Management control system: understanding, function, element, and factors that influence it
The management control system is very necessary in a company because this system has a considerable role in the development of the company. A company will vulnerable to decline if it does not have a management control system. Instead, the company has the potential to develop if there is a good control system.
Every company must have its respective control standards. The better the control system, it will greatly affect the company.
However, some companies also have not too thought of this management control system. Therefore, not a few large companies have declined or bankrupt. Based on this fact, every company is considered to have to re-test and review their management control system.
Definition of Management Control System
Management control systems are included in the part category of applied behavior knowledge. In principle, this management control system is a system that contains demands to all people in the company to run and control companies that are either based on certain assumptions. In this case, the good company can be interpreted as:
- Refuse the company’s performance that reflects the company runs effectively, efficiently and is also productive.
- Determination in determining the benchmark above.
- Appreciating the resources owned by the company, including employees in it.
Every company certainly has a different level of complexity in its management control, the greater the scale of the company will certainly be more complex.
This system is more comprehensive and integrated, meaning more focus on various efforts made by management so that the company’s goals can be achieved. So, this management control system can be applied to various scale companies, because basically every company certainly has the same component, namely:
- W = work (work)
- E = Employee (labor)
- R = Relationship (Relationship)
- E = Environment (environment)
Knowledge of this system can be interpreted as well as theoretical-practical. Therefore, the management control system will be easier to understand if the learning is always associated with human behavior in a company.
Edy Sukarno explained that the management control system is an integrated system between processes, programming, accounting, strategy, budgeting, and accountability which is basically used to help those who are within the company so that the results are more maximal.
While Anthony and Govindarajan in his book entitled Management Control System explained that control management is a process in which the manager provides direction to each member in the company to be able to implement the company’s strategy.
Some important features of the management control system are:
- Management control systems will be used by companies to control the entire organization, including control of all resources used, both human resources or equipment resources, as well as the results obtained by the company, so the company can achieve its goals smoothly.
- This system will be more focused on more integrated and comprehensive evaluation techniques and evaluation techniques with the nature of mature calculations in evaluating something in it.
- Management control systems will be more oriented to human resources, because management control is focused more to help company managers to achieve strategies not to fix them.
Therefore, the role of every dominant psychological consideration will be more attention in the management control system. Based on the characteristics above, it can be seen that the most important task of control management is trying to achieve company goals as effectively and as effectively as possible.
So that all tasks can be carried out properly, the first phase of the manager must be carried out is to decide what the company will be achieved and how to achieve this goal.
With this decision, then the management can apply policies that are able to guide the company to achieve goals. After the policy was made, this system will begin to carry out his job to ensure that what the management can be done by all company members.
Management Control System Function
Management control system is a systematic effort carried out by the company to achieve its objectives by carrying out comparisons of work performance to fit the initial plan and create an appropriate action to be able to correct every distorted difference.
Effective cost control will depend on how communication is intertwined between the information accountant and management. By creating a work performance report, the controller will also provide a suggestion at various levels of management regarding an improvement measure needed by a particular activity.
The report can be presented in the form of direct or written statements from the controller on the company’s management. The contents of the report can also be in the form of work performance reports that have been achieved by their employees.
Management Control System Elements
The elements that exist in this system include detectors, selectors, effectors, and communicators.
This process begins with the detector when searching for information about a form of activity. Detectors can be in the form of information systems, both formal and non-formal information, hereinafter described in the leadership of what happens in an activity.
After the information was successfully obtained, the activity in it would be compared to the default standard, then it was then evaluated.
This repair process will be carried out effectively, so that all forms of irregularities can be changed so that they are able to participate in various predefined criteria.
Management control process
Good management control system process will be more normal. Formal management control has several stages that are copedly related to one with the other, which consists of:
In this stage, the company will determine what programs will be carried out and estimate the resources needed for each program that had previously been determined.
In this budgeting stage, the budget will be stated in a particular financial to be used in a certain period. This budget is carried out based on a collection of budgets from the accountability center.
Operation and Accounting
At this stage, recording of various resources used and the income obtained. All of these records and fees will be categorized according to the program set by the center of responsibility
The categorization in accordance with the program that had previously been carried out would be used as a basis in future programming, while the categorization that was in accordance with the accountability center would be used to measure manager performance.
Report and analysis
This stage is the most important stage because it is a closing of the management control process cycle so that all data on the accounting accountability process can be collected.
Analysis of this management report can be:
- Necessary or or absence of the company’s strategy to be reviewed.
- Necessity or not the removal policy, addition, or change in the program next year.
- Necessary or not the budget change.
- Necessary or not repair for any problems that cannot be anticipated.
Factors that affect the management control system
The following are the factors that affect the design of the management control system:
- Enterprise size and deployment
The size and level of spread of large companies will certainly be different than small companies. This will certainly determine the contents and properties of the management control system.
- Organizational Structure, Delegation and Decentralization
The Articles of Association and Convention will regulate the entire organizational structure of the company and the extent to which decentralization and delegation throughout the company. For example, the philosophy applied by the State Bank of India management must be different from the Country Trading Corporation.
In addition, the level of decentralization and delegation changes in a company of every time will also be adjusted to changing environmental challenges and opportunities that might be present. The entire control system will affect the implementation of the company’s operations.
- The nature and distribution of operations
The nature and division of operations in a company will definitely affect the management control system.
- Type of responsibility
Different management control systems are very necessary for various responsibility centers in a company. This is to determine whether the performance of the Center for responsibility must be measured by cost or profit or profit on an investment, depending on the type of center of responsibility.
In principle, this management control system is a system that contains demands to all people in the company to run and control companies that are either based on certain assumptions.
The formal management control process has several stages that are copedly related to one with the other, which consists of: programming, budgeting, operations and accountors, and Laoran and analysis.
All of these records and fees will be categorized according to the program set by the categorized responsibility center that is in accordance with the program will be used as a basis for future programming, while the categorization that is in accordance with the accountability center will be used to measure the manager’s performance.
However, to build a large and successful company, this system alone is not enough. It takes good and appropriate financial management so that companies can apply good policies for the company in the future.
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