Abstract:

Over many years of consulting practice, the author of the present paper identified several most common errors made by financial controlling departments of international companies. These are: a. using full cost accounting for strategic decisions regarding product pricing and discontinuation; b. failure to correctly account for unused production capacity when calculating the profitability of individual products/services; c. using full rather than incremental cash flows to assess the rationality of investment projects; d. reliance on performance management system, which is not reflective of the structure of the underlying business processes; e. lack of adaptive budgeting process; f. non-alignment of management motivation systems with cost control procedures; g. sta􀆯ing the controlling departments predominantly with finance specialists without in-depth knowledge of the underlying business processes. These mistakes can have serious repercussions for the companies’ strategic decision making and can even result in severe operational di􀆯iculties. The author presents the essence of the enumerated mistakes as well as ways to remedy them.