Controlling

What it means

Controlling is a management system that helps the leadership reach its goals by combining planning, tracking actual results and analysing variances. It is not control in the sense of finding someone to blame but navigation: where we are, where we should have been and what we do about it.

Its basis is a budget or annual plan that is continuously compared with actuals from the books and updated through a forecast. The data comes from management accounting broken down by cost centre, job and product.

Strategic controlling follows long-term goals, for example with a balanced scorecard; operational controlling follows monthly figures, margins and cash. Large companies have a dedicated department, while in smaller ones the owner usually does it together with an external accountant.

How it works in practice

For clients we introduce simple controlling in three steps: an annual budget, monthly reporting of actuals against plan, and a short explanation of why the numbers differ. Well-structured books and a spreadsheet are enough; no expensive system is needed.

The key is choosing the KPIs that really steer the business: margin per job, receivables turnover, staff utilisation or month-end cash. We show them on a clear dashboard so the owner sees them in one place.

Controlling needs the books to be ready on time. If a month is closed only halfway through the next, the numbers arrive too late to act on. With clients we therefore agree deadlines for delivering documents and a close within a few working days.

What to watch out for

The most common mistake is controlling that only produces spreadsheets. If nothing follows from the variances and the plan never changes, it is just extra administration. Every report should end in a decision, or at least a question that needs answering.

The second mistake is poor costing of overheads. If overheads are allocated with the wrong key, controlling shows loss-making products where there are none, and management cuts exactly what keeps the company going. We therefore check allocation keys with the people in operations.