Planning Function of the Controller

Planning Function

• The establishment and maintenance of an integrated plan of operation is a major function of the controller.
• The business objective is usually to earn a profit, and planning is necessary to fulfill it.
• The modern controller has a role in business planning, ensuring a plan exists and is supported by all management levels.
• An integrated plan links all parts to support the business objective, requiring management participation.
• The controller coordinates, assembles, and maintains the plan, resulting in a master budget and supporting schedules.
• Key tasks related to the plan include verifying the revenue plan's achievability.
• Factors to consider are the sales staff's number and productivity, bottlenecks, and product life cycles.
• Production plan verification involves comparing projected sales to production amounts, considering existing inventory.
• It includes judgment on the production operation's ability to increase output based on skill levels, bottlenecks, and raw materials.
• Expense levels should be in proportion to other activities, like utilities increasing with new facilities.
• The need for step costs, such as new expenses from adding shifts or equipment, should be addressed.
• The organization should spend adequately on appropriate research and development projects with a mix of risk levels.
• Verify sufficient funding for projected activity and, if not, recast the plan on a smaller scale.
• After completion, the controller assesses the plan's adequacy and reports to the CFO or CEO.
• The plan should be judged on its realism based on past experience, and its reflection of expected economic conditions.
• The plan should include the expected cost of commodities during the budget period.
• Assess the probability of actual results varying from the budget and the extent of potential variations.
• The plan should meet the company's requirements for return on investment.
• Testing and analysis occur during preliminary plan formulation and after the total picture is available.
• The controller acts as a counselor and coordinator, advising during plan preparation.
• Final responsibility rests with the CEO, and each operating function's manager is responsible for their function.
• The controller should be deeply immersed in the underlying mechanics and assumptions of the plan.

Control Function

• The controller is responsible for the system of controls used to monitor accounting transactions.
• Control systems are important if the company's books are audited, as external auditors may rely on them.
• Controls are vital for publicly held companies, requiring a robust system.
• The controller maps out all control points in the company and monitors them.
• Controls may need changes to reflect business operation changes.
• Changes can include new controls or eliminating redundant ones.
• When acquiring another company, the controller assesses and integrates the acquired business's control systems.
• Controls can negatively impact efficiency, so the controller should assess the cost and benefit of each control.
• Some controls may be eliminated without significantly increasing the risk of loss.
• Control systems should be modified with deliberation.
• Control failures do not reflect well on the accounting department's perceived performance.

Reporting Function

• The reporting function is closely related to the planning and control functions.
• Reporting makes planning and control effective.
• The reporting function is not merely about presenting tabulations.
• Management cannot be kept adequately informed solely from periodic statements.
• The reporting function includes interpreting data, ensuring management understands the information.
• The controller should include an interpretive cover letter with monthly financial statements.
• The letter should describe key changes and note expected future events.
• The controller should meet with managers on important items to ensure they are aware of the issues.
• The controller may need to report to outside entities, requiring reformatting and expanding internal reports.
• Typical recipients include shareholders, creditors, the general public, customers, and the SEC.

Using Reports to Meet Fellow Managers

• In many companies, the rest of the management team sees periodic reports from the controller.
• A new controller should discuss report delivery, format, and content to meet the management team.
• Review reporting needs with them to ensure they promptly receive the revised information.

Accounting Function

• The systematic recording of financial transactions is often considered the principal function of the controller.
• The controller should apply sound accounting principles and practices.
• Staying current on technological advances is important.
• Benchmarking key practices involves comparing the accounting department's performance against other companies to identify and copy better practices.
• Using electronic transactions allows for sending and receiving most business transactions and payments electronically, increasing efficiency.
• Installing new systems, such as enterprise resources planning systems, can improve efficiency.
• Reducing cycle time involves actively reducing the time to complete primary transactions.
• Outsourcing accounting functions by handing over some or all accounting functions to specialized suppliers.

Additional Controller Functions in Smaller Companies

• Controllers in smaller companies have additional tasks due to the inability to hire CFOs, office managers, IT managers, and HR directors.
• Common additional functions are in the finance area, usually managed by a CFO in larger companies.
• Tasks include acquiring insurance coverage, conducting public offerings, dealing with investors and lenders, determining customer credit levels, entering into hedging transactions, and investing pension and surplus funds.
• Controllers typically manage insurance, credit, and investment decisions well.
• Public offerings are often outside their experience, requiring qualified help.
• Going public requires significant work to prepare quarterly and annual forms and dealing with auditors, increasing the staffing of the accounting department.
• Small companies with less than 100 employees often lack a human resources manager, so the controller must manage the function.
• Many new functions are administrative and procedural.
• Examples of HR functions include administering changes to the pension plan, new-employee paperwork, monitoring employee bonus plans, conducting employee safety training, conducting recruiting for all positions, devising a career plan for key managers, operating stock purchase plans, and maintaining employee files.
• Controllers are fairly comfortable in administering the HR department due to the similarity of the clerical tasks.

Controller's Job Description

• Accounting tasks include assisting in annual and quarterly audits, ensuring accounts payable are not paid early, ensuring accounts receivable are collected promptly, securing discounts on accounts payable, ensuring customer billings are issued promptly, ensuring job costs are calculated, guaranteeing monthly bank reconciliation, issuing interim management reports, issuing timely financial statements, issuing timely SEC reports.
• Continued - accounting tasks include maintaining a chart of accounts, managing outsourced functions, updating accounting reports for changes in standards, managing production of the annual budget, processing payroll in a timely manner, providing financial analysis, and maintaining accounting controls.
• Finance tasks include arranging for banking services, debt financing, public offerings, and investing excess cash.
• Continued -- finance tasks include investing pension funds, issuing credit customers, maintaining insurance and lender relations, managing the finance staff, and monitoring cash balances.
• Administration tasks include bringing in temporary personnel for special projects, ensuring mail is distributed and issued, ensuring officer equipment is operational, managing outsourced maintenance work, managing the secretarial staff, and upgrading office equipment.
• IT tasks include backing up the computer system, implementing hardware and software, maintaining a disaster recovery plan, maintaining computer security systems, managing the IT staff, managing outsourced functions, providing system training, and selecting hardware and software.
• HR tasks include administering safety training, administering the pension plan, monitoring bonus and benefit plans, maintaining employee files and manuals, managing career planning, operating stock purchase plans, managing the HR staff, processing worker's compensation claims, and recruiting employees.

Relationship of the Controller to the Chief Financial Officer

• There is a clear division of tasks between the controller and the CFO in a larger company.
• There is no clear delineation of these roles in a smaller company, because there is usually no CFO.
• As a company grows, it acquires a CFO, who must then wrestle away some of the controller's tasks that traditionally belong under them.