Every company follows a hierarchy that holds employees at different levels accountable. This creates an organisation that increases efficiency within the company. The phrase “span of control” helps to understand the number of subordinates who are supposed to report to a manager. This can also be considered equivalent to the management ratio.
Organisations have to determine an ideal or fixed management ratio or span of control which determines the number of employees from whom a manager has to take reporting at a certain time. Based on the structure of the organisation and its requirements, the span of control can be kept wide or narrow.
Spans of control are important for all the verticals within an organisation. They not only improve efficiency but also allow better communication within the organisation. In this article, we will be discussing the spans of control that the finance department of organisations can follow for effective financial management.
Roles and Responsibilities in an Organisation’s Finance Department
Financial management is a process that deals with planning, directing, organising, and managing the financial activities within an organisation. Effective financial management helps to make sure that the resources are utilised correctly and that the organisation reaps the benefits in the long run.
Just like every other department in an organisation, the finance department also has a number of players working in the hierarchy, all of whom are assigned specific roles and responsibilities. The Chief Financial Officer plays a pivotal role in setting the financial strategies and supervising the financial executives, controllers, and accountants, who are entrusted with the task of executing the day-to-day financial activities.
The hierarchy is as mentioned below:
- The Chief Financial Officer: He is in the topmost position in the accounting department of any organisation. The CFO reports to the CEO.
He oversees the activities of the finance department and works towards achieving the financial goals of the organisation. He also approved the financial transactions and reports. You can learn more about the roles and responsibilities of a CFO by pursuing a CFO course online.
- Management Accountant and Financial Accountant: A management accountant’s task is to control costs, prepare budgets and cash flows, and prepare timely management reports. A financial accountant is a professional who addresses the queries of external auditors on the financial reports of an organisation before they are published. A financial accountant has to report to the CFO.
- Internal Auditor: The finance department of an organisation also has an internal auditor who analyses the financial transactions on a regular basis to ensure accountability and transparency within the organisation. He also keeps track of the documents and makes sure that the transactions have been documented correctly in the ledger.
- Credit Controller and Accounts Payable Accountant: Both these individuals report to the management accountant. The credit controller has to manage the business’s accounts receivable, which consists of the outstanding debts and the cash payments. The accounts payable accountant is responsible for processing the payments for creditors’ due payments and cash purchases.
- Clerks: The accounts clerks are at the lowest level of the hierarchy in the accounting department. They report to their respective sub-department heads. Their responsibilities include filing the documents, processing the outgoing invoices and dispatching them, and receiving the incoming invoices.
Some common clerical positions are payroll clerk, accounts receivable and payable clerk, and cashier.
These days, data has an important role to play in efficient decision-making. Therefore, organisations might also have to invest in the right kind of financial leadership, that can help to analyse data and help in data-driven financial decision-making.
Based on the requirements of an organisation, it can opt for either a wide or a narrow span of control for financial management. The kind of span of control that an organisation chooses determines the amount of time it will take to make a decision. A wide span of control results in a flat organisation structure, whereas a narrow span of control is responsible for a tall structure.
A wide span of control in an organisation includes fewer levels. This means that a financial decision will not have to flow through multiple layers of approval and management can act faster. A wide span of control also helps to slash unnecessary costs.
On the other hand, a narrow span of control has its own advantages in effective financial management. Although it may be bureaucratic in nature, a narrow span includes more levels. This allows room for specialised interventions and may result in better decision-making and financial management.
Factors that Determine the Spans of Control
There are a number of factors that determine the span of control. Some of them are as discussed below:
- Geographical proximity: If the subordinates and the manager are geographically located far away from each other, it may be difficult for the manager to stay in regular touch with them. As a result, the span of control has to be kept narrow to keep communication smooth.
- Job complexity: Some tasks may be complex and require the right kind of expertise to be accomplished. If a job requires more guidance from managers and expert supervision, it is ideal to keep the span of control narrow.
- Skill level of employees: The span of control also depends on the level of expertise and skill possessed by the employees. Employees who are skilled and understand their work well do not require supervision all the time. In such cases, a wide span of control can ensure smooth management.
However, if employees lack the ability and need constant supervision and guidance from the managers, the organisation has to squeeze in extra layers of professionals.
Now that technology has helped to improve communication through cell phones, emails, and video conferencing tools, the exchange of information can take place almost instantaneously. This has made it easy for organisations to opt for wide spans of control and yet function effectively.
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