The purpose of management and control activities is to produce and use financial and support information to inform , monitor, and instigate operational actions to meet organisational activities. This will also play an important part in refining or redefining those Organisational objectives.
It includes various activities but major activities can be classified as under:
- Management Information Generation
- Information analysis and application
- Internal Audit
- Management Accounting
Management Information Generation
It includes development , production and analysis of the information used for management and control purposes. It may include financial as well non financial information. It covers planning, forecasting, budgeting, target setting, analysis and reporting. The content and scope may vary from Organisation to Organisation as per the need and requirements which may require aggregation of both past and future data. A strong and reliable information generation is very crucial in the overall process of decision making and management as this data forms basis of all other analysis and reporting.
Information Analysis and Application
This activity primarily includes how information is used for Management and Control. Sound application of data is very important for management and decision making. Following four are the major application areas of information:
- General Management and Control of Operational Activities ; generally with an implicit focus on profitability or value for money goals .
- Cash and Treasury Management ; It has two main performance dimension , first Impact on Company Valuations as it is based on the net present value of future cash flow and second as an asset class to be managed through treasury activities .
- Investment Appraisal; seeking merits of investment options using both cash approaches ( Net Present Value and Internal Rate of Return ) and Profit based appraisals.
- Tax Management : It involves the consideration of range of factors such as decision on transfer pricing , legal entity structure, operating locations, and financing structures. Generally Organisations focus on minimising tax liabilities However , progressive and bottom-line focussed managements have realized that taxes (both direct and indirect, domestic and international), should be viewed as a dynamic item of cost rather than a passive charge on the profits.
Indeed, an effective tax-cost management provides a distinct competitive advantage. This requires the application of appropriate tax strategies proactively identified and surgically implemented
In the current scenario, when business processes are getting complex, regulatory involvement is increasing , it is important to have a continuous review of the processes to ensure that they are in line with Organisations established procedure and working towards achieving the Organisation's goal and objectives.
A sound internal audit will help management to have a look at current progress, identify gaps and take timely decision to fill those gaps and proceed for implementation of decisions for improved Organisation's performance.
Management accounting involves partnering in management decision making, devising planning and performance management systems, and providing expertise in financial reporting and control to assist management in the formulation and implementation of an organization's strategy. It may be regarded as a partnering with the management in the overall decision making .The activities in management accounting includes forecasting and planning, performing variance analysis, reviewing and monitoring costs etc.