Financial Controllership

1. Compare the roles of a Financial Controller in a small, medium and large enterprises. Describe
his relationship with the CFO, CEO, Board of Directors, Department Managers and others that he deals
with in the company. Relate these to your company experiences. Discuss too how he should deal with
ethical issues, by giving examples.

 Financial Controllers have the primary responsibility of managing the costs and finances of
organizations. The controller oversees the accounting of a company. In a small business it is common
for the controller to have the final say on every financial decision, such as budgeting, reporting, and
investing and risk management. Most of the time in a small business, controllers sometimes wear the
hat of a CFO’s job. In medium sized company, controllers mostly responsible in controlling of the
accounting process, generating financials, reconciling things, keeping the machinery of accounting well
and functioning properly. On the other hand, CFO’s have the responsibility over treasury functions;
dealing with capital resources, monitoring of cost of capital, arranging for investing of excess cash,
watching cash flow, and keeping the business funded. They also have to understand the business
process, and relate that through the lens of the accounting system to management. They are the ones
responsible for making sure that financial statements make sense, and discerning what those
statements are saying e.g. what messages and decision information is contained in the financials. They
would perform financial analysis, interpretation and investigation. In large company, the duties of a
controller are often specialized in a certain financial decisions shifted to other executives, such as the
chief financial officer then to the chief executive officer e.g. a financial controller interprets the data of
the reporting he will submit it to the chief financial officer for reporting and interprets his analyzation
then once comprehensively analyze it will be presented to the chief executive officer to help the
executives makes a decision for the company.

2. How are general and administrative expenses allocated among business units? What is the
importance of reviewing general and administrative expenses information, discuss in terms of standards
for expense activities, reduction of expenses, spend management systems and budgeting general and
administrative expenses

 General and administrative (G&A) expenses are incurred in the day-to-day operations of a
business and may not be directly tied to a specific function or department within the company. General
expenses pertain to operational overhead expenses that impact the entire business. Administrative
expenses are expenses that cannot be directly tied to a specific function within the company such as
manufacturing, production, or sales. G&A expenses include rent, utilities, insurance, legal fees, and
certain salaries. The allocation of general and administrative expenses must match the company
objectives. There are several methods to allocate the G&A expenses such as; Allocated based on the
amount of resources consumed by the cost center that is receiving service, allocated based on the
relative amount caused by the various cost centers, and allocated based on the overall activity of a cost
center. To view the full costs associated with running certain business units, a company may allocate its
G&A expenses out to each business unit based on a percentage of revenue, expense, square footage, or
other measure. As a managerial accounting technique, reviewing this information with internal
management allows for more informed decisions about expanding or reducing individual business units.
The allocation of G&A depends on the company what is important that a controller must have the
control with these expenses. It a must to review all the costs before a certain unit receives a budget.
There are sets of standards used in tracking the performance and modifying system to match or beat the
standard the following are: Observe work tasks this is necessary to observe to identify the problem,
Select tasks to be standardized, once identified a standard must be selected whether a high volume or
enough volume to justify the standard, Determine the unit of work this is the measurement base on
which to set a work standard, Determine the best way to set each standard there are various kind of
routine, depending on the nature of work, Test each standard once the standard has been set, it must
be to determine if it is reasonable, Apply the standard this step involves explaining the standard to the
employees for them to apply to their job, and lastly Audit the standard it is important to audit the
standard regularly to check if it was implemented right and fit to the current level. These standards can
be applied to measure individual function or overall activity and to exercise control over repetitive tasks
within general and administrative area. Reducing general and administrative expenses is a control for
costs directly that do not contribute to revenue gains or production efficiencies. These expense are dead
weight and must be constantly reviewed to ensure that they are kept at an absolute minimum, even if
the company as a whole is growing. Spend management systems are a great way to save money. It is
used to reduce the total expenditures of a business. This is primarily a cost-reduction system, but when
properly managed, will still ensure that an appropriate amount is spent on the core activities of an
organization. The system contains the following main features: aggregates information about the
expenditure made and sorts the aggregated information in many ways for reporting purposes. The
information generated by a spend management system is then the basis for negotiations with suppliers
to cut prices. In addition, the more advanced spend management systems can track the terms of
supplier contracts, and even contain electronic supplier catalogs that employees use to order goods only
from suppliers approved by the purchasing department. The general and administrative expense budget
is usually prepared by an office manager to predict what the non-selling expenses will be for the period.
Selling expenses are all expenses that have to do with selling a product like advertising, promotions,
sales commissions, and shipping goods to customers. The general and administrative expense budget is
usually prepared by an office manager to predict what the non-selling expenses will be for the period.
Selling expenses are all expenses that have to do with selling a product like advertising, promotions,
sales commissions, and shipping goods to customers. The general and administrative expense budget
focuses on operating expenses like administrative salaries, depreciation, and office expenses. These non-
selling expenses can be planned and predicted. The general and administrative expense budget usually
includes both fixed and variable costs. The office manager can easily estimate the depreciation for the
period.

3. Enumerate and discuss briefly the considerations in accounting and disclosure requirements as
well as reporting for selected investments and employee benefits, including the role of the controller in
this activity.

 Employee benefits entail any non-salary compensation included in an employee's contract,

including health insurance, a retirement plan, or paid vacation time. Typically, benefits are included to
create a more competitive package for an employee. Benefits will attract and retain top talent, and can
help communicate your company's top priorities and values. The role of a controller with regarding this
categories: a proper accounting standards or principles are applied in the classification and valuation of
the assets, and related liabilities, if any, proper supporting or “detail” records are maintained on a
current basis to provide proper accountability and description of the assets and the related financial
facts and Performing any necessary reviews or audits to ascertain that an adequate internal control
system exists and is operating properly. The controller must consider what further communications or
reports are desirable to properly inform the Board of Directors, executive management, and plan
participants. Accounting records are all documentation and books involved in the preparation of
financial statements or records relevant to audits and financial reviews. A business entity may invest in
equity securities or debt instruments. It is highly desirable that a systematic manner be used to record
information relative to the purchase, including the objective, and sale, adjustments made to the carrying
value, income received, and relevant legal or tax information. Indeed, with these documents it is
necessary to establish a control of accounts or accounts for investments in securities and to support this
with a securities ledger or register.

4. Discuss briefly the cost systems applied in your company and how your company controller
exercise control over these systems.

 A costing system is designed to monitor the costs incurred by a business. The system is
comprised of a set of forms, processes, controls, and reports that are designed to aggregate and report
to management about revenues, costs, and profitability. There are two types of primary costing systems
are: job costing system and process costing system. Job Costing system materials, labor, and overhead
costs are compiled for an individual unit or job. This approach works best for unique products, such as
custom-designed machines or consulting projects. The cost accumulation process is highly detailed and
labor intensive. Process costing system materials, labor and overhead costs are compelled in aggregate
for entire production process, and are then allocated to individual production units. This approach works
well for large production runs of identical items, such as production run. The cost accumulation process
is highly efficient and portions of It can be possibly be automated. I work in an engineering design and
consulting firm, the cost system we used is the job costing system wherein materials, labor and
overhead varies depending on what project we are doing.

5. Discuss briefly and comprehensively the internal controls and the role of the Controller in the
following (cite examples from your company or other reference):

 Inventories - Inventories are the term for the goods available for sale and raw materials used to
produce goods available for sale. Inventories represent one of the most important assets of a business
because the turnover of inventory represents one of the primary sources of revenue generation and
subsequent earnings for the company's shareholders. Keeping a healthy level of inventory on hand is to
meet the demands of the customers. It makes sense to keep a considerable quantity on hand for those
periods when regular production capacity cannot keep up with surging demand. It makes sense to keep
a considerable quantity on hand for those periods when regular production capacity cannot keep up
with surging demand. A controller makes sure that the number of inventories are within the target cost
or budget of the company. The controller must ensure to create an overall inventory policy, verify that
inventory records are accurate, audit inventory controls, install control points, supervise the physical
inventory count , report on inventory costs – it is a prime responsibility is to ensure that the reported
cost of inventory is accurate, know how the inventory management system work – he/ she must know
how to operate the system because it has a direct impact on the control systems needed, as well as the
inventory levels needed to feed a company’s production systems, measure warehouse functions, create
inventory management policies and procedures.
 Customer Credit and Receivables – accounts receivable is the balance of money due to a firm for
goods or services delivered or used but not yet paid for by customers. It is important that every month a
company should have collected the receivables they have targeted in order them to have a good cash
flow. It granting credit to customers it is a must that customers should undergone a risk assessment in
order to know the status of a customer and which credit limit must be given as well as payment terms. A
controller must review its credit policy from time to time. There should be a billing procedure to
supplement the training program and that is readily available for review if the staff has a billing
question. The collection department is responsible for converting a large amount of receivables into
cash as soon as possible, which greatly impacts a company’s financial health. The position of receivables
should be regularly reviewed as part of managing overall working capital and corrective action taken
when needed. Methods used in monitoring the credit system would include aged debt analysis, financial
ratios and statistical data.

 Research and Development - Research development is a set of strategic, proactive, catalytic, and
capacity-building activities designed to facilitate individual faculty members, teams of researchers, and
central research administrations in attracting extramural research funding, creating relationships, and
developing and implementing strategies that increase institutional competitiveness. The financial officer
handling the financial aspects of R&D activity reports to the vice president of Research and
Development, and provides the necessary financial analysis, accounting and reporting services, and
coordination with the corporate finance group. In this instance, a dotted-line relationship is maintained
with the corporate vice president and controller. The primary responsibility of financial controller is to
provide a necessary accounting accumulation and reporting of the costs and expenses, and assets and
liabilities, of the R&D activities in economical way. A controller establish and maintain proper internal
protocols. It also assist in developing guidelines for the total amount to be spent on R&D activities. In
doing the research and development every unit of the business has its own budget. However, not all
R&D activities were approved by the management. By the help of the controller it oversee and study
also if the proposed activity is within the budget and has a high impact in contributing to company’s
improvement. In our company, each one of us is required to make our own process improvement and
with the help of our business process management they will help us to analyze if the proposed project
fits the need of the company.

 Stockholder’s Equity - Stockholders' equity is the amount of assets remaining in a business after
all liabilities have been settled. It is calculated as the capital given to a business by its shareholders, plus
donated capital and earnings generated by the operation of the business, less any dividends issued. This
equity is created initially by the owner’s investment in the entity, and may be increased from time to
time by additional investments, as well as by net earnings. The financial controllers they are responsible
for the company’s financial reporting, such as its monthly, quarterly and annual accounts. They manage
all of the company’s transactions, from accounts payable to receivable payroll, and from control
accounts to general operational finance. The controllers must safeguard the long-term financial interests
of not only the shareholders but also the providers of long-term credit, to say nothing of the sources of
short-term capital such as commercial banks and suppliers. And must ensure that accurate analyses
must be provided as well as the recommending actions to the shareholder’s in helping them making a
decision. A properly accounting for the shareholders’ equity includes the historical analysis of the source
of the equity and the segregation of the cumulative equity by class of shareholder. Making the necessary
analyses to assist in planning the most appropriate source of new funds.