MODULE 1: Definition and Functions of Management

Management - the process of planning, organizing, and controlling tasks to realize the
objectives of an organization.
The functions of management are as follows:

  Planning involves:

Planning o Setting immediate and long-term objectives

o Deciding which alternative is best suited to attain the set objectives

  Organizing involves:

Organizing o Tackling activities necessary to achieve objectives such as staffing,

subordinating, directing and motivating
o Deciding how to utilize available resources as plans are carried out

  Controlling involves:

Controllin o Comparing actual performance with set plans or standards

g o Deciding what corrective actions to take should there be any deviation
between actual and planned performance

Management Accounting and Financial Accounting

Management accounting is the application of appropriate techniques and concepts in
processing historical and projected economic data of an entity to assist management in
establishing a plan to meet economic objectives and in making rational decisions with a
view toward achieving these objectives. (American Association of Accountants)
Financial accounting is primarily concerned with producing financial statements for
external users, including investors and creditors.

The following are the differences between management accounting and financial
accounting:
Differences Management Accounting Financial Accounting
o Financial
o Decision-making reporting and
  Purpose
compliance

o Exclusively for o Primarily for

  User of information internal users external users

  Type of information o Monetary and non- o Primarily

 monetary monetary in nature

o Focus
o Focus on segments
mainly on business
  Focus of information and business as a whole
as a whole

o From
o From internal and
company's
  Source of data external sources
information system

o Extensive and o Compresse

  Amount of detail detailed d and simplified

o As frequent as need o Periodic

  Frequency arises (annually, quarterly)

o Reliability
o Timeliness
  Emphasis of reports (precision)

o Future-oriented using o Mainly

  Time orientation current and past data historical data

o Generally
o Does not comply with
Accepted Accounting
  Guiding principles IFRS
Principle and IFRS

Controller and Treasurer

Controller Treasurer

 Controllership deals with records, systems, and

 Treasurership deals with money,
processes to attain the objectives of internal controls
cash, or wealth of an organization.
and, therefore, good managing.

 The controller primarily exercises a staff function as  The treasurer knows the sources of
the controller's office gives advice and service to other money and exercises prudence in
departments and to entire organization as a whole. using the money of an organization.

 The functions of a controller are as follows:  The functions of a treasurer are as

1. Planning and controlling follows:
 1. Provision of capital
2. Reporting and interpreting
2. Investor relations
3. Evaluating and consulting
3. Short-term financing
4. Tax administration
4. Banking and custody
5. Government relations/reporting
5. Credit and collections
6. Protection of assets
6. Investments
7. Economic appraisal
7. Insurance

Role of Management Advisory Services

 Management Advisory Services (MAS) - the consulting services performed by

Certified Public Accountants (CPAs) and other financial advisors to improve the
client's use of its capabilities and resources to achieve business objectives.
 The role of MAS is to provide technical advice and assistance which should
provide for client participation in the analytical approach and process. 
 MAS involves:
1. The use of an analytical approach and processes (systematic, objective,
and rational method) of solving organizational problems.
2. More than an incident effort devoted to some combination of activities in
determining client objectives, fact-finding, opportunity or problem definition,
evaluation of alternatives, formulation, and follow-up.
 The client in MAS practice is the management.

Characteristics of MAS

1. Broad in scope
2. Involves problem-solving
3. Involves varied assignments
4. Engagements are usually non-recurring
5. Relates to the future
6. Engagements usually require highly qualified staff
7. Human relations play a vital role in each engagement
8. Services are rendered for the management that is usually a third-party client

Reasons for Hiring Management Consultants

 Management consultant - a person who is qualified by education, experience,

technical expertise to advise and assist businessmen on a professional basis in
identifying and solving specific management problems regarding business
operations.
 The following are the reasons why management consultants are needed:

1. A consultant is considered independent, objective and detached to the

problems of the organization.
 2. A consultant possesses special knowledge and skills that are not normally
available from the company personnel.
3. A consultant serves as a catalyst for much-needed changes that are not
normally perceived by the company personnel.
4. In certain business situations, hiring consultants are less expensive than
hiring full-time managers.

Essential Attributes for Practicing MAS

1. Technical competence
2. Professional independence, objectivity, and integrity
3. Analytical ability and experience in solving business problems
4. Familiarity with the client's finance, control systems, and business problems

Factors for the Emergence and Growth of Management Consultancy

1. Lack of competent staff

2. Trend towards industrialization
3. Growth in size and complexities of a business firm
4. Complexities in managing and conducting a business
5. Emergence of new management solutions and techniques
6. Need for adequate and timely information for management decision-making

Types of Management Advisory Services

Management Accounting Related Services

 This involves providing assistance to management related to planning and

controlling business operations as well as decision-making.
 Examples:
1. Cost reduction studies
2. Cost accounting systems
3. Financial statement analysis
4. Budgeting
5. Variance analysis
6. Responsibility accounting

Financial Management Related Services

 This involves the study of working capital and long-term capital requirements as
well as analysis and study of capital investment proposals.
 Examples:
 1. Capital budgeting
2. Working capital management
3. Study of cost of capital and optimal capital structure

Design and Appraisal of Accounting System

 This involves the development of an accounting system for a newly organized

firm or the revision, partial or complete, of an existing accounting system.
 Examples:
1. Systems engagement
2. Accounting software selection and implementation

Global-Risk Management Solutions

 This involves managing the totality of risks (financial, operational, and systems)
and the overall strategy to improve financial and business performance.
 Examples:
1. Financial risk management
2. Strategic risk management
3. Systems risk management
4. Compliance risk management
5. Internal audit services

Transaction Services

 This involves services related to mergers, acquisitions, divestitures, joint

ventures, and strategic alliances.
 Example:
1. Due diligence services to uncover potential financial and strategic risks
and rewards

Other Services

 Examples:
1. Project feasibility studies
2. Financial advisory services
3. Operations research (quantitative techniques/methods)
4. Industrial engineering
5. Project finance and privatization
6. Valuation services
7. Business recovery services
8. Dispute analysis and investigations
9. Computer risk management
10. Organization and personnel
11. General management
12. Marketing consultation