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GENERAL

What is controlling?Controlling is a management task, in the broader sense which consists in elaborating objectives, determining a plan and steering toward the agreed objectives. Eventually we control, if we achieve our objectives.

How can controlling be delimited from other departments? *External accounting – compliance with statutory accounting and disclose obligations (principle of orderly bookkeeping) – nowadays, due to adaptation of international standards, little separation between internal and external *Internal audit – internal monitoring tasks – controls correctness and documentation *Financial Department – finance and liquidity-oriented.

Controller, Core Tasks & Qualifications

Controllers make correcting actions, transparency; have an active rationality assurance and a critical counterpart. They are the rational mind of the company to take decisions. Tasks are: Budgeting and Planning, Reporting and Information Supply, Control, Transparency & Business Consultancy. Qualifications: – Independent, analytical thinking – Communication skills – Team Spirit – Knowledge of controlling tools – Business Knowledge

Management Accounting and Financial Accounting

• Management accounting provides information to people within an organization while financial accounting is mainly for those outside it, such as shareholders

• Financial accounting is required by law while management accounting is not

• Financial accounting covers the entire organization while management accounting may be concerned with particular products or cost centers.

Responsibility Accounting and Decision taking accounting

Responsibility Accounting: It refers that each management person (responsible) should see which costs, outputs and revenues he/she can control directly within a time-span.

Decision Accounting: There are accounts that are prepared to help managers to take decisions. It is of central importance for the quality of such decision accounts, that only those costs, revenues and volumes should be included that can really and directly be changed by the decision to be taken. The biggest questions are: which additional costs are incurred by any given decision? Which costs are saved? What additional revenue comes in or how much revenue is lost as a consequence of the decision?

KEY FIGURES SYSTEM

What is a key figure system, why are they advisable and what are they objective

Key figure systems consolidate several key figures and build a comprehensive system based on them. They reduce ambiguities in the interpretation of economic facts. They show connected key figures and try to avoid one-sidedness. Are an arrangement of key figures that are related to one another in a meaningful way. The KF complement and/or explain each other, they are organized to explain a certain fact • Three important systems: DuPont, ZVEI and RL.

Function key figures can fulfill, what are the limits of key figures?

Functions key figures: – Assure rationality of management when ‘knowledge problems’ occur – Inform quickly and in a condensed form about complex situations – They are numerically comprehensible, measurable and countable. Limits: – Reduction of complexity is also their weakness: Allow different interpretations, according to everyone’s own experience and knowledge. – Non-quantifiable facts get much less attention that can lead to sub-optimal corporate decisions. – Key figures as a basis for bonus payments can lead to decisions exclusively to achieve the figures. That can be less optimal for the whole company. – One single key figure cannot provide a true and adequate picture. The solution to this problem are key figure systems that use combined key figures.

The DUPont key figure system (sometimes called “The ROI-Tree) is the only generally accepted key figure system and it has no disadvantages.

False, although DuPont is pioneer of the KF systems, clear and transparent, focused on return and simple, it has disadvantages, because DuPont is not considering liquidity and it is more important than profitability. Moreover, it is focused in one single objective and shares the problem with every analysis (data quality).

BALANCE SCORECARD: describes eight Key Performance Areas to be considered in the elaboration of the strategy, where a company should concentrate all efforts and resources in these areas to ensure the sustainable development of the company

Four perspectives are usually differentiated when considering the Balance Scorecard. Please name and explain them briefly.

Financial: What objectives are derived from the financial expectations of our investors? Shareholders

Customers: What objectives have to be set regarding the structure and requirements of our customers in order to achieve our financial goals? Why should customers buy our products?

Processes: What objectives have to be set regarding our internal processes in order to fulfil the goals of the financial and customer perspective?

Knowledge/Growth: What objectives have to be set regarding our potential in order to cope with current and future challenges? Keeping employees happy, train them…

If employees are unhappy, then the processes are badly done, the customers are also sad with the product and we do not get money for our shareholders. It is a chain.