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CONTROLLING
Control is one of the managerial functions. These functions start with planning and end at controlling.
The other functions like organizing, staffing, directing act as the connecting like between planning
and controlling. Planning will be successful only if the progress planning and controlled, Planning
involves setting up of goals and objectives while controlling seeks to ensure
Definitions:
Knootz and O'Donnel: -
The measurement and correction of the performance of activities of subordinates in order to make
sure that enterprise objectives and plan devised to attain them are being accomplished. The
accomplishment of organizational goals is the main aim of every management. The performance of
subordinates should be constantly watched to ensure proper implementation of plans. Co!ordination
is the channel through which goals can be achieved and necessary
Henry Fayol:
"n an undertaking, control consists in verifying whether everything occurs in conformity with the plan
adopted, the instructions issued and principles established. "t has to point out weakness and errors
in order to rectify them and prevent recurrence. "t operates on everything#
Characteristics of Control
$. %anagerial &unction
'. &orward (ooking
). Continuous *ctivity
+. Control is related to planning
,. -ssence of Control is *ction
te!s in Controllin" #rocess
$. .etting of Control .tandards
'. %easurement of Performance
). Comparing *ctual and .tandard Performance
+. Taking Corrective *ction.
Techni$%es of Control or &ethods of 'sta(lishin" Control
* number of techni/ues or tools are used for the purpose of managerial control. .ome of the
techni/ues are used for the control of the overall performance of the organisation, and some are used
for controlling specific areas or aspects like costs, sales, etc.
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)* +%d"etary control techni$%e
,* Non-(%d"etary control techni$%es
)* +%d"etary control techni$%e
The techni/ue of budgetary control refers to the use of budgets as the means for controlling the
activities of a business.
,* Non-(%d"etary control techni$%es
0on!budgetary control techni/ues refer to all techni/ues of control other than the techni/ue of
budgetary control. 0on!budgetary control techni/ues include techni/ues such as#
a. .tandard Costing
b. 1reak!even analysis
c. "nventory Control
d. "nternal *udit
e. .tatistical data analysis
f. Personal observation
g. Production planning and control
h. &inancial statement analysis
i. 2eturn on investment control
j. %anagement information system
k. %anagement audit
l. P-2T 3 CP%
m. 4uman resources accounting
n. 2esponsibility accounting
"t may be noted that this type of classification of control techni/ues 5i.e., classification of control
techni/ues into budgetary control techni/ue and non!budgetary control techni/ues6 is not /uite
common.
Techni$%es of Control are:
$. Traditional or Conventional Techni/ues 3
'. %odern or Contemporary Techni/ues
Classification of Control Techni$%e into Traditional and &odern Techni$%es:
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*s stated above, the various techni/ues of control can be classified into categories, viz., 5$6
Traditional or Conventional techni/ues and 5'6 %odern or Contemporary techni/ues.
The i-!ortant Traditional or Con.entional techni$%es are:
$. 1udgetary Control
'. .tandard Costing
). 1reak!even *nalysis
+. "nventory Control
,. "nternal *udit
7. .tatistical 8ata *nalysis
9. Personal :bservation
;. Production Planning and Control
The I-!ortant &odern or Conte-!orary techni$%es are:
$. &inancial .tatement *nalysis
'. 2eturn on "nvestment Control
). %anagement "nformation .ystem
+. %anagement *udit
,. <ero!base 1udgeting
7. Pert 3 CP%
9. 4uman 2esources *ccounting
;. 2esponsibility *ccounting.
TR/DITION/L T'CHNI01'
)* +%d"etary Control: *ccording to 2*/* cott, 1udgetary control is the system of management
control and accounting in which all operations are forecasted and so far as possible planned
ahead, and the actual results compared with the forecasted and planned ones=.
,* tandard Costin": *ccording to the IC&/, -ngland, .tandard cost is a pre!determined cost
which is calculated from management>s standards of efficient operation and the relevant
necessary e?penditure=.
3* +rea4-e.en /nalysis or Cost-5ol%-e-#rofit /nalysis: Cost!@olume!Profit *nalysis or 1reak!
even *nalysis is the study of the interrelationship between the cost 5i.e., cost of production6,
volume 5i.e., the volume of production and sales6, the prices and the sales value, and the profits.
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"n other words, it is the study of the inter!relationship between the cost 5i.e., cost of production6,
volume 5i.e., volume of production and sales6, prices 5i.e., selling prices6 and profits.
6* In.entory Control: "nventory is the stock of raw materials, work!in!progress, finished goods,
consumable stores and spare parts and components at any given point to time. .o, inventory
control means control over different items of inventory or stock. 7It is defined as !hysical
control of stoc4 ite-s and i-!le-entin" the !rinci!les and !olicies relatin" thereto8*
9* Internal /%dit: "nternal audit is a continuous and systematic review of the accounting, financial
and other operations of a concern by the staff specially appointed by the management for the
purpose. "n other words, it is the auditing for the management conducted by the staff specially
appointed for the purpose to ensure that the work of the concern is going on smoothly, efficiently
and economically.
:* tatistical Data /nalysis: "t is a techni/ue under which statistical data of the past and the
present relating to the important aspects of the business are used for managerial control. The
statistical data are collected from books and registers of the concern and presented to the
management in a systematic manner in the form of tables, charts, graphs, etc.,
;* #ersonal O(ser.ation: Ander the techni/ue of personal observation, the managers keep a close
personal observation of the employees. "n other words, the manager observes whether the
workers are doing what they are e?pected to do.
<* #rod%ction #lannin" and Control: *ccording to * 'lon, Production planning and control may
be defined as the direction and co!ordination of the firm>s material and physical facilities towards
the attainment of pre!specified production goals in the most efficient and valuable way=.
&OD'RN T'CHNI01'
$. Financial tate-ent /nalysis: &inancial statements are a means of managerial control. They
can be used by the management for measuring and controlling the profitability, li/uidity and the
financial position of the business. 1y comparing the financial statement of the current year with
those of the previous years and also by comparing the financial statement of their concern with
those of other concerns engaged in the same industry.
'. Ret%rn on In.est-ent Control: Profits are the measure of overall efficiency of business. Profit
earned in relation to the capital employed in a business is an important control device. 2:" is
used to measure the overall efficiency of a concern. "t reveals how well the resources of a
concern are used, higher the return better are the results.
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). &ana"e-ent Infor-ation yste- =&I>: %anagement "nformation .ystem 5%".6 is an approach
of providing timely, ade/uate and accurate information to the right person in the organisation
which helps in taking right decisions.
+. &ana"e-ent /%dit: %anagement audit is an investigation by an independent organisation to find
out whether the management is carried out most effectively or not. "n case there are drawbacks at
any level then recommendations should be given to improve managerial efficiency.
,. ?ero-+ase +%d"etin" =?++>: "n the words of Peter * Pyher, <ero!base budgeting is a planning
and budgeting process which re/uires each manager to justify his entire budget re/uest in detail
from scratch and shifts the burden of proof to each manager to justify why he should spend
money at all. The approach re/uires that all activities be analysed in Bdecision packages> which
are evaluated by systematic analysis and ranked in order of importance=.
&rom his definition, it is clear that <ero!base budgeting is a techni/ue of preparing the budget in
which the previous year is not taken as the base, and every year is taken as a new year for
preparing the current year>s budget.
7. #ro"ra--e '.al%ation and Re.ie@ Techni$%e =#'RT> A Critical #ath &ethod =C#&>:
#'RT: "t is useful at several stages 3 project management starting from early planning stages
when various alternative programmes have been considered to the schedule place, when
time and resources schedules are laid to final stage in operation, when used as
control device to measure actual against plant programmes. "t is useful completing a
project on schedule 5time6 by co!ordinating different jobs involved in its completion.
Feed +ac4 B Control:
"t is a system 3 controlling which tries to rectify the deviations after they have occurred. "t is like a
post!mortem analysis which aims at identifying the point 3 cause of deviation.
Feed For@ard B Control
"t tries to prevent the deviations rather than correcting them, critical areas are identified at the
planning stage itself where deviations may occur and special care is taken to avoid such
deviations. The approach is diagnostic rather than post!mortem.
9. H%-an Reso%rces /cco%ntin": The /-erican /cco%ntin" /ssociation has defined human
resources accounting as the process of identifying and measuring data about human resources
and communicating this information to interested parties=.
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;. Res!onsi(ility /cco%ntin": Res!onsi(ility /cco%ntin" is defined as a system designed to
accumulate and report costs by individual levels of responsibility. -ach supervisory area is
charged only with the cost for which it is responsible and over which it has control.=