Controller's Guide to Planning and Controlling Operations

7

PLANNING AND CONTROL OF GENERAL AND ADMINISTRATIVE EXPENSES

INTRODUCTION

In this chapter, the planning for and control over the area of general and administrative (G&A) expenses are discussed. Typically an amorphous and poorly controlled area, the G&A expense area hides a significant number of expenses that a careful company can take many steps to avoid, or to at least keep from becoming larger. This chapter describes the most common elements of G&A expenses and how to control them, offers a number of pointers on how to reduce them, and finishes with a discussion of the best budgeting methods a controller can use to plan for as well as mitigate the impact of G&A expenses.

By reviewing this chapter, a controller will reach a better understanding of the components of G&A, as well as how to manage them.

COMPONENTS OF G&A EXPENSE

The G&A expense includes costs for a specific set of departments and expenses, which are both described in this section. These departments and expenses are ones that cannot be directly related to production or sales activities and so are segregated in the chart of accounts under a separate account category. This section not only describes the G&A departments, but also the accounts that are most commonly used within those departments.

For a typical company, there are a set of departments that do not relate in any way to production or sales activities, and so by default must be included in the G&A category. These departments address the overall management ...