Centralized vs decentralized acccounting, perspectives and experience

Vernon
My past includes heading up a multi-factory packaging manufacturer, so with that background, here are some thoughts:

1. I see two potentially different roles and skill sets here. First, the plant level finance guy is likely to be a strong operations-focused cost accountant/ controller. He is the Plant Manager's "finance guy" - his focus in on plant operations metrics, not on US GAAP financials produced after month end. Example: integrity of production floor measurement and reporting, utilization levels, variance analysis, trends in finished goods costs, etc. The second role is the accounting controller: is everything allocated to the right GL accounts, vendors paid, revenue recognized, non-plant overhead expense review etc. The CFO wants that person collecting data from the 4 plant managers and reporting US GAAP results etc.

2. My two cost accountants were both qualified/degreed and understood manufacturing cost accounting concepts. We implemented integrated standard costing into our processes and financial reporting and were able to show the CEO and Board each month where our profits came from: sales volume and price variances, production overhead recovery variances, purchase price variances for materials and overhead spend variances (both production and SG&A).

The plant manager may be reluctant to give up his "finance guy" because he realizes how much value he brings to the management of the plant:)

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I have previously headed the corporate level accounting and reporting function for a multi-billion, multi-plant, multi-national packaging company. I have seem both centralized and at least somewhat distributed functions. I strongly prefer the operations oriented finance guy at the plant that Len describes. Transaction processing and corporate reporting/compliance can be centralized as support functions not essential to the operations finance guy. Financial judgment at the point of customer contact and operations is critical to enabling a sound economic business focus and prevent a loss of the needed sense of reality. The completely centralized operation depends on a unchanging, standardized business model, much more rare today than even to succeed with plant operations a "color by the numbers" operation.

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