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Putting the controller in control.

Controllers of small businesses who are concerned almost entirety with the financial aspects of their organizations are missing an opportunity -- not only to help guide their enterprises to greater success but also to enhance their careers.

Many smaller businesses are run by entrepreneurs who have neither financial nor even a management orientation. They usually have developed a product or service and excel at selling it. Unfortunately, they often become chief operating officers by default, and since their expertise, experience and possibly even interest are not financial or managerial, an information and administration vacuum exists.

Enter the controller.

By training, experience and interest, the financial officer may be able to fill that vacuum with only minor adjustments in role and knowledge. After all, the controller often is the only executive in the organization in touch with all line officers, relying heavily on the information they provide. However, areas with which controllers usually don't get involved are operational and administrative control systems dealing with units of production; production schedules; the use of employee time, raw materials and other supplies; and the quality of products or services.

This is a correctable omission.

There is no question every organization can benefit if one of its executives takes a broader view of the operation. Here are some vital questions an information system under controller's guidance and integrated into existing financial controls can answer for a business:

* Are the expected numbers of products, services, parts, documents, sales, etc., being produced or delivered?

* Are the key operations proceeding on schedule?

* Does the error rate exceed acceptable limits?

* Are the costs associated with each operation in keeping with the purpose and importance of the operation?

* Is employee turnover excessive?

* Are there too many staff vacancies?

* Are the costs of raw materials and supplies within bounds?

* Have inventory levels become excessive or too low?

* Are waste and spoilage excessive?

* Are costs associated with control programs in line with the benefits?

BARRIERS TO SUCCESS It will not be easy for controllers to assume responsibility for these function. They must forge new relationships within the enterprise - and may have to overcome opposition from other executives. One way to do so is to stress that their function is similar to the former role, in which budget variances were reported to line managers, except in this case the contoller also will report operational variances from budgeted expectations.

Since line managers will be responsible for using this new variance information to take corrective action, the controller will be responsible only for advising line managers and the business owner of these variances through periodic reports. A successful transition to this new function depends on the line manager's involvement and agreement in setting the additional variance characteristics.

Controllers whose experience is entirely accounting-orriented may lack the expertise to establish appropriate operational and administrative controls. One way for the controller to get help is to turn to the organization's CPA firm. Many firms provide frequently use to assist clients in this area is the operational audit or, as it's often called, a "business performance review." In such a review, the firm examines all or part of an organization's operations, relying on interviews, observations and questionnaires. The goal usually is to recommend improvements, but a client can agree with the CPA firm in advance that the engagement of operational and administrative controls.

In these highly competetive days, someone in an organization should have the overall responsibility of monitoring operations as well as financial results. In smaller businesses, the controllers often are the best people to fill that role. Controllers who take on this added responsibility certainly can increase the importance of the controller's function and benefit the company as well.


* CONTROLLERS IN SMALL businessess are in a perfect position to expand their role into management. By training, experience and interest, controllers often are the only executives in an organization who are in touch with every line officer and who rely heavily on the information they provide.

* EVERY ORGANIZATION can benefit if one of its executives takes a broader view of the operation.

* IT WILL NOT BE easy for controllers to assume managerial responsibility. The greatest obstacle is developing new organizational relationships within the enterprise. But there are ways to overcome this problem.

* CPA FIRMS CAN help with the transition by providing management consulting services through a "business performance review" in which operational and administrative controls are recommended.

* BEFORE A CONTROLLER can take on the larger role, he or she must develop a hands-on understanding of the businesses - from marketing to manaufacturing and shipping. Cultivating such broad expertise takes time and effort. It's best done by establishing a trusting relationship with line managers so they will share the information most helpful to them in their day-to-day management activities.
COPYRIGHT 1993 American Institute of CPA's
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1993, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

Article Details
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Title Annotation:How to Turn a Controller into a Manager
Author:Kuttner, Monroe S.
Publication:Journal of Accountancy
Date:May 1, 1993
Previous Article:What to do when chapter 11 threatens.
Next Article:How a controller can grow into a management role.

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