The management control it is an indispensable activity for any business. Especially for SMEs, obtaining constant feedback on the company's work gives you the opportunity to evaluate your plans to improve your performance. It is an essential tool for identifying the most profitable sectors of the business and for improving the less performing ones.
Within a company reality, the data can come from any production area. Directional control is intended to collect and analyze this data, making them understandable in order to make winning decisions for the business.
To obtain a winning management control it is necessary to carry out some activities that aim to optimize the use of company resources and improve business results:
- Analysis and reclassification of the financial statements:
The analysis and reclassification of the company financial statements consists in the revision of the economic and financial structure of the company, in order to assess whether the economic resources are adequate for market investments. Reclassifying the financial statements allows for easier reading, highlighting the difference between current expenses and corporate investments.
- Comparative analysis
Comparative analysis is a fundamental activity of management control as it consists of the comparison between the current budget and the previous year's budget. This analysis allows the entrepreneur to have a particularly broad view of the performance of the business on the market.
- Budget or forecast budget
The preparation of the company budget is one of the fundamental activities of management control. Indeed, making a budget means forecasting in a concrete way what the expenses and revenues will be. In other words, "Making the Budget" means drawing up the hypothetical subsequent corporate budget. Earnings are arguably the hardest variable to predict, while costs are more concrete and conceivable factors. Preparing the Budget allows you to draw up guidelines for company operations. Indeed, the forecast budget makes it possible to draw up a list of operational objectives and potential investments of company resources.
- Variance analysis
The analysis of the deviations allows, indeed, to evaluate the actual results obtained by comparing them to those assumed within the budget. The final purpose of this analysis is the effective assessment of the real effectiveness of company resources, compared to the operational objectives defined above.
Management control guarantees important benefits to companies:
- Optimize corporate economic resources.
- Evaluate company performance and plan operational objectives.
- Highlight the precise role of each production unit.
If you are interested in improving your results contact me for a free meeting.