Management Control System Essay

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A management control system can be said to be a rational integration of managerial accounting techniques & tools which first collects information then reports that information and evaluates performance. This performance evaluation encompasses evaluation of performance of the various resources used in the organization as a whole which includes both financial and non-financial resources. Non-financial resources may include physical resources, human resources etc. On a strategic level, management control systems greatly impact the conduct and behavior of the different resources and organizational assets in the implementation of organizational strategies.
Having a basic understanding of a management control system, let’s look at the different
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Then is the development of performance measures.
4. Finally there is measurement of and reporting on financial and non-financial measures.

In broad terms, management control systems can be divided into different categories by virtue of the purpose they serve:
• To minimize costs
• To maximize revenues
• To mitigate risk
The following table shows these broad categories of management control system along with their purposes served and individual control systems mapped to them:
Category of MCS Purposes fulfilled by these MCS Individual control systems associated with these MCS
BASIC MCS  To set plans, standards and support basic operations (this is a general purpose shared by almost all firms).  Budget
 Pricing System
 Inventory Controls
COST MCS  To minimize costs, and improve operation efficiencies, using internal and financial information.  Cost Controls
 Quality Controls
REVENUE MCS  To enhance revenue, support growth and learn about the market, using external and non-financial information.  Marketing
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The traditional ways do not follow any framework as such and planning is done primarily in-house. The planning cycle is normally 5 years. This leaves little or no room for revision of strategies. There is the lack of innovation and very low chances of any major changes as only a few top-level executives do the entire planning, with little or no external influence. The plans as a result are highly repetitive in nature with the same patterns as before. It is almost as if planning is imposed on lower management by top management. There is no mechanism as such for reporting performance and it lacks transparency. The goals and objectives might be numerous but there exists a lack of connection with strategy. In essence, the traditional ways focus on

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