Accounts: Management Control

System, Financial Management,

Interpreting Financial Performance

Heasylyn G. Tadeo
Organizing, Directing & Controlling the Business
• Organizing is the means by which management
blends human and nonhuman resources through the
design of a formal structure of tasks and authority.
• The objective of this function is to produce an
organizational structure for the firm which indicates
who performs which task and who supervises whom.
RIZAL OCCIDENTAL MINDORO TESDA TRAINING AND ACCREDITATION CENTER (ROMTTAC)
O R G A N I ZA T I O N A L ST R U CT U R E

ROSALINA P. REYES
Vocational School Administrator III

TEACHING PERSONNELS ADMINISTRATIVE PERSONNELS

RONALD NOEL P. DE GRACIA OLIVETTE J. PASTORES

Supervising TESD Specialist Administrative Officer V

MANUEL L. RABULAN Jr. DIONISIO A. GENIL MARK ADRIAN E. CELESTE

Sr. TESD Specialist Sr. TESD Specialist Administrative Officer IV

EMMA L. ANDOYO ELIZABETH T. PAJARILLO HEASLYN G. TADEO

TESD Specialist II TESD Specialist II Accountant I

NIKKA JANE M. DELA CRUZ ANA MARGARETTE T. CORPUZ MARY JANE D. SANTIAGO
TESD Specialist I TESD Specialist I Administrative Assistant III
Owner’s Concern in the Organizational Structure
• activities necessary to reach the goals must be
identified;
• an analysis of the jobs to be performed must
be made; and
• the placement of people with the interest and
qualifications in performing the jobs.
The following concerns are reflected in the organizational structure:

1. specialization;
2. departmentalization;
3. delegation of authority;
4. span of management;
5. hierarchy of objectives; and
6. degree of centralization
Specialization
• It is the first task of the owner, to determine
the total function of the organization. Then he
divides the total work into small, specialized
tasks and assigns employees to specific tasks.
Departmentalization
• When jobs are grouped into working units,
the process is called departmentalization. The
units formed are called departments, units,
groups or divisions.
Delegation of Authority
• When an organization grows beyond phase
one, some of the tasks will have to be assigned
to subordinates who will be delegated with
commensurate of authorities.
Span of Management
• The small business operator must consider the
number of subordinates reporting to a supervisor
or to himself. When there are too many
subordinates reporting to a single supervisor, the
quality of directing and controlling the
subordinates will be compromised.
Hierarchy of Objectives
• An entrepreneurial venture is expected
to achieve a certain objective which most
often is related to the realization of profits.
This is made possible through the
achievement of subordinate objectives.
Degree of Centralization
• authority is often required to be delegated
to lower level units of work is expected to be
accomplished. In any case, management has
to decide on whether authority would be
centralized or decentralized.
Directing
-refers to guiding and motivating employees
to accomplish organizational objectives. It
involves explaining procedures, issuing
orders, and seeing that mistakes are
corrected.
Skills required for effective Directing:
Communicating with subordinates,
 counseling,
 motivating, and
 disciplining
 Controlling
-refers to the process of efficient performance to
attain the objectives of the firm.
It involves the following:
 Establishing goals and standards;
 Measuring performance against the established
goals & standards; and
 Reinforcing successes & correcting shortcomings.
 Kinds of Control
Stage Appropriate Control Tools
Simple accounting records & personal
1. Start-up supervision

Operational budgets, management by

2. Early growth objectives

Greater use of budgets, standard cost

3. Late growth systems, use of computer

More sophisticated use of control measures

4. Resource Maturity indicated in the late growth stage
 Types of Control
• Budgetary controls- a budget is a plan presented in
financial terms.
• Planning & programming systems-used by government
agencies to better plan & measure the effectiveness of
their budgets against defined goals & objectives.
• Quality control-result in significant savings in both direct
& indirect ways.
• Feedback-supplies information for problem-solving.
 Control Techniques
• Break-even chart

• Financial statement analysis

• Financial ratios
Good plans shape good decisions. That’s why
good planning helps to make elusive dreams
come true.
Lester Bittel, professor of management
 Financial Planning
-involves an analysis of possible future events and how
these events might affect the firm.
-it analyzing the financial flows, forecasting the
consequences of various investments, financing profit
decisions, and weighing the effects of various
alternatives.
-provides the small business operator or entrepreneur
with a detailed approach to managing the financial
activities of the firm.
Budget
-is an estimate of the income and
expenditures for a future period of time,
usually one year.

-must be made with the objective of

satisfying the target market, employees, and
management goals.
Steps in Budget Preparation
1. Build the foundation for the budget.
a. project the best estimate of the volume of
products or services expected and the revenue
that will be received.
b. divide the estimate into monthly figures.
c. obtain an estimate of monthly cost of sales or
rentals, by product or service.
2. Determine anticipated fixed costs.
3. Establish projected non-operating income and costs.
Common Types of Budgets
• Cash budgets

• Production budgets

• Sales budgets
The Cash Budget
-is a forecast of future receipts and cash
disbursements over various intervals of time.
o Total cash available;
o Cash disbursements;
o Cash excess or deficiency;
o Financing; and
o Cash balance
The Production Budget
-is an estimate of the quality of goods to be
manufactured during the budget period.
o Raw materials requirements;
o Labor needs;
o Capital additions;
o Factory cash requirements; and
o Factory costs.
The Merchandise Purchases Budget
-it identifies the quality of each item that must
be purchased for resale, the unit cost of the
items, and the total purchase cost.
o Planning of sales; Stock shortages;
o Stocks; Purchases; and
o Reductions; Gross margin
o Markdowns;
o Employee discounts;
Financial Analysis
-refers to the process of interpreting the past,
present, and future financial condition of a firm.
Basic requirements:
 Financial statements;
 Break-even analysis; and
 Financial ratio analysis
 Financial Statements
Three most important financial statements:
 The profit and loss statement
 Balance sheet
 Cash flow statement
Break-Even Analysis
-is a very useful tool in managing the finances
of a firm.
-is a means to determine at what point in a
business activity the total revenue equals
expenses.
-above the breakeven point, the business will
be making a profit; below it, the firm will incur
a loss.
Break-Even Analysis
Calculating the Break-Even Point
a. Single-Product Break-even calculations
1. BEPp=FxC/CMR
Where: BEPp=Break-even point in pesos
FxC =Total fixed costs
CMR=Contribution margin ratio
Calculating the Break-Even Point
a. Single-Product Break-even calculations
2. BEPu=FxC/CMu
Where: BEPu=Break-even point in units
FxC =Total fixed costs
CM/u=Contribution margin per unit
Calculating the Break-Even Point
b. Multiple-Product/Service Break-even
calculations
1. BEPp=FxC/WaCMR
Where: BEPp=Break-even point in pesos
FxC =Total fixed costs
WaCMR=Weighted average
Contribution margin ratio
Calculating the Break-Even Point
b. Multiple-Product/Service Break-even
calculations
2. BEPu=FxC/WaUCM
Where: BEPu=Break-even point in units
FxC =Total fixed costs
WaUCM=Weighted average unit
Contribution margin
Exercises of Break-Even Computations
Price per unit of product=P50,000
Fixed costs=P3,500,000
Variable costs=P450,000
Units sold=120
Variable cost per unit=P3,750
1. BEPU=
2. BEPP=
Ratio Analysis
 Financial ratios are useful tools used by
SBOs to determine the financial health of
the firm.
 Ratios are calculated from the FS to provide
users of such statements with relevant
information about the firm’s liquidity, use
of leverage, asset management, cost
control, profitability, growth and valuation.
Financial ratios may be classified as follows:

• Liquidity ratios;

• Activity ratios;

• Profitability ratios; and

• Leverage ratios.
Reasons of Over Trading:
• Having to pay in advance for large amounts of
stock to meet increased customer demand;
• Offer extended credit terms to attract new
customers;
• Customers delaying (or refusing) payment of
their invoices;
• Suppliers requiring immediate payment due to
the venture’s limited trading record or lack of
accounting statements;
Key Performance Indicators
• Important in achieving some short-term
or long-term organizational goals. Some
may be internally focused or externally.
• The specific KPIs required will depend on
the nature of organization, its stage of
development, and the priorities of the
different stakeholders.
 References
• Management in Philippines Business Setting by Ernesto Franco

• Robert Hisrich, Michael Peters, Dean Shepherd, Entrepreneurship, 10 th edition,

McGraw Hill Education, 2017.

• Entrepreneurship and Small Business Management, 1 st and 2nd ed,2002 and 2010,
Robert Medina

• Blundel, R. Lockett, N., & Wang.C. (2018)Exploring Entrepreneurship.(2 nd ed.)

London: SAGE Publications, Inc.