A Fundamental Misunderstanding
Whilst personal accountability for a profit or cost centre is to be encouraged, one can have too much of a good thing. For example, one group with a turnover of about £60 million and 1,000 employees was organised into over 30 profit centres and some 200 cost centres.
Because of the large number of different entities, there was a huge amount of transferred charges on an allocated cost basis. Managers complained that most of their costs were merely a transfer to them from a different cost centre, so they were not really accountable for costs. Worse still, few of the profit centres received adequate attention from the board. Needless to say, a large staff of accountants and data-processing people was employed to cope with the monthly management reporting.
Reorganisation of this group created five strategic businesses, with a total of nine divisions. The number of cost centres was reduced dramatically, the accountants and data-processing staff were redeployed, frustration caused by the old structure was reduced and morale improved all round.
Profit-centre accountability
The creation of individual profit centres offers the following advantages:
• personal accountability is increased
• more management-development opportunities are created
• a greater sense of local identification with the business by all staff is encou
Next:
- Demack on Professional Firms Are Facing Dramatic Changes
- Demack on How To Lay The Foundations For Success
Want INSTANT TAX ADVICE?
Setting up in business | Legal Compliance | Keeping informed | Planning for profit | Raising finance |
| Managing growth | Buy, sell or merge | Minimising tax | Agreeing tax liabilities | Tax Rates 2024/ 12 | advice
Our Services
Business start-ups, Accounts Preparation, Tax Planning and Advice, Tax enquiry and investigations, Personal & Business Taxation including Income Tax, Self Assessment Tax, Coming into/Leaving the UK, Inheritance tax, Capital Gains Tax, Corporation Tax, National Insurance, PAYE, Value Added Tax Advice and Company Secretarial services
What a Demack Chartered Accountant can do for you?