TYPES OF

CONTROLS
 Types of Control
techniques in
management are
Modern and
Traditional Control
Techniques.
Traditional Types of Control
Techniques in Management
 Budgetary Control
 Standard Costing
 Financial Ratio Analysis
 Internal Audit
 Break-even Analysis
 Statistical Control
Budgetary Control
 Showcasing plans and
expected results using
numerical information.
 Controlling regular
operations of an organization
for executing budgets.
 Budget basically helps in understanding and
expressing expected results of projects and tasks in
numerical form. For example, the amounts of sales,
production output, machine hours, etc. can be seen
in budgets.

 There can be several types of budgets depending on

the kind of data they aim to project. For example, a
sales budget explains selling and distribution targets.
Similarly, there can be also be budgets for purchase,
production, capital expenditure, cash, etc.
 The main aim of budgetary control is to
regulate the activity of an organization using
budgeting. This process firstly requires
managers to determine what objectives they
wish to achieve from a particular activity.
After that, they lay down the exact course of
actions that they will follow for weeks and
months.
 Standard Costing
 Similar to budgeting in the way that it relies on
numerical figures.
 Relies on standard and regular or recurring
costs.
 Under this technique, managers record their
costs and expense for every activity and
compare them with standard costs. This
controlling technique basically helps in realizing
which activity is profitable and which one is not.
 Financial Ratio Analysis
 Every business organization has to depict its
financial performance using reports like balance
sheets and profit and loss statements. Financial
ratio analysis basically compares these financial
reports to show the financial performance of a
business in numerical terms.
 Comparative studies of financial statements
showcase standards like changes in assets,
liabilities, capital, profit, etc. Financial ratio
analysis also helps in understanding the liquidity
 Internal Auditing
 This process requires internal auditors to
appraise themselves of the operations
of an organization.

 Generally, the scope of an internal audit

is narrow and it relates to financial and
accounting activities. In modern times,
however, managers use it to regulate
 Break-even Analysis
 Shows the point at which a business neither
earns profits nor incurs losses. This can be in the
form of sale output, production volume, the price
of products, etc.

 Managers often use break-even analysis to

determine the minimum level of results they
must achieve for an activity. Any number that
goes below the break-even points triggers
corrective measures for control.
 Statistical Control
 Is a great way to understand an organization’s tasks
effectively and efficiently. They help in showing
averages, percentages and ratios using
comprehensible graphs and charts.

 Managers often use pie charts and graphs to depict

their sales, production, profits, productivity, etc. Such
tools have always been popular traditional control
techniques.
MODERN CONTROL
TECHNIQUES
 Feedforward Controls
 Involve identifying and preventing problems in
an organization before they occur. Feedforward
controls are proactive and preventive.
 Feedforward controls are helpful to managers
because they allow a manager to plan work
effectively; they can regulate resources like
employees, raw materials and capital ahead of
time.
 Here are some examples of how a proactive and
preventative approach can help to avoid problems
later on.
 Thoroughly interviewing a candidate can tell a human resource
manager much about how this person would fit into the organization. A
rushed interview may result in hiring the wrong person for the job.

 Training programs are effective in maintaining quality standards. There

are so many things that can go wrong in an emergency room. For
example, slips and falls an be avoided by training employees how to
clean up a spill.

 Another feedforward control might be offering employees a good health

insurance plan. When employees are healthy, they reliably come to
work. This cuts down on absenteeism.
 Concurrent Controls
 Involves identifying and preventing problems in an
organization as they occur. This means the systems are
monitored in real time.
 Concurrent controls begin with standards and all employee
activity is measured against the standard. Usually these
include quality control standards. This means that products
and services can be checked as they are being produced or
performed to be sure that the highest quality product or
provided.
 Concurrent control are important because they occur in real
time.
 Quality Control
 Is a process through which a business seeks to ensure that
product quality is maintained or improved with either reduced or
zero errors.

 Quality control requires the business to create an environment in

which both management and employees strive for perfection.

 This is done by training personnel, creating benchmarks for

product quality and testing products to check for statistically
significant variations.

 A major aspect of quality control is the establishment of well-

 How Quality Control Works

 Quality Control involves testing of units and

determining if they are within the specifications for the
final product. The purpose of the testing is to
determine any needs for corrective actions in the
manufacturing process.

 Quality testing involves each step of the

manufacturing process. Employees often begin with
the testing of raw materials, pull samples from along
the manufacturing line and test the finished product.
 The quality control used in a business is highly
dependent on the product or industry. In food and
drug manufacturing, quality control includes
ensuring the product does not make a consumer
sick, s the company performs chemical and
microbiological testing of samples from the
production line. Because the appearance of
prepared food affects consumer perception, the
manufacturers may prepare the product according
to its package directions for visual inspection.
 Production Control

 It is the function of management which plans, directs

and controls the material supply and processing
activities of an enterprise so that specified products
are produced by specified methods to meet an
approved sales programmed.
 It ensures that activities are carried out in such a way
that the available labour and capital are used in the
best possible way.
 Functions Involved in Production
Control
1. Control Activities
-this is done by releasing manufacturing orders through
dispatching. Thus, plan are set in motion at the assigned time.
2. Control of Material Movement
- the time at which material is received from the supplier,
and issued to the plant is observed and a close watch is kept on
its movement is in accordance with the production cost.
3. Availability of Tools is controlled
- Steps are to be taken to ensure tools specified in the
production plan are available as and when required.
4. Quantity Produced is Controlled
- Work-in process at pre-determined stages of
production is observed to determined that right
quantity of specified quality work is processed.
5. Control of Replacement
- Quantity of raw material and work-in-process
which fails to pass each stage of inspection is
observed. Provision is made to issue replacement
orders for each material for work.
6. Labour Effeciency and Control
- Time taken on each unit of work-in-process is
observed and recorded. Comparison of time taken is
made with the time allowed in scheduling.
 Advantages of Production Control
 1. Better service to customers
- Promised delivery dates are kept, production flows as per scheduled time. This
injects confidence in the traveling salesmen of the firm to set delivery date. Timely delivery
and customers’ confidence, improve customer-relations and sales.
2. Less overtime work
- As production takes place as per schedule, there will be few rush orders. Therefore,
there will be less overtime work in the organization, compared to other firms in the same
industry.
3. Needs of smaller inventories of work-in-process and of finished goods.
-Enterprise working under an effective production planning and control system
require lower inventories of material, parts, components, etc., for work-in-process and less of
finished goods in stocks.
 4. More Effective Purchasing
- As better materials management lead to effective inventory control, purchasing is
more scientific, economical and timely.
 5. More effective use of equipment
- Management is constantly kept informed on the current position of all work-in-
process and on equipment and personnel requirements for the next few weeks ahead.
Therefore, workers can be informed in advance of possible lay-offs, transfer etc. Also,
belated purchase of equipment and materials can be avoided and idleness of men and
machine eliminated.
6. Less loss of time
- Because of phased flow of material there will be less of workmen hours.
- The time management will be conserved; Their personal attention drawn only when
there is any serious flaw in the working of the system and they need not spend to much
time on research and analysis of data, etc..
7. Savings In the Cost
- A properly designed and introduced system of production planning and control
results in major cost-savings.
8. Less work-stoppages
- Worked-stoppages are avoided or minimized in terms of time duration. Therefore,
delay occurring in the dispatch of goods to customers is very rare.
Inventory Control
 Application of
Management Control in
Accounting and
Marketing Concepts and
Techniques
 Accounting Or Financial Control Ratios
 Liquidity Ratio- test the organization’s ability to meet short term obligations; it may also
refer to acid tests done when inventories turn over slowly or are difficult to sell.
current ratio= current assets ÷ current liabilities
 Leverage Ratio- determines it the organization is technically insolvent, meaning that the
organization’s financing is mainly coming from borrowed money or from the owner’s
investments.
debt-to-assets ratio= total debt ÷ total assets
 Activity Ratio- determines if the organization is carrying more inventory than what is
needs; the higher the ratio, the more efficiently inventory assets are being used.
inventory turnover= cost of goods sold ÷ average inventory
 Profitability Ratio- determines the profits that are being generated;
net profit after taxes ÷ total sales or it measures the efficiency of assets to
generate profits
return on investment= net profit after taxes ÷ total assets
 Strategic Control
 A systematic monitoring at control points that
leads to change in the organization’s strategies
based on assessments done on the said strategic
plan.

 It provides a chance for comparing the plan’s

intended goals with the actual organizational
performance.
 Benchmarking
 Is an approach or process of measuring a company’s
own services and practices against those of
recognized leaders in the industry in order to identify
areas for improvement.

 It is a widely used and well-accepted approach

because it helps organizations gather data and
information against which performance can be
measured and controlled.