Alexey Anikandrov, senior budgeting consultant, INTALEV Group

In this article we will analyze common mistakes when constructing the basis of the Company's budgetary management - the financial structure.

The main goal of building a company's financial structure is to manage the company's financial results by giving responsibility and authority to management to manage the company's income and expenses, profits and investments.

The elements of the financial structure as a system are Financial Responsibility Centers (FRC) - structural divisions (or a group of divisions) that carry out a certain set of business operations that can have a direct impact on expenses and/or income from this activity, and, accordingly, are responsible for these expense items and /or income. Thus, by building a financial structure, it lays down the potential and opportunities for the formation of budgetary management and management accounting in the company.

Depending on the structure and specifics of the business, various variations of the central financial district are distinguished that affect one or another financial result: standard cost centers, management cost centers, financial accounting centers, which is a characteristic coloring of the well-known cost/income centers. We will dwell on a universal list of types of financial financial institutions, which allows you to form the result of a company at any hierarchical level of the financial structure: Investment Center (CI), Profit Center (CP), Marginal Income Center (MCM), Income Center (IC), Cost Center (CZ) ).

So what is a Cost Center? The cost center (CC) is responsible only for the incurred costs of its activities. Cost centers can be various production departments and functional services (accounting, advertising, security), whose tasks do not include generating income. Cost centers determine the expenditure side of the enterprise's budgets. Cost centers can be both an element of the structure and a consolidating result of the expenditure part of the elements. For example, the Central Bank Financial Department may include costly central financial departments: Central Bank Accounting, Central Bank Financial Analysis Department, Central Bank Financial Control. Naturally, in practice, financial departments produce profitable operating results, but for this it is necessary to identify company-wide income centers, and not the CD Accounting Department, the CD Financial Analysis Department or the CD Financial Control Department, which is often a typical mistake. From here, we smoothly move on to the concept of an Income Center (IC) and its characteristics. So, the Revenue Center (RC) is a division that, through its activities, brings income to the company and is responsible for the revenue side of the budget.

The income center can be the divisions of the company involved in the sale of finished products, goods and services, i.e. functionally intended to generate income (Sales department, warehouse store, wholesale base, chain of branded stores and others). Therefore, we cannot allocate CD Accounting to the income center, because The functional purpose of this division is accounting, which inherently generates only costs. Of course, a company can include in its financial structure income centers Accounting, Financial Control, etc., if these areas are a source of income for the company, as in consulting and auditing companies.

When forming Income Centers, you must adhere to the following rules:

• A revenue center can be a separate element;
• An income center can be a consolidating income-generating central financial district;
• Income and cost centers of the same structural unit can be located at the same hierarchical level.

In other words, the same rules apply to income and cost centers (hence, violation of them leads to errors), which are schematically presented below:

Correct schemes.

1. CD Sales Department
   1.1 CD Product sales department
   1.2 CD Sales department services
2. Central Sales Department

1. TsZ Warehouse
2. TsZ Warehouse perfumery
3. TsZ Warehouse grocery

Wrong scheme.

1. CD Commercial department
   1.1 CD Grocery
   1.2 TsZ Grocery

Often, Russian enterprises are multifunctional and diversified businesses, holding structures with a developed territorial structure and product line of goods and services. In this case, managers have a need to obtain information about the intermediate financial result of a particular business area or structural unit, in other words, marginal income. To do this, when building a financial structure, the concept of a Marginal Income Center (MCC) is introduced as a division or structural unit responsible for the marginal income of a certain group or line of business, i.e. contribution for coverage.

CMDs are created at enterprises where there are divisions that carry out a more complex type of activity - not just one production (cost centers), and not just one trade (as income centers), but the production and sale of products of a diverse range, i.e. are actually separate business areas (businesses). Businesses are responsible for the efficiency of their activities by controlling the income and expenses of their business.

Marginal income (contribution to coverage) refers to the difference between the revenue of a direction and its direct costs, i.e. those costs incurred directly by the direction itself.

It makes sense to highlight a marginal income center when the company has several businesses or areas. CMD is the contribution of each business to cover general company expenses. It follows that creating a digital business center for one direction/business does not make sense, because General company expenses will be allocated to one business.

1. CMD Sales
   1.1 CMD Metal Sales
   1.2 CMD Glass Sales
   1.3 Central Logistics,

CZ Logistics is a common cost center for the two CMDs. If the CZ corresponds to any specific DSM, the CZ should be included at a lower level.

Incorrect schemes:

1. CMD Plant 1
2. TsMD Plant 2
3. TsZ Factory 1

1. CMD Factories
   1.1. CMD Plant 1
   1.2. TsZ Factory 1

Following the hierarchy of the financial structure, the center that manages the final financial result of the company's activities is the Profit Center. Profit centers (CPs) are responsible to management for the amount of profit earned, i.e. They, by analogy with marginal income centers, control both the expenditure and revenue sides of their activities.

But profit centers calculate the income and costs not of a separate area, but of the entire enterprise as a whole. Accordingly, the profit center is an enterprise, both independent and as part of a multi-level structure, for example, a holding company.

A profit center (CP) may consist of at least one CP and a CD; in such cases, a CP is not created. A profit center can only be a division or business whose result (profit) is not affected by the costs/income of other divisions or businesses. Following the previous rules, the CPU must consist of at least two CMDs and a Cost Center common to these CMDs.

Correct schemes:

1. CPU Company
   1.1. CD Commercial department
   1.2. Central Purchasing Department

1. CPU Company
   1.1 CMD Plant 1
   1.2 CMD Plant 1
   1.3 Central Accounting General

Wrong diagram:

1. CPU Company
   1.1 CMD Plant
   1.2 TsZ Accounting Plant

Investment centers (ICs) are the top level of the financial structure.

They have the right to manage not only working capital, i.e. be responsible for the amount of profit earned, but also manage non-current assets (fixed assets), including making investments. For example, build a new workshop, replace outdated equipment, and on a large scale buy a company, sell a business, etc. In this case, the investment center controls the return on these investments, and is thus responsible for the profitability of all the company's assets. The investment center is always just an enterprise, either independent or a multi-level structure with a parent company. An investment center (CI) must consist of at least one Profit Center, or several PIs. CI is responsible directly for the distribution of investment resources, and not for the payment of funds for investment activities. Often, when building a financial structure, CI is placed at the level of income and costs, investing in the CI the meaning of payment responsibility, which is incorrect.

Correct schemes.

1. CI Parent company
   1.1 CI Company 1
   1.2 CI Company 2

1. CI Company
   1.1 CPU Company Alpha

Wrong scheme.

1. CI Parent company
   1.1 CI Company Alpha
   1.2 CPU Company Alpha

The rules and examples discussed directly relate to the grammar of constructing financial structures.

Each CFO is assigned a responsible person of the company. At this stage, critical moments also arise when several responsible persons are assigned to one central financial district; as a result, it is impossible to determine the boundaries of responsibility for each, thereby reducing the company’s performance.

The financial and organizational structures of a company are closely related, but not necessarily the same. Possible options:

• The Central Federal District includes several organizational units;
• Org. the unit is divided into several central financial districts;
• An organizational unit corresponds to a specific central federal district.

Competent and correct construction of the financial structure allows you to build a full-fledged budget model, thereby quickly and effectively managing the financial results of the company.

8.1. Construction of management accounting by responsibility centers

Identification of cost centers and responsibility centers is the basis of analytical management accounting in a construction organization. There are different classifications and names of responsibility centers depending on the application areas. We will consider existing approaches to building management accounting by responsibility centers.

Under responsibility center It is customary to understand a structural unit that carries out economic activities, headed by a leader (manager) who has a direct impact on the results of this activity and is responsible for them.

The classification of responsibility centers is based on the criterion of the economic responsibility of managers, which is determined by the breadth of powers granted to them. The basis for the formation of responsibility centers is the organizational structure of management of a construction organization. Depending on the scope of powers and responsibilities of the manager, centers of cost, income, profit, capital investments and investments, control and management, etc. are distinguished (Fig. 8.1).

Rice. 8.1. Classification of responsibility centers

Let's consider the centers of economic responsibility in the main areas of activity. Let's start with cost center, whose manager has the least managerial authority and bears the least responsibility for the results obtained.

Cost Center – This is a responsibility center whose manager controls costs, but does not control profits and other economic indicators.

A cost center can coincide with an organizational unit (shop) or be part of it as a department (section). Some business units may have two or more cost centers. The basis for identifying cost centers is the unity of the equipment used, operations or functions performed. The cost center accounting system aims only to measure and record costs at the input to the responsibility center. The results of the activity of the responsibility center (volume of products produced, services provided, work performed) are not taken into account, especially since in many cases it is either impossible to measure them or there is no need for it.

In other words, a cost center is a structural unit in which rationing, planning and cost accounting can be organized in order to monitor, control and manage the costs of production resources, as well as evaluate their use. The center manager is responsible for the cost level.

Many construction organizations make the mistake of evaluating a cost center solely on its ability to control and reduce costs. For example, the head of the procurement department, who is responsible for the selection of suppliers and the price of materials, is also responsible for their quality. Managers are doing the right thing when they evaluate the performance of a cost center by its contribution to the success of the construction organization (timely execution of contracts, compliance with corporate ethical and economic obligations, employee safety).

When defining cost center objectives, consider the following:

Each center should be the responsibility of a foreman or department head, who will assist the organization's management in planning and cost control;

Each center must combine construction machines and jobs, the costs of which are homogeneous. This makes it easier to determine the factors influencing the amount of expenses of a given center and to select the basis for distributing expenses among cost carriers. Since the main factor determining the amount of costs at production sites is capacity utilization, it is most often chosen as the basis for cost distribution in the centers. At the same time, at each production site, the utilization of production capacity should be as uniform as possible, which requires a deeper division of the organization into cost centers;

All costs should be written off to cost centers without much difficulty. As the division of an organization into cost centers deepens, the share of costs that are common to several cost centers increases, which necessitates their distribution.

Revenue Center- This is a responsibility center whose manager is responsible for generating income, but not for costs. The activities of the heads of such departments in the cost management system are assessed on the basis of the revenue received or the amount of internal income, so the accounting task in this case will be to record the results of the activity of the responsibility center at the output. This does not mean that the departments do not have expenses, but the costs of maintaining them are not comparable to the amount of revenue they control. A revenue center is usually formed in sales departments that are responsible for revenue from sales in their divisions or even market areas.

Revenue center managers, like cost center managers, may be responsible for achieving non-financial goals, such as ensuring competition in markets where the firm ranks first or second in sales. Some revenue centers control prices, the range of construction products and sales promotion activities.

Since the performance of a construction organization can be determined only by the size of profit, which is not the goal of managers of cost and income centers, profit and investment centers are often found in cost management systems of organizations.

Profit Center – This is a division whose head is responsible for the income and expenses of his division. The profit center manager makes decisions on the amount of resources consumed and the amount of expected revenue. The criterion for evaluating the activities of such a center is the amount of profit received. Therefore, accounting should provide information about the cost of costs at the entrance to the responsibility center, about the costs within it, as well as about the final results of the unit’s activities at the output. The profit of a responsibility center in a cost management system can be calculated in different ways. Sometimes only direct costs are included in the calculations, in other cases indirect costs are included (in whole or in part).

A profit center operates similarly to an independent business. The difference is that the level of investment in the responsibility center is controlled by the management of construction organizations, and not by the center manager. For example, if the head of the mechanization section of a construction company has the authority to make decisions on prices for the services it provides, promotion of these services, selection of suppliers of spare parts, fuel, oil, tires, etc., then this section can be rated as a center arrived.

Income and profit centers differ as parts and as wholes. Profit center managers (unlike cost center managers) are not interested in reducing the quality of products, since this will reduce their income, and therefore the profit by which the effectiveness of their work is assessed. The goal of this center is to obtain maximum profit through the optimal combination of its defining elements: sales volume, selling prices, variable and fixed costs.

Profit center managers, as in previous cases, may be responsible for achieving certain non-financial results (satisfying customer requests, etc.). Controlled revenues are not limited to sales revenues, they cover all incoming revenues.

The structure of profit centers is more complex than that of revenue centers. Profit centers consist of several cost responsibility centers and one or more revenue centers. They are formed in separate structural divisions that do not have the status of a legal entity, but have a production cycle and a sales cycle for construction products or a cycle for the purchase and sale of goods with the right to set purchase and sale prices in a certain range.

Capital investment (investment) centers– divisions of organizations in the investment and construction sector, whose managers control not only the costs and income of their departments, but also the efficiency of using the funds invested in them. An investment center can be compared to an independent business; as a rule, it is allocated in construction organizations with a high degree of decentralization.

Heads of investment centers (capital investments) have the greatest authority in management: they are delegated the right to make investment decisions, that is, to distribute allocated funds among projects. These centers work with a capital budget or plan for the expected costs of acquiring long-term assets and the means to finance these acquisitions (Table 8.1).

Table 8.1

Characteristics of responsibility centers

Based on their tasks and functions, business responsibility centers are usually classified as main, auxiliary and auxiliary. The main centers of responsibility produce construction products, for the production of which structural divisions are created, auxiliary ones are intended for the production of products and services that meet the needs of the main production.

In relation to the production process there are production And serving cost centers .

TO production include workshops, sections, teams, service departments and management services, warehouses, laboratories, etc.

The degree of detail of cost centers in various construction organizations depends on the goals and objectives set by management for the cost control manager assigned to the responsibility center. Typically, the degree of responsibility increases with the size of the cost center.

Responsibility centers are created for a clearer organization of control and regulation of costs as a management function, ensuring personalized responsibility for the level of individual expenses and expenses in the organization. The essence of this process is to compare the achieved results with the planned ones (or with the norms), analyze the causes of deviations, establish responsibility for them and take the necessary measures.

Each responsibility center is part of the company's management system and has an input and an output. Input is raw materials, materials, semi-finished products, labor costs and various services. The responsibility center uses these resources to complete the assigned work. The output of the responsibility center is products (products and services) that go to another responsibility center or are sold externally to external customers. The activities of each such center can be assessed in terms of efficiency. Although the resources necessary for the production of products (works, services) are mostly in physical form, for management control they are presented in monetary terms in order to combine physically dissimilar elements. The monetary measurement of resources is their cost. In addition to cost information, non-accounting information is used on such issues as the physical quantity of materials used, their quality, and the professional level of the workforce.

If the responsibility center's output is sold to external customers, the output is measured as revenue. Goods or services transferred to other organizational responsibility centers are measured either in monetary terms (for example, as the cost of the transferred goods or services) or in non-monetary terms (number of units of production).

In the domestic economy, construction organizations are represented mainly cost or income centers, at best, profit centers; investment centers are extremely rare.

In management accounting practice, the concept of “financial responsibility center” (FRC) is widely used. This is a structural unit that bears responsibility for financial results. The selection of a central federal district is the first step towards creating a budgeting system. The types of financial responsibility centers are similar to the types of economic responsibility centers:

The Investment Center has the right to manage working and non-working capital, including making investments;

The profit center is responsible for the volume of profit;

The contribution margin center is responsible for the difference between revenue and variable costs;

The income (revenue) center is responsible for the income it brings to the organization in the course of its activities;

The cost center is responsible only for the costs incurred.

It is also possible to group responsibility centers according to other characteristics, for example, by level of management: corporate, intra-company structural divisions.

According to the principle of efficiency, the optimal solution will be the one that allows you to get the maximum result for a certain level of investment. The main task responsibility centers - to minimize the investments required to achieve a given result.

Financial indicators are not enough to evaluate the performance of a cost center. This approach can lead to cost savings at the expense of reduced product quality. Therefore, when forming the structure of a construction organization solely as a set of cost centers, it is necessary to provide for additional quality control of manufactured construction products in the cost management system.

To ensure controllability of the cost level, it is important to plan and take into account only those costs at the center that can be effectively influenced by its manager. Sharing of responsibilities is possible. For example, the cost of materials depends not only on their quantity (the head of the production department is responsible for this), but also on the price (the responsibility lies with the supply department employee). When identifying deviations of actual costs from planned ones, responsibility should be personalized, since a person not authorized to control these costs cannot be responsible for their level.

For economic reasons, responsibility centers can be formed as self-supporting and analytical. Analytical the centers are not economically isolated - they are not connected with the internal economic accounting system. They provide analytical accounting and detailing of responsibility for individual costs. Self-supporting centers exercise control, are responsible for costs and are interested in reducing them. Separate analytical accounting is not maintained for self-accounting responsibility centers, but information is used based on where costs arise.

The feasibility of a particular type of cost is determined by the people participating in the management process. A responsibility center is a structural element of a construction organization, its economic entity, within which the manager is responsible for expenses incurred. The manager decides how to classify costs, how much to detail where they arise, and how to link them to responsibility centers.

Cost management by responsibility centers can be considered as a method of intra-company entrepreneurship, since their principles are similar:

Compliance with the technical and technological features of a specific construction industry;

Providing structural units with independence by delegating rights and responsibilities for the occurrence of costs, receipt of income, and use of investment resources (giving them the status of responsibility centers of a certain type);

Personification of all elements of the intra-company entrepreneurship system (determination of controllable cost and income items);

Selection of approved and estimated indicators, etc.;

Organization of activities of structural units based on plans;

Comparison of all costs incurred by the center with the results achieved;

Systematicity;

Compliance of information support with management needs (regulatory framework, relevant document flow, adequate software products and their technical support).

In most organizations, there is a division of managerial responsibility for tasks within an overall management structure. This division often has a hierarchical structure, in which three levels are conventionally distinguished:

1. Lower level. A manager at this level is responsible for operational decisions on the development, coordination and implementation of the production (work) plan for his department. In this regard, it is recommended to generate reports to provide managers with operational management information, starting from the lower level of responsibility, at which they can directly influence the results of work.

Low-level planning involves obtaining very detailed information relevant to the current moment. The decisions made are short-term; they relate to accounts receivable and payable, wages, implementation of the work schedule (plan), identification and analysis of deviations of actual results from planned ones.

2. Average level. Here, issues of effective use of resources to achieve better results are considered, decisions are made regarding purchases, location (storage) of stocks of raw materials, materials and finished products, sales (based on the results of the analysis) and cash flow forecasts.

3. Highest level. Responsibility centers are focused on strategic planning, which involves making decisions about the organization as a whole for the long term and determining the directions of its development. Decisions are made regarding investments in certain projects, entering new markets (developing potential markets), forecasting and budgeting.

Operational information intended for responsibility centers at different levels should not be duplicated. Goals and objectives, including accounting ones, are determined for each center. It is necessary to indicate what information, with what frequency, where and by whom should be transmitted. The work must be aimed at finding the necessary information and providing it to decision makers when they need it, and in a form that makes it practical for practical use.

Based on economic considerations and the possibilities of delineating responsibilities, we can give a reasonable description of any center of responsibility.

Management Accounting by responsibility center allows:

Simplify the procedure for maintaining synthetic and analytical accounting by accumulating information on deviation accounts;

Create conditions for generating reporting on needs;

Increase the validity of management decisions.

Problem assessment of structural divisions in a construction organization usually comes down to the selection of indicators that best characterize the activities of the department, as well as the assessment of the implementation of planned targets and compliance with established norms and standards for these indicators.

Mislavsky A.V. Head of the accounting systems design department of the management technologies and accounting systems design department of AKG RBS CJSC
Double entry No. 10 - 10/04/2005

Formation of the financial structure of an enterprise, namely the identification of financial responsibility centers (FRCs), is the first step towards creating a budgeting system. Each division of the company contributes to the final financial result of the company (in the form of raising income or making expenses) and must be responsible for its actions: plan, report on results. It is on the delegation of responsibility that the budgeting process is built.

The advantages of the transition to management in the Central Federal District are obvious. By dividing responsibility between departments, we determine who is actually responsible for what in the enterprise, we get the opportunity to evaluate the results and quickly coordinate the actions of departments, create a competent system of motivating employees to complete assigned tasks. The attention of the head of the department is concentrated on the performance indicators of the center entrusted to him, the efficiency and validity of making management decisions increases. Senior management, on the contrary, frees up time to complete strategic tasks.

There are different centers

If we proceed from the understanding of budgeting as a management technology, and budgets as a management tool, the enterprise in this case will be an object of management.

A commercial enterprise as an object of management in its simplest form can be considered as a combination of current activities (creation and sale of products, works or services) and investment ones. Current activities involve expenses (purchase of raw materials or finished products, production, sales costs) and income (revenue) from the sale of products, work or services. The difference between current income and expenses is defined as the profit (or loss) from current activities.

Responsibility for income in a commercial company, as a rule, rests with the sales division (sales department or trading house). Costs are borne by all departments, but to a greater extent by the supply (purchasing) department, production departments, and warehouses. Profit in most cases is determined for the entire enterprise, and decisions on its use are made by the company's management.

Thus, the activity of an enterprise as a management object can be divided into separate processes: procurement, production, sales, investment. Accordingly, the structural units that manage these processes can be considered as centers of responsibility for their implementation.

Based on the above functions, we will define four main (1) types of responsibility centers:

• revenue center;
• cost center;
• profit center;
• investment center

In practice, there are many more types of responsibility centers (for example, marginal income centers, responsible for marginal profit, or venture centers, responsible for the company's innovative activities).

Let's look at the main types of central financial institutions in more detail.

Revenue center is a structural unit responsible for the sales activities of the company. Its effectiveness is determined by maximizing the company's income within the resources allocated for these purposes. The question may arise: isn’t the division responsible for sales the center of costs for selling products (promotions, salaries of sales managers, etc.)? Of course, it is possible to define the sales division as a cost center, but taking into account their insignificant share in comparison with the amount of income (which is the income of the entire enterprise), we will still refer to it as an income center. The budget management tools for this type of central financial district are the Sales Budget and the Sales Cost Estimate (the purpose, structure of these documents and the procedure for working with them will be discussed in the following publications).

A cost center is a structural unit responsible for performing a certain amount of work (production task) within the framework of the resources allocated for these purposes. As a rule, most divisions of the company belong to this type of central financial district. First of all, production (workshops of main and auxiliary production, service departments). At the same time, the cost center may also have income (for example, revenue from the sale of external services by a transport division), but if their value is insignificant, and the provision of these services is not the main business of the company, the Central Federal District is defined as a cost center. The budget management tools for this type of central financial district are the Production Budget (production program) and the Cost Budget (or Cost Estimate). Purchasing centers and administrative cost centers can be distinguished as a type of cost centers.

• A purchasing center is a type of cost center; it is responsible for the timely and full supply of the enterprise with the necessary material resources within the limits allocated for these purposes. Such responsibility centers include, for example, purchasing departments. The budget management tools for this type of central financial district are the Procurement Budget (may include transportation costs) and the Cost Estimate.
• A management cost center is a type of cost center; it is responsible for the quality performance of management functions. This type includes the company's management apparatus, in most cases without dividing it into structural components (directorates, departments). The budgetary management tool for this type of central federal district is the Estimate of Management Costs.

A profit center is a structural unit (or the company as a whole) responsible for the financial result of current activities. In most cases, company management is responsible for current profit (or loss). In some cases, a company may have profit centers responsible for the financial results of a particular type of activity. The profit center may contain income centers and cost centers that are lower in the hierarchy. The budget management tool for this type of central financial district (not counting the Budgets of sales, purchases, costs) is the Budget of Income and Expenses (BDR).

Investment center is a structural unit (or the company as a whole) responsible for the effectiveness of investment activities. A traditional misconception is to define the investment center as the unit involved in planning and controlling investment activities (for example, investment management). The fact is that the final investment decisions are made by the company's management and bear full responsibility for them. The budget management tool for this type of central financial district is the Investment Budget, as well as the Forecast Balance Sheet (or Budget on the Balance Sheet). On an enterprise-wide scale, as a rule, the investment center coincides with the profit center and, in this case, the responsibility center is defined as the profit and investment center.

Thus, the type of financial reporting center determines the rights and responsibilities of a structural unit for the financial indicators assigned to it, which are an integral part of the financial result of the company as a whole.

A set of interconnected and subordinate centers of responsibility represents the financial structure of the company, which is based on the organizational and functional structure, but does not always coincide with it. Several divisions of a company can be defined as one central financial district (for example, management services can be defined as a cost center headed by the head of the company), at the same time, several central financial districts can be allocated within one structural unit (for example, within a trading house a wholesale trade income center and a foreign economic activity income center can be distinguished separately). When identifying a center of financial responsibility, it is necessary to take into account the possibility of clearly defining the list of products, works or services provided to external clients or internal structural units. The center of financial responsibility is characterized by financial independence, that is, its head must be able to determine and manage the financial result of the Central Federal District. The activities of the responsibility center are planned and controlled through a system of key indicators.

"Key" retreat

The purpose of this article is not a full description of the system of key performance indicators of the Central Federal District, so we will only briefly define them.

The key indicators for the income center are sales volumes, cash receipts, the state of accounts receivable, the volume of costs associated with the sale of products, for own maintenance, etc.

The key indicators of the cost center are the volume of work performed (production tasks), quality indicators for production, the amount and structure of costs for production and its cost, indicators of the efficiency of using means of production and labor resources, etc.

The activity of the profit center is assessed by all of the above indicators, as well as by indicators of financial and economic efficiency of current activities: profitability, working capital structure, return on assets, etc.

In addition to those indicated, indicators of the profit and investment center include indicators of the effectiveness of investment activities (payback period, ROI) and the financial condition of the enterprise as a whole (such as coefficients of financial independence and sustainability, etc.).

The system of key performance indicators of the Central Federal District serves as the basis for building a budget model. Some of them can be directly included in budget forms (for example, a revenue target), some are not directly related to budget indicators (for example, profitability). When using top-down budgeting, performance indicators also serve as the basis for the formation of budget targets. In any case, when determining key performance indicators, it must be taken into account that they must have a numerical value, be unambiguous and be contained in accounting systems.

Step by step

Returning to the topic of financial responsibility centers, we will determine the main stages of the formation of a financial structure.

First, it is necessary to determine the investment center, that is, the division responsible for the efficient use of profits received as part of current activities. In practice, in most cases, the enterprise itself as a whole is designated as the investment center, since only its management determines the investment policy, structure and amount of fixed assets and controls the financial condition of the company as a whole. Responsibility for the activities of the enterprise also includes control of current activities, therefore most often this center is defined as a center for profit and investment.

The profit and investment center includes dedicated income centers and cost centers. If there are structural divisions responsible for the financial results of certain types of business (for example, manufacturing enterprises that are part of a holding company, have separate sales markets, their own suppliers, independently determine the pricing policy, but do not make decisions on investing the profit received as a result of current activities), profit centers are formed along with income centers and cost centers. Profit centers can be formed not only on the basis of a separate structural unit, but also as part of several structural units of various divisions of the company, located within the same technological or product chain. Further, within such a profit center, its own subordinate income centers and cost centers are distinguished. The subsequent allocation of centers depends on the complexity of the organizational structure and the need for delegation of authority (for example, within a cost center, cost centers lower in structure can be allocated). An example of such a structure is shown in Fig. 1.

Rice. 1 Complex subordinate structure of the Central Federal District

Thus, a hierarchy of financial responsibility centers is built, which determines the financial structure of the company. The formed set of responsibility centers and their hierarchy is fixed by an internal regulatory document - “Regulations on the financial structure of the company”, which includes a description of the types of financial financial institutions, their composition and hierarchy, the powers of managers, the procedure for calculating (planning and accounting) financial results of activities based on the use of the system key indicators. This document is developed by the financial director (or a department reporting to him) and approved by the general director (president) of the company. Heads of structural divisions are given the right to make proposals for changes and additions to this document.

To summarize, it can be noted that we have considered only one of several components of budget management technology - management by financial responsibility centers. Other important components are: a system of key performance indicators of the Central Federal District, a budget model (the composition and relationship of indicators of budget forms), budget regulations, methods of plan-fact and factor analysis of budget execution, and others. We will talk about them in detail in the next issues of the magazine.

PROFIT CENTER

(profit center) A division of a company whose performance is measured by its profit.

Business. Dictionary. - M.: "INFRA-M", Publishing House "Ves Mir". Graham Betts, Barry Brindley, S. Williams and others. General editor: Ph.D. Osadchaya I.M.. 1998 .

See what a “PROFIT CENTER” is in other dictionaries:

Profit center- Profit center... Economic and mathematical dictionary

profit center- Usually all divisions, one way or another tied to the line of the product orientation structure, are capable of independently making a profit regardless of the success of other parts of the enterprise, and the amount of profit is set based on those... ...

Profit center- A structural unit (responsibility center), the head of which is responsible for receiving income and incurring expenses. The profit center affects both the revenues and costs of an organization. An example of a branch of an organization that... ... Vocabulary: accounting, taxes, business law

Profit center- PROFIT CENTER An independent unit in the organizational structure of a company to which the corresponding part of income and expenses can be attributed to calculate its profit. When a company is divided into profit centers, it is easier for company managers to identify... ... Dictionary-reference book on economics

PROFIT CENTER- usually all divisions, one way or another tied to the line of the product orientation structure, capable of independently making a profit regardless of the success of the work of other parts of the enterprise, and the amount of profit is set based on those ... ... Great Accounting Dictionary

PROFIT CENTER- usually all divisions that are in one way or another tied to the line of the product orientation structure, and the amount of profit is set based on those elements of marketing that the corresponding division is actually capable of managing... Large economic dictionary

PROFIT CENTER- (profit center) a division of a company that keeps records of its income and expenses and whose activities are assessed by the company’s management based on the profit it receives... Foreign economic explanatory dictionary

profit center (in information technology)- (ITIL Service Strategy) A business unit that charges fees for services provided. A profit center may be created for the purpose of generating profits, recovering costs, or controlling losses. The IT service provider may be a cost center or... ... Technical Translator's Guide

Profit Center (PROFIT CENTER)- A responsibility center whose financial results are determined through profit (the difference between its income and expenses/expenses). Wed. with Expense Center... Glossary of management accounting terms

marginal profit center- Profit center, in which variable or direct costs are compared with income Topics finance EN contribution center ... Technical Translator's Guide

Books

• Profit management, I. A. Blank. The book examines the main range of issues of managing the formation of profit of an enterprise in the process of its operating, investment and financial activities. Considerable attention...
• Accounting and tax accounting of profits, A. I. Nechitailo. The publication examines the essence, functions and role of financial results and profit distribution in the activities of commercial organizations. Particular attention is paid to methodological and methodological…

Budget management is an operational system for managing an enterprise by centers of financial responsibility using budgets. allowing you to achieve your goals through the most efficient use of resources. Consequently, the construction of a budgeting system is based on the concept of decentralized management and the allocation of central financial districts within the organizational structure of the enterprise."

In passing, we note that the organizational and financial structure are functionally different. Financial structure shows how profit is generated. It reflects the structure of cost, cash flows, and the logic of the formation of the financial result. Organizational structure, in turn, determines the order of subordination of the divisions of the company (enterprise).

Management of financial responsibility centers is one of the subsystems providing intra-company management. As an independent system, it allows you to evaluate the contribution of each half-division to the final results of the enterprise, decentralize cost management, monitor their formation at all levels of management and, on this basis, increase the economic efficiency of management.

When drawing up budgets, you first need to focus on the business model. First, you need to understand how the value chain is structured and what business processes the enterprise’s activities consist of. Based on this, it is possible to form a financial structure that reflects the structure of activities and centers of responsibility for results.

Thus, financial structure of the enterprise is a hierarchical system of financial responsibility centers.

At all financial responsibility center - This is a structural unit or group of units that carries out operations whose ultimate goal is to optimize profits, can have a direct impact on profitability, and is also responsible to senior management for the implementation and compliance with cost levels within established limits.

As a rule, the following centers of financial responsibility are distinguished: costs, income, profit, investment, control and management.

Cost center - This is a structural unit or group of units of an enterprise whose managers control only costs (for example, a production site, a production workshop).

The formation of cost centers should be carried out taking into account the organizational and technological features of the enterprise. The level of cost detail varies depending on the size of the organization and the goals set by management. The head of the Central Federal District has certain powers and financial responsibility for the costs incurred.

Income Center - This is a structural unit or group of units of an enterprise whose managers are responsible only for revenue from sales of products, goods, services and for the costs associated with their sales (for example, marketing and sales units).

By identifying income centers, management considers the latter to be the main indicator for assessing the performance of managers. When choosing income as the main evaluation criterion, it should be taken into account that the income of each central federal district must be formed objectively, regardless of the amount of income for the organization as a whole, and that the increase in income of one center should not lead to a decrease in the income of another center.

Profit center - This is a structural unit or group of units of an enterprise, whose managers are responsible not only for costs, but also for the financial results of their activities.

An example of such a central financial institution could be subsidiary company of the holding, located on a separate balance sheet. The managers of such profit centers have expanded powers and bear greater responsibility than managers of cost centers. Managers control income and expenses for the organization as a whole and are interested in increasing profits, since it is by this indicator that the effectiveness of their work is assessed.

Investment Center - This is a structural division or group of divisions of an enterprise, whose managers are responsible not only for revenue and costs, but also for capital investments and the efficiency of their use.

Examples of investment centers are large subsidiaries of industrial holdings. The main focus of investment is to maximize the market value of the company.

Let us give a practical example of the formation of a financial structure using the example of a furniture company.