Controlling

Presented by: group 7

 Controlling
Controlling is the process that measures current
performance and guides it towards the
accomplishment of some objective. It includes
monitoring the implementation of a plan and
correcting deviations from that plan. The essence of
control is to compare present actions to some intended
results that were set throughout the planning process.
Example of Controlling Process
Control
Control is one of the managerial functions like planning,
organizing, staffing, and directing. It helps to check the errors and to
take the corrective action so the deviation from standards are
minimized and stated goals of the organization are achieved in
desired manner. Control is all about keeping an organization on the
right track. It allows for effective management and decision-making,
helps manage risks, and aids in performance improvement. In
essence, it offers a clear pathway to achieving strategic objectives
and maintaining a competitive edge.
 Characteristics of Control
 Control is a Continuous Process
 Control is a Management Process
 Control is Embedded in Each Level of Organization
Hierarchy
 Control is Forward Looking
 Control is Closely Linked with Planning
 Control is a Tool for Achieving Organizational Activities
 Control is a Continuous Process
Change is the one constant in the fast-paced world of
business. Control must be a continual activity in order to
properly manage these changes and ensure organizational
efficiency. Continuous control does not entail
micromanaging, but rather monitoring processes, finding
deviations from established goals, and adopting remedial
actions as soon as possible. This continual inspection assists
firms in staying on track, maintaining standards, and
achieving their objectives.
 Control is a Management Process
Control’s function ensures that all managers monitor
and assess their subordinates’ performance, thus allowing
them to take corrective measures. This, in turn, helps
organizations prevent losses. Moreover, control ensures the
efficient and effective utilization of the available resources to
achieve the predetermined goals. There are three levels of
control in management — tactical, operational, and strategic
control.
 Control is Embedded in Each Level of
Organization Hierarchy
The delegation of authority and responsibility
embeds control at each level of an organization's
hierarchy. Control is embedded in each level of
hierarchy through the chain of command. Each level of
the hierarchy has a specific role and responsibility, and
employees are expected to follow the orders of their
superiors.
 Control is Forward Looking
Controlling is regarded as a forward-looking
function because in controlling actual results are
compared with expected results and deviations
between the two are determined. After that corrective
actions are undertaken to achieve the expected results
in the future.
 Control is Closely Linked with Planning
Planning and controlling are inseparable twins of
management. Planning and controlling functions
always co-exist or have to exist together as one
function depends on the other. Planning decides the
control process and controlling provides a sound basis
for planning. In simple words, planning and controlling
are basically dependent on each other.
Example of Planning - Controlling
Relationship
 Control is a Tool for Achieving
Organizational Activities
Control is an important function since it
assists in identifying mistakes and implementing
corrective measures to reduce standard deviation
and ensure that the organization's goals are met as
intended.
 The Elements of Control
 The Characteristic or Condition to be Controlled
 The Sensor
 The Comparator
 The Activator
 The Characteristic or Condition
The first element of control is the characteristic or condition
of the operating system. It requires selecting a specific
characteristic because a correlation exists between it and how the
system is performing. The characteristic may be the output of the
system during any stage of processing or it may be a condition that
has resulted from the output of the system.
 The Sensor
Sensor is a means of measuring the characteristics
or conditions. It is a device, machine, or subsystem
that detects events or changes in its setting. The
control subsystem must be designed to include a
sensory device or method of measurement.
 The Comparator
The comparator determines the need for correction by
comparing what is occurring with what has been planned. Some
deviation from plan is usual and expected, but when variations are
beyond those considered acceptable, corrective action is required. It
is often possible to identify trends in performance and to take action
before ana unacceptable variation from the norm occurs. This sort of
preventative action indicates that good control is being achieved.
 The Activator
The activator is the corrective action taken to
return the system to expected output. Activator
means something is to start it off, trigger it, or set it in
motion.
 Requirements for Effective Control
There are requirements which must exist for effective control
to take place.
 Control should be tailored to plans. This means that control
should focus on result.
 Control must provide useful and understandable information.
Misunderstood controls will not be applied properly. The system
must be clear and simple.
 Control should report deviation quickly. This is necessary effect
of deviation.
 Control must be tailored to positions. This is necessary so that the
right persons will monitor activities in their own fields. The
accounting checking activities in the finance department, the
Marketing manager, in the marketing department and so on.
 Control should be directed to strategic points. The strategic points
are those very sensitive areas.
 Control should be economically realistic. This means that the cost
of implementing the control system must be less than the benefits
derived from the system.
 Control should be flexible. This is important because of changes.
Flexible control can adjust for uncertainties.
 Control system should indicate and lead to corrective action.
Simply uncovering and measuring deviation are not enough.
Control system should point out correcting action immediately.
 Control must be simple but difficult to manipulate.
 Controls must be acceptable to all members of the organization.
 Signs Showing that Control are Inadequate or Ineffective
There are outward signs which indicate that controls are
inadequate and ineffective. Management should be aware of them.
These are the following:
 Late correction. When problems, unfavorable deviation or
shortfalls are discovered too late with the result that to correct
them is medicine after death.
 Taking unnecessary corrective action. When the manager finds
himself taking corrective action which could have been avoided.
 Unnecessary Excuses. When subordinates are frequently
explaining, giving excuses and apologizing for their actions on
decisions. When too much time is focused on control instead of
the results to be obtained.
 Trying to circulate control. When subordinate direct the efforts
and energies toward circulating control, i.e. trying to make
control not to work is an indication that the control is not
effective.
 Always checking subordinates work. When the manager always
mend a great deal of time checking and monitoring the work of
the subordinates.
 The Link between Planning and
Controlling
Planning and control is concerned with the reconciliation
between what the market requires and what the operation's resources
can deliver. Planning and control activities provide the systems,
procedures and decisions which bring different aspects of supply
and demand together. The purpose is always the same - to make a
connection between supply and demand that will ensure that the
operation's processes run effectively and efficiently and produce
products and services as required by customers.
Planning is a formalization of what is intended to happen at some time
in the future. But a plan does not guarantee that an event will actually
happen. Customers change their minds about what they want and
when they want it. Suppliers may not always deliver on time,
machines may fail, or staff may be absent through illness. Control is
the process of coping with changes. It may mean that plans need to be
redrawn. It may also mean that an 'intervention' will need to be made
in the operation to bring it back 'on track, for example finding a new
supplier that can deliver quickly, repairing the machine which failed,
or moving staff from another part of the operation to cover for the
absentees. Control makes the adjustments which allow the operation
to achieve the objectives that the plan has set even when the
assumptions on which the plan was based do not hold true.
 Control Methods and Systems
Control methods and system are techniques used
for measuring an organizations financial stability,
efficiency, effectiveness, production output, and
organization members attitudes and moral.
 Process of Controlling
 Setting performance standards
 Measurement of actual performance
 Comparing actual performance with standards
 Analyzing deviations
 Correcting deviations
 Kinds of Control
Control may be grouped according to three general
classifications.
 The nature of the information flow designed into the system (that
is, open- or closed loop control).
 The load of components includes in the design (that is man or
machine control systems).
 The relationship of control to the decision process (that is,
organizational or operational control).
 Open- and Closed-Loop Control
Open-Loop Control System is used in applications in
which no feedback and error handling are required. It is
simple and economical but optimization is not possible.
Maintenance of OPCS is easier.
Closed-Loop Control System is used in applications
where feedback and error handling are required. It is a
complex system and not economical but optimization is
possible. Maintenance of CLCS is difficult.
 Man and Machine Control
The man-machine concept as developed in this paper
refers to a closed-loop control system comprising a machine
and an actively participating human operator. Man/machine
interface descriptions are complicated by the human
controller’s versatility as an information processor. System
interface characteristics can evoke behavior ranging from
open-loop (precognitive), through combination open-loop,
closed-loop (pursuit), to closed-loop (compensatory) control
structures.
 Organizational and Operational Control
The concepts of organizational and operational control within the framework
of Max Weber's bureaucratic theory. Organizational control, rooted in principles like
"span of control" and "hierarchical authority", is about evaluating and reviewing the
overall system, its components, and performance based on organizational goals and
strategic plans. This involves using specific performance measures like market share
and return on investment. In cases of underperformance, it may lead to
reorganization or redesign. Operational control, on the other hand, focuses on
managing daily operational inputs such as materials, information, and energy,
ensuring day-to-day operations align with schedules, specifications, and costs. It's
concerned with maintaining the quality of products or services, managing
inventories effectively, and ensuring efficient resource use.
 Role of Budget Application in Management
Control
Budget application in management control is a comprehensive process that involves
detailed planning, performance monitoring, and both budgetary and non-budgetary tools,
including ratio analysis, to ensure efficient and effective management of resources.
 Types of Control: Budgeting is essential for planning the future in measurable terms. It
encompasses both financial aspects (like capital and revenue expenditure budgets) and
non-financial elements (such as units of production).
 Purpose of Budgeting: Budgets are aligned with the organizational structure, broken
down into detailed parts to correlate with overall planning. This detailed breakdown
helps in delegating authority effectively while maintaining control, showing where
resources are specifically needed.
 Budgeting Control: Performance standards are set to guide the achievement of the
budget plan. The annual plan is divided into shorter periods (monthly or weekly) for
control. Budget performance is compared with actual results regularly to identify and
correct deviations, ensuring alignment with both short-term and long-term objectives.
Budgetary control extends to departmental costs, with accountability assigned to
relevant managers and supervisors.
 Non Budgetary Control: Besides budgetary measures, other control tools like ratio
analysis, break-even charts, and statistical data are used. These tools are not directly
linked to budgeting but are vital for broader organizational control.
 Ratio Analysis: This involves analyzing relationships between different financial
figures in the accounts. Ratio analysis helps in identifying interrelationships between
various financial aspects and measures efficiency. It serves as a critical tool for
evaluating financial performance and efficiency, providing insights beyond what
budgetary controls can offer.
 Control by Audit
 External Audit - the role of the external audit is traditional. It is the independent
appraisal of an organizations financial records and statement. Assets and liabilities
verified by qualified accounting personnel employed by external accountancy firm The
purpose of the audit is to verify that the organization in preparing its own finance
statements has followed acceptable accounting principles and has applied them in a
correct manner. The external audit is a check against fraud within the organization and
provide people in financial and other institutions (bankers, and potential investors) with
evidence that statements have been prepared in an honest and consistent manner. The
external audit not very helpful in controlling the everyday operations of an organization
as it concentrate upon a limited number of statements and transactions. It is however, a
deterrent to fraud.
 Internal Audit - is an effective tool of managerial control. The term is often limited to the
auditing of accounts. It should be considered in a wider aspect, that is involving the appraisal of
all operations, for example, appraisal of policies, procedures, quality of management. The
concept of internal auditing could be broadened as there is no reason why the actions of
management should not be audited.
 The Term Management Audit - can be regarded as a procedure for systematical examining and
appraising a management' overall performance. The object is to determine the present position
of the business by assessing the results of its operation in specified areas in relation to accepted
standards where imperfection found can be remedied.
 Accounting - According to Glautier and Hinded own in the book accounting theory and
practices, Pitman 1986. It is defined as the process of identifying, measuring and
communicating socio-economic information to permit informed judgments and decision by the
users of the information. Accounting is not only concerned with keeping rate preparing budgets
and final accounts. The boundaries of accounting have been extended by the changing
environment. Accounting is also concerned with collecting data of the activities of an enterprise
and the use of its resources, it also analyzes the data for the purpose of decision making and
helps to control the use of resources.
Uses of Accounting as an Information System
Raw data is selected by the accountant thru the conventions of accounting Selected
data forms the input to the accounting system, once raw data is selected it becomes input
data processing the information (output) is used by management and passed to users.
Persons interested in the output of accounting information system are;
 Equity Investor Group - shareholders and investor are concerned with the value of their
investment and any income they expect to derive from shareholdings.
 Loan Creditor Group - long term investors who have committed or may be prepared to
commit funds to the company by way of debentures or other loan stock. The ability of
the company to repay borrowings if it went into liquidation is of interest to all creditors.
 The Employee Group - this includes trade unions who act on employees'
behalf Reports may indicate future prospects of the company and its ability
to pay wage increases.
 Analyst Adviser Group - this includes members of the financial press and
others advising on the purchase of company security.
 The Government - the accounts of an organization are used as basis for
deciding the amount of taxation to be collected in addition to regulatory
aspects on merges of companies which might create monopolies. The
accounts give an indication also of the state of the economy.
 The public - This includes any member of the community who may interact
with the company, example are tax payers, rate payers, consumers political
parties and environmental protection societies
 The Accounting Process
Identify
Measure
Record
Classify
Summarize
Report financial information of an economic unit to the users of
the accounting information.
thank you !