Lecture Notes Management Accounting and Control (2022/2023)
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Course
Management Accounting and Control (324039M6)
Institution
Tilburg University (UVT)
Notes from all courses given concerning the Management Accounting & Control course. Several examples are also included in the notes. These examples help to understand the theory, but can also be used as exam questions. The notes have helped me to understand the theory and pass the exam.
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Management Accounting and Controlling
Lecture 1 – Kick-off
A managerial reporting system in a firm is as our human brain in our body
Our human brain and managerial reporting systems (MRS)
What are functions of our human brain?
- Remembering things
- Instructing body parts
- Coordinating between body parts
What are the functions of a managerial reporting system in a firm?
- Decision-facilitation function
- Decision-influencing function
- Coordination-facilitating function
MRS helps to:
- Make better decision
- Direct employees
- Coordination
Overall goal of this course
Develop a sophisticated understanding of the powerful role(s) of managerial reporting
systems to achieve organizational objectives in a timely, efficient and effective manner.
How does this course relate to ‘practice’? General
Controllers - corporate finance
Designing, maintaining, and improving the managerial reporting system
- Could we make the data more accurate at reasonable cost?
- Can we measure customer satisfaction in a better way?
- Should we move to real-time tracking of performance measures?
- How should we design our rolling forecasts so that it is still reasonably accurate
during crises (as the Covid19-crisis)?
Advisory role for operational and strategic decisions
- What are the strategic uncertainties of the firm?
- Which supplier should we select?
- Should we use bonuses to motivate employees?
- Which control system do we need when we adopt the ‘new way of working’?
,How does this course relate to ‘practice’? Case of X
IMS: HR, Marketing, Professional Services, Tax, Travel Financial Services, IT, Real Estate,
Logistics, Industrial Equipment and Services, Energy
What is the business problem?
- X outsourced many services to third parties and notices that they loose cost control
here up to the point that it threatens profitability and competitiveness
How can management accounting help?
- X wants to get more insights into those costs in order to set better profitability
forecasts and targets for divisions and individuals.
How does this course relate to ‘practice’? Reflection
Good controllers/corporate finance specialists do not only play with numbers and Excel-
sheets, they also know the business and interact with the business.
Are management reporting systems important? (1)
Have you ever had a concussion? What was the impact on your life?
,Are management reporting systems important? (2)
Human brain MRS
Remembering, instructing, coordinating Decision-facilitating, decision-influencing,
coordination-facilitating
Not visible from outside Not visible for outsiders
Motivation to train the human brain is Willingness to invest in properly functioning
rather low MRS is rather low
Malfunctions in the human brain strongly Weak MRS limit value creation
decrease quality of life
Other body parts do not function properly Other functions in the firm do not function
without the human brain properly without MRS
Surgery on the human brain is difficult and Improving MRS is difficult and delicate
delicate
What is the problem?
- Macro-level
- Macro-level 1
- Macro-level 2
What is the problem? Macro-level
Step 1:
- Strategy
- You expect some outcomes based on the strategy
Step 2&3:
- Strategy
- Control objectives
o An objective is a desired outcome for an action or a set of actions.
- Expected outcomes
- External risks
o Any risk external to the firm because of competitor behavior, regulation,
geopolitical issues, etc….
- Internal employee related risks
o Employee behavior (i.e. actions and decisions) that hinder the firm in realizing
the outcomes.
Step 4
How to create a Management Control System, so that the internal employee related risks
and external risks are lower.
, Management Control System
- A MCS embodies the elements of an organization that, taken together, support
people in the achievement of the organization’s objectives
- An effective control system reduces the probability of a risk happening the impact
when a risk occurs or both.
What is the problem? Micro-level
Let’s think about an entrepreneur without employees…
Control problems
- Employees are lazy or is not motivated → lack of effort
- They don’t have the ability to work/work hard → lack of ability
- They don’t know the strategy → lack of direction
The business grows, employees are hired a paid a fixed wage
Control problem 1: Lack of direction
Employees do not know what the strategy is and
what the control objectives are. Employees do not
know what is expected form them.
Control problem 2: Lack of ability
Employees do not have the right ability to implement
the strategy and reach the control objectives.
Employees do not have the right ability to do what is
expected from them.
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