CHAPTER 17

CONTROLLING
Introduction
z Control is the last function of
management. The controlling function
will be unnecessary to the management
if other functions of management are
performed properly. Planning identifies
the activities and controlling regulates
the activities. Success or failure of
planning depends upon the results of
success or failure of controlling.
PLANNING
Definition

z Control is any process that guides activity

towards some pre-determined goal. The
essence of the concept is in determining
whether the activity is the achieving desire
results
Areas or scope pf control
z Control over the policies of the concern,
organization, the personnel employed in an
organization, capital available to the
concern, capital expenditure, production,
wages and salaries paid to the employed,
the cost of production, public relation,
research and development, tools and
equipment and overall control.
Steps in Control process

Establishing Measuring
standards performance

Taking
corrective action

Comparison
of
actual
with standards
Requirements of effective control system
z Feedback
z Objective
z Suitability
z Prompt reporting
z Pointing out exceptions
z Flexible
z Economy
z Indelible
z Suggest remedial action
z Motivation
 Techniques of control
Statistical Management Gantt Critical path
control information milestone method
reports system chart

personal
Zero-based
observation
budgeting

Cost accounting and Production

cost control control
Control
Break even Performance
analysis evaluation

Special control
Managerial
repots
statistics

management Standard return on Responsibility

audit costing Internal Audit
investments Accounting
 Pert/Cpm
Advantage of pert/cpm
z Ensure planning:

z identification of favorable factors:

z Savings of cost and time:

z Taking preventive or corrective

actions:
z Attention on critical activities:

z Everything at right:
Advantage of pert/cpm
z Making awareness of responsibilities:
z Securing co-operation:
z Facilities decision-making:
z Improved communication:
z Simultaneous performance of works:
z Advance control action:
z Timely completion of a project:
Limitations of pert/cpm
z Error in estimation of time and cost
z application
z Time consuming and expensive
Distinction between pert and cpm
PERT CPM

Three times estimation done Three times estimation done

It gives importance to time It gives importance to cost

It is suitable where activity It is suitable where activity

timings are not known timings are well known

It is event oriented It is activity oriented

 Characteristics or features of control

Controlling process An Essence of

action

Universal Influencing
factor

Forward Control involves

looking management
Dynamic
process
Need of control
z Judging the accuracy of
standards:
z Minimize dishonest behavior:
z Better performance:
Advantages of control
z Adjustments in operation
z verification of policy
z managerial accountability
z Psychological pressure
z Maintaining morality
z Co-ordination
z Efficiency
Limitations of control

z Absence of perfect standards

z Uncontrollable factors
z Difficulty in fixing responsibility
z Expensive process
Types of managerial control
z Standardizing control
z preserving control
z Delegation of authority control
z Measurement control
z Motivating control
Budget & Definition of budget
z Budget is derived from the French word
Budgette which means small leather bag.
Budget is a financial and quantitative
statement.
z Budget is a plan for income or outgo or
both, of money, personal, purchased items,
sales items, or any other entity about which
the manager believes that determining the
future course of action will assist in the
managerial efforts
Budgetary control & Definition
of budgetary control
z The term budgetary control is applied
to a system of management and
according control by which all
operations and output are forecast as
far ahead as possible and the actual
results when known are compared
with the budge t estimates.
Characteristics of budgetary control
z The activities the organizations are
presented department-wise or section-wise.
z Budgets give the extent of expenditure
though which cost control is achieved.
z The co-ordination of various departmental
activates helps to prepare the determined
standards.
z Clear-cut and specific requirement of the
organization are expressed in quantitative
terms.
Characteristics of budgetary control

z Determines the deviations by comparisons

and causes of such deviations.
z Recommends and implements the
corrective actions when ever necessary.
z The future is planned on the basis of past
experience.
z Recording the present performance for
comparing purpose with the pre-determined
standards.
 Advantages of budgetary control
promotion of
Tool for planning
efficiency
the activities
Better utilization
Thinking in advance of resources

Promoters
balanced
activities
Co-ordination
of efforts
Budgetary
Achievement Criteria of self-
of goals examination Delegation of
Control of authority
expenditure
Encourages Fixation of Ensures proper Solving financial
exchange of responsibility communication difficulties
information
Disadvantages, Limitations or
problems of budgetary control
z Inaccuracy
z personal bias
z Non-availability of Co-
operation
z Rigidity
z Results are not attainable
Disadvantages, Limitations or
problems of budgetary control
z Consistency
z Time Consuming process
z Ineffective budgetary control
z Discourage the initiative
z More paperwork
Essentials of Effective budgeting system

z Efficient organization
z Preparing master budget
z Quick reporting
z Flexible
Essentials of Effective budgeting system

z Support of top management

z Based on reasonable
assumption
z Reward and punishment
z Appropriate authority
 Techniques of control
Statistical Management Gantt Critical path
control information milestone method
reports system chart

personal
Zero-based
observation
budgeting

Cost accounting and Production

cost control control
Control
Break even Performance
analysis evaluation

Special control
Managerial
repots
statistics

management Standard return on Responsibility

audit costing Internal Audit
investments Accounting
 Types of budgets
Master Physical property
Sales budget
budget budget

Cash budget Research

and
development
Production budget
budget

Types of Production
Time and budgets overhead
material budget
budget

Production
Selling and cost budget
distribution Balance
cost budget sheet budget Supplies budget
Budget can also be classified as
z Fixed budget
z Flexible budgets
Preparation of a budget
z Sound forecasting
z Developed accounting system
z Fixation of responsibility
centers
z Formation of budget
committees
Preparation of a budget
z Clear definition of business
policies
z Statistical information
z Support of top management
z Budget period