The objective of establishing a system of financial control for areas of responsibility aims to identify the results obtained by each area or department that comprise a financial institution and meet the person responsible for obtaining such results.
The first step in defining the areas of responsibility is to define the organization of the company, as there will be defined levels of responsibility for directors, managers and coordinators or managers of different areas or departments that make up the structure of the organization. One of the areas of responsibility that should be reflected in the organizations is marketing, as the role played by this department in a company is vital.
When the areas of responsibility of a company are defined, it is for the Finance Division drafting a budget that serves as a basis to the General Directorate to establish the objectives of sales and expenses which will have to meet those responsible for each area within the Organization, objectives must be achievable and measurable to achieve proper growth.
For the marketing area, the responsibility will come twice, since its function will be analyzed from the point of view of obtaining goals set by sales as well as from the point of view of the expenses incurred in its control area, so it will be up to the Department Director staging analysis where it can ensure that the company is not incurring excessive costs to achieve sales targets and thus be partially responsible for the results obtained in the gross profit of the company.
The responsibility of the Director of Finance in a financial system for areas of responsibility is to give timely monitor compliance with expenditure budget each of the areas within the organization and if the budget is exceeded in any of the areas, talk to the responsible person for that area to explain the variation between the actual expenditure against budgeted expenditure and if such variation is fully justified or responsible for this area is not doing its work in an efficient manner its continuity within the organization should be assessed.
The main advantages of having a system of financial control for areas of responsibility are:
- Facilitates the correct evaluation of the executives responsible for different areas or departments within the organization, as they are perfectly well defined objectives at both the revenue and expenditure, so you can identify if it reached the desired goals, if exceeded or fell below the request.
- Allows comparing budgeted against reality to give an explanation of variations and detect if the budget was poorly developed or quite simply the head of the area could not fit the budget.
- When responsible for each of the areas of the organization are defined and it is also easier to define objectives, can provide incentives for managers to meet or exceed goals.
- The accounting system by areas of responsibility allows you to know at any time to the partners or shareholders of an economic entity areas that are getting utility, loss or emerging tables.
- Allows more accurately identify areas that need more investment.
Having a system of financial control for areas of responsibility requires the Department of Finance and the heads of each department to provide better internal, helpful, reliable service to help improve the profitability of financial institutions and the financial information is presented to those responsible for implementation in different areas or departments that serve them as a basis for making the best choices for power to meet and exceed the objectives of both revenues and expenses that were established in the overall budget of the company and can see the results of their work in the organization.