The best Answers for the Business Management

Keeping the accounts and making the budget is not enough. The company management needs data and information that the financial statements and general accounting cannot provide on their own.

In fact during the management we will find ourselves asking questions like these:

  • how much does it cost to produce the product?
  • does the maintenance department work well or could it do better?
  • How much can I hope to earn next year?
  • What is Business Management?

To find an answer to these questions we will have to make use of a whole series of tools and management techniques which are collectively referred to as management control.

What is management control

It is a directional process which presupposes:

  • the formulation of objectives – expressed in quantitative terms – and of action programs, valid in the short term and consistent with the strategic lines, i.e. with the company’s basic decisions (to whom, what, how)
  • periodic measurement of results actually achieved and comparison with the set objectives
  • Analysis of deviations from forecasts, identification of their causes and the adoption of appropriate corrective actions.

The introduction of a management control process requires a considerable rationalization effort at the organizational level, offset however by the advantages obtainable. It represents an irreplaceable driving tool, as:

  • allows the coordination of the various corporate bodies,
  • Provides the economic and financial parameters with which to compare the results obtained.

Management control, to be effective, requires adequate accounting tools.

The accounting tools of management control

These tools are multiple but, in summary, they can be traced back to the following:

  • general accounting and financial statements
  • analytical accounting
  • budget and standard costs

The general accounting provides the necessary information on the management operations that are held with the market. The accounting records are summarized in the financial statements, which is the document that illustrates the overall result of the management (profit or loss for the year) and the assets available to the company.Analytical accounting does not study the company as a whole, but highlights the costs and revenues of each of its individual “parts” or “responsibility centers”.

The analytical accounting concerns the “internal” management operations, it serves to know the costs of the different products, of the individual departments and to know if the use of the acquired productive factors is correct or gives rise to waste.

The budget is a short-term budget. Its construction requires the knowledge of preventive or “standard” costs, through which to establish how much the production process should cost in certain operating conditions. The budget has a dual function: it serves to guide future actions and, in the final analysis, to check if everything went as planned.

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