Management control
Management control to understand margins, costs and priorities
In many companies the problem is not the lack of numbers. The problem is that the numbers exist, but they do not really help with deciding. Months are closed, files are updated, variances are discussed, but when the time comes to choose where to invest, what to stop or which customers to defend, the conversation quickly drifts back to impressions, urgencies and habits. This is where management control becomes useful: not as an administrative overlay, but as a tool to better read margins, costs and priorities.
Why it matters more than before today
In recent years many businesses have had to manage uneven growth, rising fixed costs, commercial volatility and greater pressure on profitability. In this scenario, looking only at revenue is no longer enough. IFAC too emphasises that performance and financial management are among the most relevant factors for SMEs' survival and growth in volatile contexts. A similar line is added by McKinsey, which insists on the value of more complete and less short-sighted decisions when reasoning about ROI, resource allocation and priorities.
The three useful lenses: margins, costs, priorities
If I had to summarise the function of management control in three words, I would use these: margins, costs and priorities. They are three different lenses and they must be kept together. If today you are taking decisions on pricing, channels or customer mix without this base, get in touch: we can start with an audit and understand what is really off, before adding more activities.- Margins help you understand where the company really creates value and where, on the contrary, it erodes it.
- Costs help you distinguish between necessary structure, inefficiencies and spending that has lost its connection to strategy.
- Priorities serve to turn numbers into choices: what to push, what to correct, what to stop.
Where the system usually breaks down
The recurring signals are almost always the same. The company grows in revenue but not in profitability. Some customers seem important but, once you load commercial costs, service and operational complexity, it turns out they yield little. Departments speak different languages. Management asks for more control, but receives files that are too long or too technical. A managerial reading of the data is missing. PwC and Deloitte have for years been describing finance transformation in exactly this direction: fewer reports produced as a ritual, more useful information for decision-making.
What useful management control should produce
A useful system does not just produce reports. It produces better decisions. Concretely, it should generate at least these outputs:
- a clear view of margins by area, customer, channel or project
- a classification of costs as compressible, structural or strategic
- a 90-day priority hierarchy
- a small set of indicators readable by management
- a basis for aligning sales, operations and leadership
How it translates into competitive advantage
According to CIMA, management accounting contributes to strategy precisely because it connects economic analysis and business decisions. The same principle is also found in Bain & Company, which highlights the role of the CFO and performance systems in guiding choices, not only in measuring after the fact.
To understand how to set up this system concretely starting from management decisions, also read how to set up management control that is useful for management.
FAQ
Is management control only useful for large companies? No. In SMEs it is often even more useful, because it helps in taking decisions with less margin for error and with more limited resources.
Is revenue alone enough to understand if an area is working? No. Revenue alone does not show cost absorption, complexity and margin quality.
When is the right time to introduce or revisit it? When the company grows, changes customer mix, opens new lines or feels that decisions are being taken with little economic clarity.