Financial Control in Management Control Systems

Financial Control in Management Control Systems

Introduction

How the use of standard costing is quite valuable in pricing and budgeting and how the standard costing installation is a desirable vehicle for accomplishing the objectives of a progressive management.

Standard costing technique is the most efficient means of establishing desirable results for a given company. This method uses all the efficient methods available to evaluate, analyze and interpret a given set of results. Setting prices for given products or goods in a given company is the most overwhelming step that a company can take. A standardized method that considers all the dynamics necessary for this can actually calculate and stipulate on a fair price plan that is efficient for both the consumers and producers (Darcy, 84). Standard costing system takes all these into the broader perspective of going to the extreme end of analyzing all the necessary steps and outlines that should be taken into consideration when coming up with a definitive price plan.

A strategic upfront company that adopts the standard costing pricing technique can be assured of maximum returns to their profit influx. This can be realized if a professional expert that has mastered all the necessary execution techniques of undertaking this. The cost of the input or the raw materials being used should be considered when using the standard costing system. This provides a clear cutline of how the intermediary and final product quantity, quality, as well as price, should be fixed appropriate (Lipin & Knecht, n.p.)

Standard costing technique is a prolific tool when setting up a budgeting plan for a given company. This tool encompasses all the dynamics necessary for effective budget plan. This tool takes into consideration the wider perspective of allocating and establishing a solid ground of an enforceable budgetary plan. Standard costing technique is a reliable tool for any given company that yearns for qualitative profit plan.

Standard costing installation is another technique that the frontline companies should adopt. This technique uses a broad scope that works hand on hand with the management of a given company in realizing the set objectives of the company. Most professionals who specialize in management practices usually uses this technique when setting up their prices and installing them for it to be practical in nature. Standard coating installation technique provides a ground where the management can focus on monitoring and evaluation of the given goals and objectives of the company. Through this, the management is able to determine the cumulative progress of the company towards achieving the set goals that are given (Eroğlu, 76). Standard costing installation technique is one of the best methods that multinationals companies use for their price appraisals and budgetary plans. This is critical to their success due to the strict outlines and measures that should be adhered to the later.

Standard costing installation technique is being appraised by plenty of company management frameworks across the globe; this is due to its practicability and enforceability that works to achieve desired results that are critical to a company success. This tool provides a wider spectrum of checking in detail the cumulative progress of a given company and how this progress can be maintained until the desired objectives are achieved (Nedyalkova, 208). This technique is efficient if only the strict outlines and measures that are provided are followed to the later.

The analysis of the actual and the standard cost in the case given above: STANDARD BUDGE

NO. EXPENSES QUANTITY AMOUNT ($)

1. Personnel 3 10,000

2. Whole year salary (Security) 2 120,000

3. Maintenance 10 50,000

4. Insurance 10 200,000

5. Installation 20 100,000

6. Project Continuity – 50,000

7. Solar Street lights 10 500,000

8. Advertisement boards 10 100,000

9. Office and office equipment – 115,000

10. Website development and hosting – 24,000

11. Communication – 12,000

12. Training 2 10,000

13. Travel – 10,000

14. Evaluation/ Information Dissemination – 20,000

15. General Administration/ Overhead – 30,000

16. Miscellaneous Expenses – 159,000

17. TOTAL EXPENSES 1,500,000

18. Other Funding Sources (Funds received from area CDF) 500,000

10. Total Grant Funding Requested 1,000,000

11. Estimated Annual Project Revenues 100,000

12. Personnel Requirement Personnel –

1 consultant, 1 project manager, 1 project coordinator, 1 community mobilizer. 1 logistics manager .2 security officers. General labour.

NO. EXPENSES QUANTITY AMOUNT ($)

1. Personnel 3 12,000

2. Whole year salary (Security) 2 128,000

3. Maintenance 10 67,000

4. Insurance 10 270,000

5. Installation 20 150,000

6. Project Continuity – 55,000

7. Solar Street lights 10 675,000

8. Advertisement boards 10 120,000

9. Office and office equipment – 100,000

10. Website development and hosting – 44,000

11. Communication – 20,000

12. Training 2 8,000

13. Travel – 10,000

14. Evaluation/ Information Dissemination – 25,000

15. General Administration/ Overhead – 40,000

16. Miscellaneous Expenses – 162,000

17. TOTAL EXPENSES 1,750,000

18. Other Funding Sources (Funds received from area CDF) 600,000

10. Total Grant Funding Requested 1,200,000

11. Estimated Annual Project Revenues 98,000

12. Personnel Requirement Personnel –

1 consultant, 1 project manager, 1 project coordinator, 1 community mobilizer. 1 logistics manager .2 security officers. General labour.

ACTUAL BUDGET

The set of workings and data given above shows the estimation that is provided for a company that wants to invest in street lighting program. The first phase of the working shows definitive working of the standard costs that the company is likely to incur while carrying out all the activities that entails the installation of the lighting along all the streets. These standard costs show the possible approximation workings that the company is bound to incur for this project. These workings attract a provision for either appreciation or depreciation of the goods and services.

Standard Budget/Costs;

This shows the estimated workings for every expense that will be accounted for every good acquired or service’s offered. These estimations are in monetary terms. This is due to the use of monetary terms as a basic measurement for fair compensation of goods or services offered. These are just but preliminary approximations that a professional’s expert’s estimates that the given project will have to undertake. This estimation is given prior to timely consultation to the budgetary committee on the status of the financial position of the given company. The applicability of the standard costing technique is quite evident from the workings that are given. This is due to the current market of goods and services being offered, therefore; this leads to the notion that the cumulative expenses are relatively related to the current market provision of the prices of goods and services (Hinshaw, 19). Experts design these approximations bearing in mind the possible appreciation or depreciation of the market interest rate. The market interest rate is flexible; it can either appreciate or depreciate depending on the market forces of demand, hence, this provision should be enforceable and all the necessary precautions should be adhered to strictly. The standard costs o budget is just but a blueprint of the possible expenses that the company is to incur. These provisions allow for the budgetary team to plan adequately and ensure that every factor is put in place to realize maximum returns from the project.

Actual Costs/Budget

This is the practical bit of all the expenses that the project has incurred. These expenses have either increased or decreased from the late standard approximations. This is due to the prevailing market interest rate and market forces of demand and supply. Some of the prices of the available goods and services decrease due to the decreased demand for these factors (Vian et al, 10). The actual costs show the timely estimation of the goods and services that the company will incur in setting up the project. This project needs a monitoring and evaluation team that will work to ensure that all these money is spent in the right way and at the right team for the right purpose. Project work is an activity that takes quite sometimes for the possible income to be realized. This is the reason as to why the company spends most of it financial resources on setting up and establishing this project. Therefore, the basic notion of immediate profit realization is waivered upon.

The actual costs are practical enough after this amount is spent on the field for the rightful purpose and timely expenditures. This project is quite sustainable in the long run perspective only if the management employs a taskforce that will work to realize the execution of the project and the possible profit influx from the project. Projects are quite hard in maintaining; therefore, this forces the company to outsource for an independent consultancy firm that has experience on such projects and will work closely to ensure maximum realization of this project (Stubbs,11).

The most likely areas for further attention

There are plenty of areas that should be monitored closely and checked upon constantly for positive results from the project. A financial team that will monitor all the dynamics of the projects especially on how expenditures will be managed should be established (Parnaby, 1068). This prepares the company against any possible miscellaneous losses against unscrupulous management team.

Another possible area of concern is developing a monitoring and evaluation team that will work closely with the finance team on checking and ascertaining for the possible progress of the project.

Other information that is desirable when making decisions based on the above data.

The main information that should be taken into perspective is not about the total costs of the project but the long run impact of the project. The company should not be concerned mainly on the heavy cost of the project; instead, they should project and prepare for the possible huge long-term income from the project. Such projects are fruitful in the long-run and maintenance should be a critical factor to the management team.

The main limitations associated with the techniques of standard costing and variance analysis

There are plenty of limitations that are associated with these techniques; for the standard costing technique, time is the main limitation that affects the period when the standard budget is set, and when the actual costs are practical, this affects the profits of a given company negatively.Bibliography;

Darcy, A 2001, ‘Strengthening North-South Partnerships for Sustainable Development’, Nonprofit & Voluntary Sector Quarterly, 30, 1, pp. 74-98

Eroğlu, Ş 2009, ‘Patterns of Income Allocation among Poor Gecekondu Households in Turkey: Overt Mechanisms and Women’s Secret Kitties’, Sociological Review, 57, 1, pp. 58-80,

Hinshaw, PM 2011, ‘Regulatory Readiness Understanding the Triple Aim’, Nursing Management, 42, 2, pp. 18-19,

Lipin, S, & Knecht, G 1995, ‘How Many Other Barings are There?’, Wall Street Journal – Eastern Edition, 28 February

Nedyalkova, Pl 2010, ‘Selection and Applicability of Financial – Control Rate in the Control Process’, Trakia Journal of Sciences, 8, pp. 204-210,

Parnaby, pf 2009, ‘Sit Back and Enjoy the Ride: Financial Planners, Symbolic Violence, and the Control of Clients’, Canadian Journal of Sociology, 34, 4, pp. 1065-1086

Stubbs, W 1995, ‘Two down, Many to Go’, Times Higher Education Supplement, 1167, p. II

Vian, T, Richards, S, McCoy, K, Connelly, P, & Feeley, F 2007, ‘Public-Private Partnerships to Build Human Capacity in Low Income Countries: Findings from the Pfizer Program’, Human Resources for Health, 5, pp. 8-11,