The role of the financial dashboard in managing hidden costs

Abstract

The management of hidden costs is essential for maintaining the performance of companies. The financial dashboard plays an essential role by enabling the monitoring, controlling, and optimizing of company profitability concerning hidden costs. The central problem of this research is to understand how financial dashboards can be effectively used to detect and manage hidden costs in industrial companies in Morocco.

The main research question we seek to answer is: how does the financial dashboard enable effective management of hidden costs in the operational processes of industrial companies?

Hidden costs, defined as costs associated with activities not visible in financial statements but having a significant impact on company performance, can originate from various sources such as operational inefficiencies, productivity losses, process errors, quality failures, or human resource management issues (Monks and Minow, 2008). Often insidious, these costs go unnoticed in traditional financial reports. The financial dashboard allows for the systematic and structured identification and tracking of these hidden costs, thereby facilitating the implementation of measures to minimize them and improve company profitability.

The primary objective of this research is to evaluate the effectiveness of the financial dashboard in detecting and managing hidden costs in the operational processes of industrial companies in Morocco. It aims to provide managers with the knowledge and tools necessary to make informed decisions and implement effective management strategies to optimize their company's profitability in an ever-evolving competitive environment.

To achieve this objective, a quantitative research approach was adopted. Data were collected using questionnaires distributed to industrial companies in the automotive sector in Morocco. The questionnaire consisted of forty-eight questions, developed based on previous research and proven theoretical models. The target population is the industrial ecosystem operating in the automotive sector in Morocco. Of the 52 questionnaires distributed, 43 were completed by management controllers, 58% of whom are men. The respondents are distributed as follows: 42% are between 25 and 30 years old, and 5% are between 40 and 50 years old. Regarding company size, approximately 35% have more than 200 employees, 37% have between 10 and 50 employees, 21% have between 50 and 200 employees, and 7% have fewer than 10 employees. In terms of legal form, 65% are LLCs and 35% are joint-stock companies.

The results show that the management of hidden costs is influenced by three main variables: the frequency of use of the financial dashboard, its integration into management processes, and the selection of relevant indicators. These results align with existing literature, highlighting the importance of regular and integrated use of financial dashboards, as well as the selection of relevant indicators for effective hidden cost management.

The study confirms that the financial dashboard is an essential tool for effective hidden cost management. By integrating these costs into overall management, companies can not only improve their profitability but also maintain their competitiveness in the market. The results enrich existing literature by demonstrating the strategic importance of financial dashboards and their positive impact on companies' financial performance.

The study highlights several limitations, notably the sample size and the focus on a single industrial sector. For future research, it would be beneficial to explore other sectors and use larger samples to generalize the results. The main recommendations include the systematic adoption of financial dashboards and the training of managers to maximize their use.

Key words: Hidden costs, financial dashboard.

JEL Classification : M41,D24,L62 

Type du papier : Empirical Research