Control Management, Part Something

So last weekend was the first of two weekends of BUS651: Performance Measurement and Control Systems. It was rumored to be one of the harder classes in the second half of the program, but so far it’s looking not too bad. At least for someone with my background.

The big assignment (2/3 of the grade) is a business plan. Projected financials, mission statement, cost variables, pricing, financing, all included. I’m kind of excited about it. Sure it’s a huge document (I’m guessing well over 50 pages since Dr. Wayvon asked for it double spaced). By the end of Friday I had six different thoughts on what I could use for my business idea for the BP, and I let the family help decide. It’ll be a project that Theresa and the kids have tossed around before and we’ll get to take study time to examine the idea more thoroughly. At least three of the children will be helping with the data gathering.

Management accounting is very different than Cost Accounting. Here’s a few of the differences:

Cost accounting (C/A) has a backwards focus vs. a future focus in management accounting (M/A)

C/A focuses on the “big picture” (like financial statements) vs. individual decisions, divisions and products in M/A

C/A has lots of rules (i.e. GAAP) vs. almost no structure or rules in M/A

C/A has a shareholder and lender focus vs. a completely internal decision making focus in M/A

I think I’m going to enjoy the class. It’s not going to be easy, (though I didn’t go to school to do easy things…the goal was to be stretched) but it’s going to be rewarding when it’s done. And while cost accounting is necessary but a hated function for me, management accounting is all about taking data, making useful information, and using that knowledge to make decisions. The future focused nature adds to the fun, and it doesn’t hurt that we’re in the middle of making final budget decisions for next fiscal year here at Samaritan right now. So it’s timely even.

A few more nuggets from last weekend, and then I’ll post more thoughts later, including some about our business plan idea:

  • Management accounting lives in the planning mode. Short term (12 months) is important, but a longer, 3-5 years, focus is needed as well.
  • A business plan has to manage three forms of capital:
    • Human Capital (People)
    • Physical Capital (property, plant, equipment…)
    • Financial Capital (that one’s obvious, right?)
  • The value of an idea depends on its execution (value=execution x idea). Even a poor idea can produce value if executed properly. A great idea, executed poorly, will have little organizational value. The goal of any organization is to create value through management of all three forms of capital.

It’s going to be a fun month.

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