Meaning of Controlling Part II
What does operational controlling mean?
Planning, control and management for corporate processes, both short and long term, means operational controlling . For you, you have to achieve the best possible results with the resources and structures that are available to you. Operational controlling is closely related to the goal of maximizing efficiency.
Definition of operational controlling
As already mentioned in the introduction, operational controlling deals with the planning, control and management of corporate processes and procedures. According to Electronicsencyclopedia, this applies to both a short-term and long-term period. The following points are in the foreground:
- Results of the individual quarters
- Results from production
- Short-term comparisons in the area of actual and target status
- Presentation of the contribution margins
When it comes to operational controlling, it is important that the planning for this is always derived from a corporate goal that is overriding. In plain language this means that you always have to formulate or set the strategic goals in the first step. This is the only way to derive the corresponding operational goals from it. As a rule, the controlling receives a top-down plan , created by the management and the various functional areas, a bottom-up plan. In controlling, it is your job to bring these two plans into line. The so-called balanced scorecard, which is perfectly suited for this task, can be found among the controlling instruments. This balanced scorecard represents a link between strategic and operational planning and control.
Tasks in operational controlling
Operational controlling has three main tasks. These are as follows:
- Collection of data and information
- Preparation of data and information
- Providing this information to all areas in the company
An important task for you in this context is the preparation and delivery of regular reports from which the economic success of the company can be recognized. In addition, you will set up and coordinate partial plans in operational controlling and merge them into a holistic corporate plan. Your role is therefore a mediator between the management and the individual departments or departments.
Instruments for operational controlling
There are a number of instruments that are used for operational controlling.
The break-even analysis is used to determine the total sales of a product or area. Falling below this leads to losses, exceeding it leads to gains. This is also referred to as cover turnover.
This instrument can be used to present a picture of the company’s situation. Questions relevant to sales need to be answered and specific measures must be derived from this. To answer the questions, these are divided into three categories. A = very important, B = moderately important and C = less important.
Contribution margin calculation
Contribution margin accounting is a partial cost accounting . Only the variable costs are offset against the cost units.
Cost and performance accounting
In cost and service accounting , only those costs and services are used that are directly related to an in-house provision of services. The cost and performance accounting is the counterpart to financial accounting .
The budgeting is one of the most important controlling tools. The aim of budgeting is to create a budget in which the future (as planned) of a company is presented in the form of numbers.
An investment calculation is created to show whether the investment in a particular project is worthwhile for the company.
Target / actual comparison
This comparison is an analysis of cost variances . It is created to check cost centers or operational areas for profitability.
What does strategic controlling mean?
With the help of strategic controlling, a company considers the possible long-term potential for success. The strategic controlling also represents an important support of the management and its strategic orientation.
Definition of strategic controlling
The task of strategic controlling is to identify deviations from goals or problems that arise at an early stage. This has to be done before these show up in the operating figures. Therefore, strategic planning and strategic control are among the most important areas of responsibility when it comes to strategic controlling. Basics are:
- long-term planning
- Control and management of processes and procedures in a company
- Targeted orientation towards specific markets, business models and target groups
As a rule, strategic controlling works with qualitative methods. This means that you are guided by parameters that are not always precisely measurable, but that fit the company’s long-term orientation. In contrast to operational controlling, graphics are very often used here for illustration and representation.
Strategic controlling tasks
With strategic controlling it is important to provide the management with all important information. The different tasks are derived from this requirement.
Clarification of questions with the management
In cooperation with the management, the strategic controlling must define issues. These questions need to be analyzed and examined . In addition, there is the information that is required in order to carry out sensible planning of the strategy. It is important to recognize exactly what interests the management is pursuing.
Determination of strategic goals
The management must define which goals are important for the company. In addition, it must be defined which goals have the highest priority and which should be examined and considered.
Carry out an analysis of the environment
A characteristic of strategic controlling is the observation of developments in a social, political and technological direction. The strategic controlling examines markets, suppliers and customers and analyzes the comparison with competitors.
Define correct key figures
The task of strategic controlling is to define the correct key figures, measured values and indicators . Answers to the questions must be derived from these.
Definition of processes
In order to determine the above-mentioned measured values, key figures and indicators, it is necessary to define processes and responsibilities .
Key figures and their target values
By the management must set values or plan values are set. Strategic controlling needs this in order to carry out the corresponding analyzes.
Monitoring of threshold values
The management sets a threshold value for each individual key figure. This is a metric that determines whether a key figure is critical . This threshold value must be monitored by strategic controlling.
Determination and evaluation of success and financial indicators
The success of a company is always expressed in its financial figures. The task of strategic controlling is therefore to determine and evaluate these figures for the past and to make a forecast for the future.