How to avoid the failure of internal control

At the morning meeting of all management cadres on Nov 12, 2022, Mr. Wang cited the case of development cases applying for compulsory termination in batches, and expounded how to avoid the failure of internal control from three aspects of cost control, project evaluation and organizational construction.

On Wednesday, the staff of the Product Planning Department reported that the Engineering Department of about 100 new development projects had recently applied for compulsory termination. In response to the problems reflected by the Product Planning Department, the company arranged Mr. Long Weiquan, the Director of Standard Office to investigate why so many new projects need to be closed compulsorily. Through investigation, it is found that the Engineering Department has applied for the termination of the development plan of about 90 new samples in the system, and some new materials have been purchased back to the warehouse, waiting for the trial production of products. The above phenomena indicate that we still have failure points in cost control, project evaluation, organization construction and other internal controls. What is internal control? Internal control refers to the internal control operation of an enterprise. Internal control is imposed on us by the outside. It requires that everyone in the enterprise should use the correct method to do what should be done. Enterprise managers need to better master the basic theory, regulatory requirements, practical operation skills, evaluation indicators and management methods required for the construction of enterprise internal control system, so as to help enterprises improve the effectiveness of the internal control system.

Do good jobs in cost control.

Through the investigation of the Standards Office, it was found that the salary cost of each new sample was up to 1078 yuan from the four stages of design, drawing, BOM building and PE planning. If the mold planning cost and material cost are included, the 90 new samples applying for compulsory termination have wasted nearly 250000 yuan before entering the trial production stage of new products. The company has always emphasized that financial management should be upgraded from bookkeeping and accounting based financial management to management based finance. The fundamental point of managerial finance is to regard finance as an internal control system. The focus of enterprise management is control, and financial control is the core of this system. Financial personnel should have a keen sense of smell, where there is waste, there are corresponding control measures, and truly achieve the integrity and unity of capital flow, information flow and logistics. At the same time, the Finance Department should also train other departments in financial knowledge so that they can learn how to calculate accounts. Only when department heads learn to calculate accounts and have cost awareness can they cherish opportunities and avoid waste. I remember that when we were young, we learned a poem from Li Shen, "In the afternoon of weeding, sweat drips down the grain. It's hard to eat every grain." Why do farmers cherish food? Because they know the hard work of farming and that a grain of grain is bought with a drop of sweat. Why are the children's "Grandpa Yuan Longping" respected? Because he solved the problem of people's eating, so that farmers' harvest increased.

The project evaluation should be serious and rigorous.

The 90 new samples that the Engineering Department applied for compulsory termination were all planned by NPI (including process planning, process flow planning, mold planning, quality planning, cost planning and delivery schedule planning). These plans also went through the initial review, review and final review processes. Why did the projects that were planned in the earlier stage finally choose to give up development? On the one hand, it shows that our previous planning work is not rigorous, and the trial production and process validation of new products may not meet the expected effect and requirements. On the other hand, some new models missed the launch time of customers' new products. Glasses are both medical supplies and fashion products. If our project cycle is too long, we will miss the peak sales season. In order to avoid the long development cycle of new samples, missed sales seasons and saved research and development costs, the company requires that the load of the product development department be controlled within a certain range, and priority should be given to certain new projects (such as customer confirmation samples, customer selection, customer transfer, etc.). At the same time, we also need to recruit mature designers to design for customers according to their brands, consumer groups, sales pricing and other factors, so as to achieve precise positioning, so as to improve the hit rate of new products. The company requires the current PE engaged in planning to learn experience and lessons from the 90 new projects with compulsory termination, so as to pay tuition fees without waste, that is, the company advocates learning at work and working in learning, and to be "serious, rigorous, normative and efficient" in the planning process. Because NPI planning is the source, and the Engineering Department is the standard setting department, only when their work is serious and rigorous, can we ensure that products can achieve high efficiency in mass production.

Give play to the positive role of organizational construction.

Some of the more than 90 samples applied for compulsory termination by the Engineering Department are projects several months ago. Why did these new projects apply for compulsory closure several months later? On the one hand, it reflects that the engineering team is not professional and does not work logically. On the other hand, it shows that the surrounding departments have not played a positive role in the embedded management model. The company has implemented the embedded management mode as early as 2019, that is, when a team or department has problems, we should play the role of organization building. As the superior and surrounding departments, we should timely intervene to deal with them. In this case alone, the personnel of the surrounding departments related to the development of new products include the salesman, the PD of the New Product Planning Department, the CQE responsible for quality, and the MPS responsible for the delivery date. If they step in, participate in the order checking, and control the delivery date, they will find the problems earlier and nip them in the bud. If our senior executives can intervene in a timely manner, the internal management of the Engineering Department will be more controlled, rather than being left to their own devices. As early as 2019, the company required the Logistics Department to set up the Engineering Material Control Section to provide material support, data management and sample progress control for product development units. If the Logistics Department has earnestly implemented this work in 2019, the Engineering Department will not be left with no one to handle the balance, unclear data handover, excessive in process quantities and other undesirable phenomena. Why has the production department been gradually straightened out in recent years? It is not that the awareness and professionalism of the management cadres of the production units have improved, but that our senior executives and surrounding departments have played a positive role in the embedded management model and organizational construction, so that the problems of the production units can be exposed in the sun in a timely manner, so that everything is managed and supervised everywhere.

In order to improve the effectiveness of the enterprise's internal control system, first, we need to do good jobs in cost control. Financial management should be upgraded from bookkeeping and accounting based financial management to management based finance, so that where there is waste, there are corresponding control measures. To truly achieve the integrity and unity of the enterprise's capital flow, information flow and logistics, and teach other departments to calculate accounts, only the heads of each department can learn to calculate accounts and have cost awareness, only then can we cherish opportunities and avoid waste. Second, the project evaluation should be "serious, rigorous, standardized and efficient". Because NPI planning is the source, and the Engineering Department is the standard setting department, only when their work is serious and rigorous, can we ensure that products can achieve high efficiency in mass production. Third, senior executives and surrounding departments should play a positive role in the embedded management model and organizational construction, so that all problems can be exposed in the sun in a timely manner, so that everything is managed and supervised everywhere.