What Difference Between Line, Staff, Controller and Treasurer

Organizations go with their own basic mission objectives. People who have direct responsibility to achieve the basic objectives of an organization be in “ LINE POSITIONS “, while “ STAFF POSITIONS “ consist of people who support and have indirect responsibility to achieve the organization’s basic objectives.

For example, an organization which has the basic mission to produce and sell televisions, has line positions and staff positions. Line positions consist of Vice Presidents of Manufacturing, Vice Presidents of Marketing, Factory Manager, Production Manager, Assemblers manager, Electrical Foreman. They are managers who set policy and make their decisions which have direct impact on productions.

Staff positions consist of Vice Presidents of Financial, Vice Presidents of Human Resources, Controllers, Cost Accounting Manager and Purchasing Manager. These people have no authority over the managers in the production area but they may have influence upon the organization. Using accounting information, management accountants  have significant input into policies and decisions.

The chief accounting officer called Controller. He or she as a controller supervise all accounting departments because management accounting plays critical role on the operation of an organization. The controller is often viewed as a member of the top management team and is encouraged to participate in planning, controlling and decision making activities. A controller has responsibility for internal and external accounting requirements. Direct responsibility for internal auditing, cost accounting, financial accounting including financial reports and statements, systems accounting including  analysis, design, internal controls and taxes. The duties of a controller may vary from firm to firm. In some firms, the internal audit department may report directly to the financial vice president or some other vice president.

The Treasurer is responsible for the finance function such as to raise capital, manage cash and investments. As a treasurer, he or she may also charge of credit, collection, insurance and reports to the financial vice president.

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The Purpose of Management Accounting Information and The Process of Management Accounting

Management accounting information system

It is an information system that produces outputs using inputs and processes to satisfy specific management objectives.

Process are the heart of a management accounting system and are used to transform the inputs into outputs that satisfy the system’s objectives. Processes are described by activities such as :

• Collecting
• Measuring
• Storing
• Analyzing
• Reporting and managing information

Outputs include special reports, product costs, customer costs, budgets, performance reports and personal communication. The management accounting information system is not bound by any formal criteria that define the nature of the inputs, processes or output. The criteria are flexible and based on management objectives. The management accounting system has three objectives or purposes

1.  To provide information for costing out services products and other objects of interest to management. Management accounting system have to determine the cost of products and processes. Thus, it emphasizes the importance of accuracy in product costing to suggest ways of improving a company’s operations. Accuracy in costing assignments have led to the development of new and more useful management accounting information.

2.  To provide information for planning, control and evaluation. Managers, executives and workers need an information system to identify problem such as the possibility of cost overruns or the inability of a manager in a subunit to implement a plan. Once problems are known, the actions can be taken to implement solutions.

Tracking efficiency measures both financial and non financial information to evaluate and monitor the effects of decisions that are intended to improve operational and unit performance. Informing workers about operational and financial performance allow workers to assess the effectiveness of their efforts to improve their work. In this circumstance, workers and managers should be committed to continuously improving the activities they perform. Continuous improvement means searching for ways of increasing the overall efficiency and productivity of activities by reducing waste, increasing quality and reducing costs.

This information is needed to help identify opportunities for improvement and to evaluate the progress made in implementing actions designed to create improvement.

3.  To provide information for decision making. It is interwined with the first two. Information about the costs of products, customers, processes and other objects of interest to management can be the basis for identifying problems and alternative solutions.

imilar observations can be made about information pertaining to planning, control and evaluation. By using product cost to prepare a bid for example, helping a manager to decide whether to reduce price by reducing the airfares and increasing advertising expenditures to improve profitability, it is cost – value – profit decision (by decreasing cost and increasing sales volume to get more profit) or decided to change manufacturing equipments with robotic manufacturing equipments system, it is what we call capital investment decision and ong run planning.

 

Management process is defined by

• Planning
• Controlling
• Decision making

  

Management process describes the functions carried out by managers and empowered workers to participate in the management process. It means to give them a greater how the plant operates. Employee empowerment is simply authorizing operational personnal to plan, control and make decisions without explicit authorization from middle and higher level management. Employee empowerment is justified by the belief that the employees closest to the work can provide valuable input in terms of ideas, plans and problem solving. Workers are allowed to shut down production to identify and correct problems and their input in sought and used to improve production processes. For example, empowered workers by redesign in one department can avoid machine downtime and produces significant savings. Employee empowerment is a key element in achieving continuous improvement.

      

Planning the detail formulation of action to achieve a particular end is the management activity called planning. Setting objectives and identifying methods to achieve the objectives is required in planning. A firm may have the objective of increasing its short term and long term profit ability by improving the overall quality of its products. By improving product quality, the firm should be able to

Reduce scrap and rework

Decrease the number of customer complaints and warranty work

Reduce the resources assigned to inspection and so on

The works what have to be done to increase profit ability. To accomplish all, management must develop some specific methods and implement it to achieve the desired objective.

As a plant manager, he or she may evaluate and select suppliers that are willing and able to supply detect free parts. By empowering workers, they may be able to identify production causes of defects and create new methods for producing a product that will reduce scrap, rework and the need for inspection.

Planning is only half of the battle, once a plan is created, it must be implemented. Managers and workers must monitor its implementation to ensure that the plan is being carried out as intended.

Controlling on implementation of plans and taking corrective action as needed must be done. Control is usually achieved with the use of feedback or information that can be used to evaluate or correct the steps being taken to implement a plan. Based on the feedback, a manager or worker may decide to take corrective action to put the actions back in harmony with the original plan or do some replanning.

Feedback is a critical part of the control function and be done by management accounting. Feedback can be financial or non financial. Often financial and non financial feedback is in the form of formal reports that compare actual data with planned data. This is what we call as performance reports.

Decision making is to choose among competing alternatives. It is interwined with planning and control. A manager cannot plan without making decisions. Managers must choose among competing objectives and methods to carry out the chosen objectives.

Only one of numerous competing plans can be chosen. Similar comments can be made concerning the control function. Decisions can be improved if information about the alternatives is gathered and available to managers. One of the major role of the management accounting information system is to supply information that facilitates decision making.

The manager can requested information concerning the expected manufacturing costs of the product. This cost information, along with the manager’s knowledge of competitive conditions, should improve his or her ability to select a bid price. Imagine having to submit a bid without some idea of the manufacturing costs.

The accounting information system within an organization has two major subsystems

• A management accounting information system
• A financial accounting information system 

The accounting information system is a subsystem of a firm’s overall management information system. The financial accounting information system is concerned with producing outputs for external users. It uses well-specified economic events as inputs and processes that meet certain rules and conventions which are defined by Securities Exchange Commission (SEC) and Financial Accounting Standard Board ((FASB). The overall objectives is the preparation of external reports / financial statements for

• Investors
• Creditors
• Government
• Other outside users.

  

For investment decisions, stewardship evaluation, monitoring activity and regulatory measures.

The management accounting system produces information for internal users such as

 

• Managers
• Executives
• Workers

Thus, management accounting called internal accounting and financial accounting called external accounting. Management accounting identifies, collects, measures, classifies and reports to internal users in planning, controlling and decision making.

Management accounting is not subject to the requirements of Generally Accepted Accounting Principles (GAAP), The Securities and Exchange Commission (SEC) and Financial Accounting Standard Board (FASB) that must be followed for financial reporting. Unlike financial accounting, management accounting has no official body that prescribes the format, contact and rules for selecting inputs and processes for preparing financial reports. Managers are free to choose whatever they want provided, it can be justified on a cost-benefit basis.

Type of information by financial accounting tend to objective and verifiable financial information. Management accounting information more subjective since it maybe financial or non financial.

Financial accounting has a historical orientation, it records and reports events that have already happened. Although management accounting also records and reports events that have already occurred, there is also a very strong emphasis on providing information about future events. Management not only want to know what it costs to produce a product, it may also want to know what it will cost to produce a product. Knowing what it will cost, helps in planning material purchases and making pricing decisions among other things. This future orientation to support the managerial functions of planning and decision making.

Management accounting provides measures and internal reports used to evaluate the performance of entities, product lines, departments and managers in very detailed information, while financial accounting focuses on overall firm performance.

Management accounting is  much broader than financial accounting because it includes aspects of managerial economies, industrial engineering and management science.

However management accounting and financial accounting are part of the total accounting information system. The content of management accounting system is driven by the needs of the financial accounting system. A firm’s profitability is of interest to investors but managers need to know the profitability of individual products. The accounting system should be designed to provide total profits and profits for individual products, that is why accounting system should be able to supply different information for different purposes.  

   

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Concept of Management and Its Role on Enterprise

Management of a business enterprise is based upon three structure of levels

1. The operating management group, consist of foremen and supervisors.
2. The middle management group, consist of department heads, division managers and branch managers.
3. The executive management, consist of president, executive vice president, the executives of marketing, purchasing, engineering, manufacturing, finance and accounting.

They are people whose activities must be planned and controlled through top level directives, decisions and instructions. They always use plans on each moves and activities.

Plan should be considered under the term “planning” and the continuous of the plans under the term “control”. Planning refers to the construction of an operating program to cover all phases of operations and specific attention may be given to the program’s fulfillment in controllable segments.

Control guides the business to compare of performance with predetermined policies and decisions. Management needs systematic, comparative cost information as well as analytical cost and profit data to manage an enterprise. This kind of information is needed to assist in :

1. Setting the company’s profit goal by executive management.
2. Establishing departmental targets which direct middle and operating management move toward the final goal.
3. Measuring and controlling departmental and functional activities with the aid of budgets and standards.
4. Analyzing and deciding on adjustments and improvements to keep the entire organization moving toward established profit and company objectives.

In making decisions, giving orders, establishing policies, providing work and rewards and hiring people to carry out policies, are not as simple and easy thing to do. Management sets certain objectives which have to accomplish through the efforts of the people through a series of steps and processes. They requires the integration of knowledge, skills,  practices and experience of those who are entrusted with the task of carrying out the objectives. The objectives can be achieved by management together with the efforts of all employees and workers through planning and controlling.

Planning is a basic thing to the management process of an organization to external opportunities and threats, determining objectives and deploying resources to match the objectives. Without planning there is no basis for controlling. Planning provides the foundation upon which the control function operates. Effective planning is based on facts collected and analyzed. As a planner, he or she should be able to visualize the proposed pattern of activities. Planning is looking a head, preparing the future, it involves a choice of several alternatives, a matter of making a decision and precede the doing.

One kind of plan is called “the budget”. Budget is the most important plan of an enterprise and basic link of cost accounting with management. The use of budgets as a tool of control called “budgeting control” to anticipate results.

Budgets are expressed in quantitative data such as dollars, working hours, number of employees, units of input and output, units of products made and sold. Another kind of plan made by engineering, manufacturing, marketing, research and development, finance and accounting, must be maintained and participate in the establishment of the corporate plan. No single function should plan and act individually from other functions since all are interdependent. The failure of this process can cause complexity and disaster result for the organization at all.

Profits are the indispensable elements in a successful business enterprise. A firm with inadequate profit will not survive and perhaps become a social or economic disaster to the society where they belong.

Social responsibility is a fair weather concept. Management cannot begin to think about it unless profits are adequate. However, profit cannot become the sole objective of the company and its management. Management must execute a series of thinking processes and actions which will guide them to produce specific products or services in a manner or method that will effect in the long run and assure a profit, win the cooperation of employees, gain the goodwill of customers and meet social responsibilities.

Business logic and public expectations suggest that plans should be formulated within a framework of economic, technological, social and political. As a result, organizational objectives and performance criteria must be broader and more sophisticated.

On the other side, controlling or management control is the systematic effort by business management to compare performance to plans. The control function is important to accomplish the final objectives. The need for control increases along with the size and complexity of the organization. Continuous supervision of an activity is required to keep it within previously defined boundaries and these boundaries termed “budgets or standards” are set up for manufacturing, marketing, finance and all other activities.

They measure actual results against plans and if significant differences happened, remedial action are taken.

In a small company, planning and control activities often tend to be performed by a single person. The owner or general manager often perform their tasks without elaborate fact finding and analysis due to his intimate knowledge of men, materials, money and customers. However in a large company with numerous divisions and a variety of products or services, planning and control responsibilities are not combined in the same person or group of persons. Larger business organizations faced greater problem of planning and process of controlling the activities of individual units. For this reason, many firms have initiated the decentralization of certain planning and control functions in order to place the reports and necessary corrective actions closer to the scene of activity.

Overall responsibility for control rests with exevutive management or the president of the company. President cannot attend to every aspect of the control program so he must delegate authority and assign responsibilities to the middle and operating echelons of management. The delegation of authority and the assignment of responsibility are fundamental requirements if management’s plans are to succeed and control is to be exercised.

Authority is the key to the managerial job and the basis for responsibility. It is not only the force that binds the organization together, but also the power to command others to perform or not perform certain activities. Authority vested in a division manager, a departmental head, a supervisor or a foreman enhances compliance with the plans and objectives of the organization. Delegation of authority is essential to the existence of an organizational structure, however delegation does not mean a permanent release from obligations.

Closely related to authority is responsibility. The essence of responsibility is obligation. It arises particularly in the superior since the superior has the authority to require specified work or services from another person. This other person accepts the obligation to perform the work, he creates his own responsibility. Responsibility cannot be delegated, his responsible for performance or nonperformance.

Responsibility have two facets. To securing results and accountability or reporting back to higher authority of results achieved. The reporting phase is important as budgetary control and standard cost accounting. It makes possible to compare of actual performance with predetermined plans to measure the quantity, quality, time and cost of the extent to which objectives were reached.

Accountability is basically an individual rather than a group problem. The principle of single accountability has become well established in business organizations. Divided authority and responsibility results in divided accountability. The organizational structure must avoid duality or pooling of judgment for this diffuses responsibility and nullifies accountability. Without single accountability, control reports would not only be meaningless but corrective actions would be delayed or not forthcoming at all.

Organizing is essential to establish the framework within activities are to be performed and a designation of who should do them.Without proper organization a person cannot function as a manager. The terms of organize or organization refer to the systematization of various interdependent parts and units into one whole. Considered in this sense, organizing requires many functional units of an enterprise into a well conceived structure and assigning authority and responsibility to certain individuals. These efforts include the task of getting people to work together for the good of the company. All of attitudes, ambitions, ideas of many persons involved, indoctrination, instruction and patience are needed to arrive at the desired organizational structure. Creation of an organization involves the establishment of organizational or functional units into divisions, departments, sections, branches, etc. These units are created for the purpose of breaking the tasks into workable parts leading to division and specialization of labor. Actually there are three large fundamental activities in a manufacturing enterprise, they are manufacturing, marketing and administration. Within these three basic organizational units, numerous departments or section are formed according to the nature and the amount of work, specialization, number of employees and location of the work. After organizational units have been created, management must assign the work to be done within each unit. Appropriate division and distribution of work among the employees combined in organizational units are vital to the attainment of company objectives and the relationships between superior, subordinate and among managers within the management team must bind the units into one whole for ultimate success.

The organzation chart sets forth each principal management position to define authority, responsibility and accountability. The accountant’s reports help management to evaluate the effectiveness of its plan and establish the conditions to corrective action.

An organization chart is essential to develop cost system and cost reports which parallel the responsibilities of individuals for implementing management plans. The coordinated development of a company’s organization with cost and budgetary system will lead to “responsibility accounting”.

Generally, the type of organization chart is based on the line staff concept, a concept that is particularly useful when a product lines of a company are simple and not subject to frequent changes over the years. All positions or functional divisions can be simply categorized into two groups, the line group which makes decisions and performs the true management functions and the other group called staff gives advise or performs any technical functions. The functional teamwork is structured to place proper emphasis and balance on the truly important functions of any enterprise. These business functions can be grouped into

a. Resources

• Acquisition
• Disposal
• Husbanding of a wide variety of resources

                 Tangible
                 Intangible
                 Human
                 Physical


b. Processes

• Product design
• Research and development
• Purchasing
• Manufacturing
• Advertising
• Marketing
• Billing

c. Human interrelations
    Directs the company's effort toward the behavior of people inside and outside the company.

The use of company capital is one of management’s chief concerns because this capital is invested in the form of productive facilities (factory building, machinery, tools and equipment). The use of this capital is determined by management’s plans for the immediate future and by plans for more than two years ahead. The budget emerges as the result of management’s planning and plays an important role in controlling operations. Comparison fo the budget plan with actual results not only provides a measure of the amount of deviation but also reflects the reasons for variances or differences.

The effectiveness of the control of costs depends upon proper communication through control and action reports from accounting function from the various levels of management. Accounting and cost control reports are directed to executive management, middle management and operating management. Each managerial level requires data for deciding and solving varied and difficult problems. The data assembled for one purpose may not be usable for another purpose. Data collected and assembled for measuring and reporting to operating management of the past in using of materials, labor, machines and money cannot be used for future price and output decisions made by executive management.

A member of the management team called “controller” assists management in planning and control. In planning he classifies and presents the financial data of men, money, material, machines and methods into a coordinated plan for management’s considerations and decisions. In recent years, the controller and his staff have become the nerve center of many large corporations. Their knowledge and control of the basic communication network permit them to extract diverse data from computer to suggest to executive management for alternative plans in certain crucial areas of operations. In this control phase, the controller’s function is the result of a need for checks and balances within the business. Actually, the controller does not control but through the issuance of performance reports advises all levels of management where and what jobs or tasks require corrective action.

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