Controller's Function

Steven M. Bragg, CPA (Centennial, CO), has been the chief financial officer or controller of four companies, as well as a consulting manager at Ernst & Young and auditor at Deloitte. He is the author of over 30 books primarily targeted toward corporate financial leaders (controllers, treasurers, and CFOs) and their needs. Bragg received a master's degree in finance from Bentley College, an MBA from Babson College, and a bachelor's degree in economics from the University of Maine.

• Preface xiChapter 1: The Controller’s Job 1Main Job Functions 1Job Description 2Job Qualifications 5Organizational Structure of the Accounting Department 6Ethics 11Chapter 2: Internal Control 13Basic Elements 13Controls to Use in Your Business 20Elements of Internal Accounting Control 48Levels of Controls 49Fraud 50Auditing for Fraud 54Notes 55Chapter 3: Planning and the Strategic Plan 56Strategic Plan Overview 56System of Plans 59Planning Cycle 60Planning Roles 62Planning Timing and the Planning Period 63Business Mission 65Developing Long-Range Objectives 67Developing Long-Range Strategies 69Chapter 4: Long-Range Financial Plan 73Layout and Purpose 73Trends of Revenues and Profits 75Capital Investments 76Cash Flows and Financing Requirements 77Risk Analysis 78Breakdown by Business Unit/Product Line/Geography 81Financial Position 81Chapter 5: Annual Plan 87System of Plans 87Additional Budget Modeling Topics 100Annual Planning Cycle 102Role of the Controller 103Sales Planning: The Base of All Business Plans 103Steps in Developing the Near-Term Sales Plan 104Methods for Determining the Sales Forecast 105Changes in the Sales Mixture 109Changes in the Sales Price 111Changes in the Cost 112Chapter 6: Sales 114Role of the Controller 114Sales Analysis 116Sales Standards 120Sales Reports 122Product Pricing 125Chapter 7: Distribution Expenses 132Role of the Sales Manager 133Analyzing Distribution Costs 133Analyzing by Application 135Setting the Distribution Budget 141Chapter 8: Direct Materials and Labor 148Objectives 148Role of the Controller 149Types of Cost Systems 152Measuring Direct Material Costs 153Controlling Direct Material Costs 154Controlling Direct Material Quantities 155Measuring Direct Labor Costs 158Controlling Direct Labor Costs 159Target Costing 165Chapter 9: Overhead 167Need for Overhead Controls 168Responsibilities of the Controller 169Account Classifications 170Fixed and Variable Costs 172Cost Allocation 178Controlling Overhead 186Production Reports 190Chapter 10: General and Administrative Expenses 193Functions Involved 193Accounting for and Allocating Administrative Expenses 194Responsibility Accounting 196“Unique” Expenses 197Controlling Costs 199Chapter 11: Cash and Investments 202Objectives of Cash Management 202Role of the Controller 203Cash Collections 204Cash Disbursements 207Investment of Short-Term Funds 208Accounting for Records of Investment 210Cash and Investment Controls 214Chapter 12: Receivables 221Functions of the Credit Department 221Shortening the Receivables Cycle 225Reserve for Doubtful Accounts 227Receivables Fraud and Control 227Chapter 13: Inventory 229Inventory Management Systems 229Inventory Tracking 235Physical Inventory Procedure 241Inventory Valuation 244Inventory Fraud and Controls 247Chapter 14: Property, Plant, and Equipment 251Role of the Controller 252Capital Budgeting 253Postproject Appraisals 267Other Aspects of Fixed Assets 268Chapter 15: Liabilities 271Objectives 271Controls 272Credit Agreement Provisions 274Debt Capacity 275Bond Ratings 276Leverage 278Chapter 16: Equity 281Role of the Controller 281Cost of Capital 282Dividend Policy 290Long-Term Equity Planning 291Repurchasing Common Shares 298Capital Stock Records 299Chapter 17: Operational Accounting 301Create Departmental Job Descriptions 301Create a Departmental Training Program 303Clear Out Excess Documentation 306Streamline the Accounting Workflow 307Document All Major Processes 309Schedule the Department 310Correct the Underlying Causes of Errors 312Use of Best Practices 314Outsourcing Selected Accounting Functions 316Chapter 18: The Fast Close 322Different Types of Fast Close 323How to Achieve a Fast Close 324Enhanced Closing Process 339Summary 339Chapter 19: SEC Filings 341Form 8-K 341Annual 10-K and Quarterly 10-Q Reports 348Timing of Annual and Quarterly Report Filings 350Form S- 1 351Form S- 3 352Form S- 8 353Forms Requiring Payment to the SEC 354Fedwire Payments 355Chapter 20: Performance Measurements and Trends 356Performance Measurements 357Trends 373Interrelationship of Ratios 375Just-in-Time Ratios 375Chapter 21: Financial Analysis 378Analyzing Financial Statements 378Analyzing Working Capital 385Analyzing Financing Options 391Services Profitability Analysis 394The Throughput Analysis Model 397Production Outsourcing Decision 399New Product Decision 401Chapter 22: Cost Reduction 404Types of Reports Used for Cost Reduction Analysis 404Spend Analysis Overview 408Spend Database 409Supplier Consolidation Analysis 410Parts Consolidation Analysis 412Maintenance, Repair, and Operations Item Analysis 412Spend Compliance 413Spend Analysis Reports 414Workforce Reduction Analysis 417Workforce Reduction Issues 421Workforce Reduction Alternatives 4225S Analysis 423Check Sheets 424Error Quantification 424Fixed Cost Analysis 426Ishikawa Diagrams 427Value Stream Mapping 427Waste Analysis 430Chapter 23: Taxes 432Tax Strategy 433Tax Organization 434Role of the Tax Manager 436Tax Records 437Tax versus Book Accounting 440Sales and Use Taxes 441Proper Classification of Accounts 442Chapter 24: Selecting a Financial Information System 444Reasons to Purchase Software 445Defining Systems Requirements 445Existing System Documentation 448Joint Sessions 449Preparing the Request for Proposal 452Distribution of the Request for Proposal 457Review of the Vendor’s Completed Proposal 458Reference Calls 462Demonstration 463Site Visits 463Cost of the System 464Final Selection 465Contract Negotiations 465Postimplementation Review 466Appendix New Controller Checklist 469About the Author 477Index 479