Management and Control

An integral role for the business plan will be the need to demonstrate to the financiers that the business will be suitably controlled once it commences trading. It will be necessary to produce regular records which are useful both to the management of the company itself and external authorities such as tax inspectors, accountants and banks. It is sometimes considered by small businesses that bookkeeping and the maintaining of records is a time consuming formality which must be endured simply to conform with time honoured precedent.

This is a complete misunderstanding of the situation. These management controls are used to steer the business in the same way that a car’s controls are used to steer it along the highway.

It is necessary for the executives of the new venture to determine what are the key indicators of successful performance in every important sector of their particular company. Systems must then be devised for collecting the relevant data on a regular basis, analysing it and then presenting the conclusions in a simple way which nevertheless paints a comprehensive picture of the state of play at any one moment of time. The procedures devised must be both sufficiently comprehensive to provide useable information yet be easily workable so that the data can be provided promptly enough for remedial action to be taken if this is necessary. There would be little value in providing detailed analyses if they were not available until a problem became critical.

The three principal areas in which controls are required are:

- Financial
- Sales
- Operations

In the area of financial controls it will be necessary to decide whether the venture will be of a sufficient size to warrant the services of an in-house accountant. This would be the preferred option for any company which planned to grow to an appreciable size. However, if the resources were not sufficient in the start up phase, the alternative would be to appoint someone within the company to carry out the function of bookkeeper on a day to day basis and then use a firm of accountants to process the data at regular intervals.

Sales data will most conveniently be collected and processed by a member of the sales force. Information required may include records of sales by product type, sales by individual customer, sales by individual sales representative, sales generated per visit, and sales generated by telephone call. Customer record files or cards will be needed which summarise the sales achieved, the sales visits and calls made together with the main points of the discussion. Other additional types of record may be considered to be relevant.

Manufacturing records will be required which can be used to analyse the cost, efficiency, speed and quality of production, the time required for the manufacture of individual components scrap rates, the output rate of individual machines, material costs, power consumption etc. These will be best collected and analysed within the manufacturing department but they will also have to be made more widely available within the company to people like the accountant so that they can be analysed in the context of the total business costs.

CHECK LIST
- What book-keeping and accounting system have you chosen?
- What control information does it produce and with what frequency?
- Who will keep the accounts?
- Who will be your auditors?
- What other business controls (manufacturing, personnel, quality, environmental) are important?