Ch 11 Student Financial Control Theme 2.pptx - Financial...

Financial Control
Contemporary Management Accounting Issues
Accounting 586
Chapter 11

Focus of the Theme and this Chapter
•
Theme 2 examines budgeting & control
•
The last chapter examined budgeting for
planning and coordination
•
Now we turn to the organizational structures
and methods providing financial control
•
Tend to focus of the financial aspects of
control

Importance of Financial Control
•
The class of variables which organizations
typically exert most influence over are costs
•
Tendency to focus on the financial aspects of
control
•
However, using the BSC the concept of control
can be expanded to the other 3 levels
•
Financial control facilitates strategy
implementation by

Environment of Financial Control
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Financial control uses financial information
and measures to assess organizational and
management performance
•
Traditionally financial control was based solely
on financial measures (discussed in Theme 1)

The Balanced Scorecard and Financial Control
•
This approach adds to traditional financial
control (what to do for financial success) the
perspectives of
•
Internally
–
Decision making
•
Externally
–
Organizational performance

The Balanced Scorecard and Financial Control
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The process perspective provides
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The learning & growth perspective
–
How or why employees are

Basics of Financial Control
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Financial control in an organization & its units have both internal
and external aspects
•
Internal: decision making
•
External: overall firm performance regarding
•
Control structures (Authority & responsibility)
–
Examples: Light and Power company, Auditing a class
– Centralized
•
Sr. Managers have the authority and responsibility
• Lower level management: Tasks are defined in detail for employees
•
Issue becomes some difficulty in or with growth and diversity of products and
services
–
Decentralized
•
Financial control and organizational structure are related

Decentralization
•
Decision-making authority is delegated to frontline
managers
–
Better knowledge
–
Better to adapt
•
Shifts evaluation from tasks to results
•
Also provides career paths or training
•
Historic perspective on decentralization
–
Organizational structures in U.S. evolved to in early 1900s
–
As organizations grew the product lines of the services
become more diversified

Advantages of Delegated Decisions
•
Advantages from decisions by decentralized
rather than centralized managers

Decentralization
•
Why financial control is needed with
decentralization
•
Results are measured in financial terms
•
Degrees to decentralization