The center of financial responsibility is ... Types of centers of financial responsibility

Financial Responsibility Centers are an important element in managing the budget of a legal entity. These are the structural units of the enterprise, which are responsible for achieving digital indicators. Also, these departments are responsible for the distribution of responsibility for this activity among employees within the organization.

Key features of the organization’s financial responsibility centers

Enterprises that have corresponding centers in their structure are distinguished by two key features:

• allocation of separate structural units for the implementation of the centers;
• the presence of a clearly built hierarchical system of subordination, which includes this center;
• the large role of the department's performance in relation to the economic efficiency of the organization;
• the presence of a budget structure that allows you to draw up plans and reports in relation to various financial centers;
• the organization sets the department the task of correctly drawing up financial (budget) plans and their successful implementation to achieve certain results.

Management of the organization's income and expenses with the help of financial responsibility centers in the budgeting system has a number of features:

1. The tasks assigned to the department are distributed for each individual indicator at various levels, without going beyond the organization. A separate responsible person is assigned for each part of the work.
2. The formation of goals and plans and their implementation is carried out through work within the framework of a single coordinate system of the organization.
3. When working, employees are guided by financial indicators.
4. The results obtained as a result of the work are analyzed taking into account those factors that were noted in the plan.
5. Based on the results of the work, the goals set and the achieved indicators are reconciled.

In the work of the centers of financial responsibility (CFD), an important role is played by a special unit (financial accounting center), which is engaged in the implementation of the current activities of the organization and in accounting for key indicators of expenses and income. During the work of this department, the place where the costs occurred (cost centers) is primarily determined. The organization’s financial responsibility center is responsible to the management for their appearance, and the CFU is responsible for their accounting for further forecasting of work.

The place of occurrence of costs in most cases is an object of technological type. This is due to the fact that its normal functioning requires regular investment of budget money in materials, raw materials, maintenance and other expenditure items. The activities of each cost center do not require the creation of a separate center of financial responsibility. This is associated with low costs compared with other areas of the organization.

If the enterprise is large, it includes several CFDs. Together, they form a financial hierarchical structure. This system determines the order of subordination of all centers of financial responsibility of the enterprise. Proper construction of the structure allows for high efficiency in the joint work of all departments for managing budget indicators.

Center classification criteria

Budget departments can be systematized for various reasons. To determine what types of centers of financial responsibility can be distinguished, one should take into account economic indicators that are the subject of control of departments. This demarcation criterion is suitable for all organizations, irrespective of field of activity, industry, or size.

The main indicators of the allocation of groups of centers of financial responsibility in budgeting are:

• costs for similar periods;
• profit in a specified period of time;
• investment indicators with a ratio in percentage of invested finances and profit received from them;
• intermediate results (results) ;
• indicators of income (profit), which was obtained for all expenditure items, taking into account the costs incurred.

Department classification

Based on these indicators, the following types of financial responsibility centers are distinguished:

1. Responsible for costs (implementation of the production process, procurement, administrative and commercial).
2. Income departments that are engaged in the development of the main activities of the organization.
3. Centers of real income that are responsible for a particular branch of activity, as well as for the profit made by the organization of this branch. The structure of this department includes cost centers that reflect production costs, and income received in this area. This department may be a separate subdivision or a part of an association of several enterprises.
4. Centers of profit, which are responsible for maintaining a positive balance of the organization after all the necessary costs and their calculation. Most often, such a center represents a separate organization or their association. In cases where the finances are managed by a separate legal entity, it includes centers for expenses, income and net profit.
5. Investment departments. These types of financial responsibility centers are engaged in investing the organization’s budget funds and changing non-current assets. Their main task is to increase operational efficiency based on invested funds (taking into account the ROI coefficient). The structure of such organizations includes several profit centers, the entire enterprise, a holding or a group of legal entities of an industrial direction. In companies that are engaged in investing profit in other projects, investment and revenue centers are one and the same.

Activities and features of the work of cost centers

For any enterprise, one of the most important indicators is the amount of expenses that are associated with the efficient use of resources and the organization’s work in general. Cost centers are the departments that carry out this accounting. They are divided into two groups: functional and production.

Production centers consider material investments and labor costs of all departments of the organization. They do not engage in pricing, but carry out work on the expenditure of enterprise resources and accounting for its costs. The leaders of such centers control that the costs correspond to the established planned level, and also work to minimize costs.

Functional cost centers are responsible for business needs and costs associated with various economic, legal and financial operations.

Features of creating centers of financial responsibility in the enterprise structure

For any organization, the correct accounting of the items of income and expenses plays an important role, allowing not only to maintain the profitability of the enterprise, but also to increase its income. The construction of effective centers of financial responsibility is a long process, which begins with an analysis of the organization and structure of the enterprise. The analysis is carried out in four stages:

• allocation of organizational units through the formation of lists;
• building a hierarchy of subordination between different links, starting with the head of the company and ending with the ordinary performer;
• numbering of links taking into account nesting.

After conducting an appropriate analysis of the structure of the organization and its activities, conclusions are drawn on determining the direction of the company. After this, the formation of the financial structure is carried out.

The construction of the system of departments is carried out by compiling a directory indicating each link and its characteristics (income, costs, profits and investments). Some organizations form all of these departments in the state, while others form one. The compiled matrix of values ​​helps to qualify the sources of each of the centers.

For example, company X may have the following totals:

• profit - company;
• investments - company;
• income - sales;
• costs - marketing, financiers, administration and staffing.

After the final distribution of the directions of a particular department, a hierarchical pyramid is formed, which reflects the subordination of each compartment. Then, in each of them, a head is appointed, whose duties include monitoring the responsibility of the department and responsibility for it. All this data is collected in a structured information table and stored in company documents.

The relationship of financial responsibility centers and cost accounting

Accounting for the flow of budget funds is one of the responsibilities of the center. It is a tool that allows you to distribute company management. After decentralizing power at the enterprise, the department transfers part of the responsibility from senior managers to middle and lower level personnel.

Regardless of what types of centers of financial responsibility can be distinguished, they are united by the fact that not many of them carry out cost accounting and have the right to distribute profits. Many departments involved in the organization’s income-generating activities do not have the right to participate in the distribution of profits received by the responsible center. This situation is especially common in large companies with a large staff.

Those departments that deal with both of these issues can much better measure, evaluate, and correlate their plans and their final implementation. Many experts believe that accounting of the managerial type works most effectively, since it most effectively facilitates access to relevant digital indicators, the study of which will help to make the right decision in relation to finance.

If the correct financial management chain has been built in the course of accounting, specific (target) reliable information will be used in the work. Corresponding databases and reports on them are compiled in two forms: by assessment centers and by units in the structure of the organization. They analyze technological innovations, specific types of products and financial proposed solutions.

To prepare such reports, it is recommended to use a simple and easy-to-learn information system. For it to be most effective, it is necessary to take into account the possibilities of decentralization of power and the fact of the personal responsibility of managing personnel for the financial performance of the organization when creating it.

The importance of decentralization in the structure of the organization

The most effective are organizations in which, along with the availability of budgeting, responsibility centers in financial planning, as well as a hierarchical structure, the principle of decentralization of responsibility is used. This is due to the fact that the traditional approach to the activities of the enterprise plays a large role in the analysis of errors of line managers.

When implementing the principle of decentralization of responsibility, more attention is paid to the final result of the work, rather than to technical issues. In such a company, the initiative of employees is more often manifested, innovative and innovative ideas are introduced. As a result, everyday work tasks are solved much faster, which as a result allows us to optimize the work of the company as a whole.

The financial responsibility center is the departments that may exist in the company, while not coinciding with its production or organizational structure. In some cases, a single hierarchy is built under one center from auxiliary departments that are engaged in various areas of the organization’s activities, which are interconnected and controlled by a higher center.

Responsible Centers Budget

One of the most important concepts in the work of the centers is the budget. It takes into account all the costs and profits of units. In this case, funds on the balance sheet and the movement of finances may not be taken into account. This is due to the fact that the types and lines of activity of the organization indicated in the financial documents are not controlled by the center.

Analyzing the above provisions, we can conclude that the responsibility of the departments in question is limited. This is due to the fact that the main goal of financial assessment centers is to achieve the planned indicators. Exceptions are only accounting centers, which, in addition to the main activity, are involved in monitoring compliance with restrictions and standards.

Classification of CFD in accordance with the characteristics of a commercial organization

The basis for dividing the centers into groups is the concepts of functionality used in a commercial organization and the tasks of the respective supervisory departments. According to this criterion, the main and auxiliary centers are distinguished.

The main departments of financial responsibility are engaged in manufacturing products, performing work and providing services established by the statutory documents. In such companies, the cost is the cost of production. The most common examples of such centers are workshops and sales departments.

Subsidiary financial responsibility departments are involved in the maintenance of basic ones. Their costs and expenses are divided into main departments and summed up, after which their real cost is calculated. The most common examples of such centers are administrative departments, technical control services, repairs, and tool workshops.

The relationship of responsible and cost centers

In some organizations, these two centers are identical. In this case, costs arise in structural units that consume resources. Employees of the department draw up plans, establish consumption standards and keep records, which allows controlling costs (expenses) and ensuring economic accounting in the organization.

Most often, financial responsibility centers are responsible for several departments of the enterprise at the same time. At the same time, heads of various departments refuse to be responsible for the costs of the work of other departments. In such cases, decisions on the allocation of costs to any center are made by the head of the organization.

The centers of financial responsibility play a huge role in the activities of any company, taking into account and controlling costs, revenues, profits and investment options.