Management control of a company: what it is, 2 common mistakes and tips to enhance it
There is no place today for the non-existence of a management control system for a company, whatever its size and main activity, without measuring deviations, the planning and direction of the business loses logic.
To the extent that we can establish a mature management control system, oiled and, as an ideal performance, with automated processes, we will see that we will have better results, which will bring us closer to our goals.
Now, of course, you are probably wondering how can I be thinking about the control of the financial and economic management of my company if I have to be aware of the operation? Having dismissed the idea of adding hours to the work day (we both know that working ten hours a day is not an efficient or sustainable alternative), we will have to find a way to have control over the management of our company’s resources and processes.
What is the management control of a company?
In case you are not familiar with the term, a company’s management control system is an administrative structure that allows an organization to know its economic and financial situation, and to have tools and mechanisms for correcting or improving this structure. Management control allows the executive body of an SME or a large company to make better decisions, based on reliable and real information.
For this reason, we return to the first line of our post: whether your company or enterprise has five or one hundred employees, it is recommended that you have a management control system in place. The point here is that, to the extent that you can professionalize the management control processes, believe us, you will have better results and you will see that the money invested in this area will be returned in better financial health and better operations.
Management control of a company: common conceptual errors
Let’s slow down a bit and look at some common mistakes in business management control design. The objective of this article is to provide you with information and some recommendations on how to implement a management control so that you can see the financial management of your project with new eyes.
A management control system, as we have seen, allows you to evaluate the economic behavior and the management exercised on it within any organization: for this it feeds and interacts two-dimensionally with all the sectors of the company and its corresponding processes, compiling information and data necessary for the preparation of reports and reports that will later serve to develop the necessary intelligence when making decisions based on the business plan.
However, when kicking off to materialize a real and competent management control department in companies, some vices or misconceptions are usually found, such as:
1- The non-allocation of suitable human resources to the position or the partial allocation of the time of these resources.
This is very common in small companies that consider that what is invested in economic management is not profitable enough, or that find the limit of their good will in more operational issues related to the core of the business. Although this is perfectly understandable, in the face of this type of argument, the important thing is to be very clear about two things:
- Understand the relevance of the management control of our company. If we do not do it effectively, it is very likely that we will incur financial losses, use resources in a non-optimal way, and even have uncomfortable legal and accounting situations, which would have been perfectly avoidable with correct preventive financial management.
- As a result of the digital transformation in which we live, there is currently a world of possibilities in software that allow us to carry out management control of a company in a healthy, orderly and efficient manner. For what a few decades ago you needed a team of professionals, in the 21st century you can save on hiring costs by making a smart investment in a suitable software tool.
In this sense, we invite you to get to know our FP&A solutions through some demos and videos of a few minutes so that you can do your analysis and evaluate this recommendation.
2- These are strictly control tasks, and the value they bring to my business does not go beyond that of a mere audit
You would be surprised to know that this prejudice is very common! And furthermore, it is one of the main things that we want to break down who we are professionals in the financial management of a company.
It is that evaluating the daily internal management and how we are with respect to the proposed business objectives is only part of the work of the management control area of a company. The value that this role adds (which this role must add) is also in data analysis, processing of information collected by and through sectors, as well as granting visibility to whoever requires it on the firm’s resources. : current status, flow (how it is spent, what it is spent on, etc.), estimated projections and the fundamental plus of the recommendation.
In short, offer a serious, reliable and up-to-date diagnosis of the state of the company together with the package of measures that it would be advisable to follow in order to move towards the objectives proposed by the business plan.
So, how do I go about implementing a management control system for a company?
As we have seen, the management control of a company is essential to increase productivity, improve coordination between areas and enhance the overall operation of the business.
If you are an executive or business owner and you are planning to implement a management control system, we at Plika recommend that you consider following the steps below: remember, they are not a method, but rather a guide built on the basis of our experience as consultants.
1. Designate a person responsible for the management control processes (clearly you cannot do everything yourself if you are the CEO)
In general, management control tasks are directed by a role called financial controller, which, by the way, has been on the rise in the labor market in recent years.
The financial controller is responsible for the control and financial management of the company. Whoever occupies this transcendental position must have multidisciplinary knowledge, team leadership skills, as well as technical knowledge and specific software tools.
Mainly, a financial controller is responsible for:
- Develop budgets for each company project, as well as its corresponding monitoring and reporting to executives.
- Supervise the global results of the business, as well as carry out “autopsies” and diagnose when a misalignment with the Business Plan has occurred.
- Propose improvements to the economic management of the company, with the north set on the optimization of resources.
In very small companies, you can also take on more operational functions, such as managing the treasury or accounting exercises.
2. Clearly states the entry requirements for the management control department
Are you interested in knowing in detail how to set the price of each product? Do you need to have updated the billing balance point and how are we regarding it? Do you want to know which area or dependency is the most productive and which the least? These are just some of the questions that every business executive should ask themselves before forming a management control team.
You must clearly define what you need from them, whether it is just one person in charge or a team of several people, and how. This is essential to generate a positive synergy between this role, which will be fundamental in the performance of the company and will soon become the cane of your right arm when making decisions.
3. Equip the department with suitable tools. Do you think about Excel? Well today there are other alternatives
Today for everything we do we must rely on technology. The financial management of a company is no different: the management control processes of a company are carried out in a much more efficient, reliable, secure and fast way through software tools specifically designed for it.
You can continue using Microsoft Excel or with the legacy tools that you have always been using, but believe us that it is not comparable to the dynamism, optimization of time and quality in the presentations that you will gain by adopting an FP&A management tool.
FP&A type programs were developed ad hoc for the elaboration of scorecards, control panels, training and analysis of key financial indicators (KPIs), between a complete range of native technologies of data analysis and B.I., through a concept comprehensive, which facilitates the use of these tools both in small businesses and in large corporations.
We invite you again to get to know our FP&A solutions for finance teams, whether you work in executive positions or even if you are in the financial area of your organization: in both cases you will have a new vision about the management control tools for your business.
As we mentioned at the beginning of this note, in today’s market it is essential to have a defined area of management control in any company, be it with five workers or more than one hundred.
Our organizations handle an enormous amount of data on a daily basis; These data must not be wasted, but must be transformed into information, so that with an intelligent reading, the best decisions can be made that bring us closer to the objective that we had set.
To achieve this, we must first understand the need we have to have a management control system for a company, and the second is to allocate the necessary resources so that the work is done with professionalism and dedication.
And for this, nothing better than finding the right technology, which is our ally in the search for results with the highest quality at the same time as the lowest costs.