of accounting in more detail.
What is managerial accounting?
In managerial accounting—or management accounting—financial data and analysis are utilized to support decision-making and achieve organizational objectives.
The process includes identifying relevant financial information, measuring it accurately, and using tools such as data analysis and interpretation to understand and communicate it to managers and improve spending habits.
Unlike financial accounting reports, which businesses use for external purposes such as public records and taxes, managerial accounting is only for internal use as a decision-making tool.
Financial advisors, like CFOs, utilize managerial accounting to aid decision-making.
This type of accounting helps you analyze essential functions like accounts receivable by offering managerial reports, forecasting, analytics, and insight into a company's financial health. Your team can use this data to develop strategies, set goals, and make decisions.
Example of managerial accounting
A great example of how businesses use managerial accounting is through the analysis of gross margins, which is the difference between sales and cost of goods sold (COGS).
When used on a product-specific level, this can help startups identify their most profitable offerings, helping managers make informed decisions regarding pricing, production, and marketing.
To show how this works, consider Allbirds, the sustainable footwear and apparel startup. Since it went public, it’s required by Section 13 of the Securities Exchange Act to file quarterly financial disclosures with the Securities and Exchange Commission (SEC).
In Q1 2025, Allbirds reported a gross margin of 44.8% at the company level. Imagine Allbirds wants to boost that with an aggressive marketing campaign for one of two popular shoe models: the Wool Runner or Tree Dasher.
The Wool Runner has a sales price of $98 and costs $60 to manufacture, resulting in a gross margin of $38. Meanwhile, the Tree Dasher has a sales price of $135 and costs $75 to manufacture, resulting in a gross margin of $60.
By comparing each product line’s gross margins and finding that the Tree Dasher is significantly more profitable, Allbirds’ managerial accountants might determine that the Tree Dasher should be the focus of the marketing campaign.
Managerial accounting report templates
One of the most universal managerial accounting reports is the budget variance report. It compares actual and budgeted performance results, providing insight into where you deviated from expectations so you can refine your strategies and budget going forward.
Here’s a straightforward framework you can use for your budget variance report, along with some sample numbers to demonstrate how it might work:
Budget Variance Report
| P&L Account | Actual Results | Budgeted Amount | Difference | Variance (%) |
|---|---|---|---|---|
| Sales | $250,000 | $275,000 | ($25,000) | (9.1%) |
| COGS | $110,000 | $100,000 | $10,000 | 10% |
| Gross Income | $140,000 | $175,000 | ($35,000) | (20%) |
Sales
Actual Results:
$250,000
Budgeted Amount:
$275,000
Difference:
($25,000)
Variance (%):
(9.1%)
COGS
Actual Results:
$110,000
Budgeted Amount:
$100,000
Difference:
$10,000
Variance (%):
10%
Gross Income
Actual Results:
$140,000
Budgeted Amount:
$175,000
Difference:
($35,000)
Variance (%):
(20%)
A similarly useful managerial accounting report is the accounts receivable (AR) aging report. It tracks unpaid invoices by how long they’ve been outstanding, helping you manage cash flow, follow up with delinquent customers, and prioritize collections.
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