What is Controlling?

Controlling
- a management function that involves ensuring that the work
performance of the organization's members are aligned with the
organization's values and standards through monitoring,
comparing, and correcting their actions.
Importance of Management Control
Management control make sure:
• that the firm's operating cash flow is sufficient, efficient and if
possible, profitable when invested.
• that the decision to seek funds should be appropiate, so as not
to incur expenses as well since borrowing would be subjected
to payment of interest.
Importance of Management Control
• That there is a continues monitoring of the organization's
activities, followed by corrective actions based on previously
planned programs of action.
• That task are completed with less errors by comparing these
with previously set standards or with competitor's standards or
standards prevailing in their particular industry setting.
The Control Process
Control techniques used for controlling financial resources, office
management, quality assurance, and others are essentially the
same. The typical control process involves establishing
standards, measuring and reporting actual performance, and
comparing it with standards, and taking action.
Controlling Process
1. Establishing standards

- means setting criteria for performance. Managers must be

able to identitfy priority activities that have to be controlled,
followed by determining how these activities must be
properly sequenced. In doing so, managers will be able to
set key performance standards that need to be achieved.
3. Taking Action

-involves the correction of deviations from set

standards. This activity clearly shows the control function
of management. Managers may recitify deviations by
modifying their plans or goals, improving the training of
employees, by firing inefficient subordinates, or by
practicing more effective leadership techniques.
2. Measuring and reporting actual performance and
comparing it with set standard

- to be able to do this, managers must be able to

develop appropriate information system which will help
them identify, collect, organize, and disseminate
information; through these, managers are able to
control facts and figures called data, information, which
have been given meaning and considered to have value.
 LESSON 2:
THE LINK BETWEEN
PLANNING AND CONTROLLING
• The relationship between planning and
controlling could be easily established.
Control is integrated planning. Planning
involves a through process which is
essential to the creation and refinement of a
blue print or its integration with other plans
that may combine forecasting of
developments in preparation for future
scenarios in order to eventually react to
them.
Definitions of terms:
• Double entry accounting- accounting strategy
of some firms which requires the preparation of
two different accounting reports, one for internal
use and another for external use.
• Dual entry- process of journalizing with debit and
credit entries.
• Liquidity- the organization's ability to meet short-
term obligations.
 Organizational Performance Control
All managers must know which measures will give them data
and information about overall organizational performance
control. The usual measures are organizational productivity,
organizational effectiveness and ranking in industry.

• Organizational Productivity
- is the amount of goods or sevices produced(output) divided by
the inputs needed in order to produce the said product.
- All organization in their work units aim to be productive, in
other words, they want to produce to biggest amount of outputs,
using the least input.
• Organizational Effectiveness
- measure of the organizational goal's suitability to organizational
needs and how well these said goals are being attained.
-Managers make use of this in their decison making regarding the
design of organizationak strategies and work activities, and in linking
the various work endeavors of their employees.

• Ranking in Industry
- way commonly useed by managers to measure organizational
performance. Being in Fortune Magazine's list of Most Admired
Companies, 100 Best Companies to Work For, 100 Fastest Growing
Companies, and others is agood measure of an oraganization's
success in the business world. Being ranked high, middle or low
indicates the company's performance in comparison with others.
Other Performance Controls is
Organizatons
• Bureaucratic Control- makes use of strict rules,
regulations, policies, procedures and order from formal
authority. Negative performance evaluation is given to
human resources who do not comply with the said
control measures.
• Clan Control- based on compliance with norms,
values, expected bhavior related to the firm's
organizational culture and other cultural variables of the
country where the company is located.
 LESSON 3
CONTROL METHODS AND
SYSTEMS
METHODS OF CONTROL
• Quantitative Methods
- quantitative methods make use of data and different
quantitative tools. Budgets and audits are among the most
common quantitattive tools.
a. Budgets - is an expression in financial terms of plan for
meeting the organizations goal for specific period.
b. Audit - measures and evaluate the effectiveness of
management control
METHODS OF CONTROL
• Non Quantitative Methods
- refer to the overall control of performance instead of only those of
specific organization process such as inspection, reports, direct
supervision and on the spot checking.

- Other control processes include the following:

a. Feedforward control - prevents problems because managerial
actions is taken before the actual problem occurs.
b. Concurrent control - Takes place while work activity is happening.
c. feedback control - is cntrol that takes place after the occurence of
the activity.
METHODS OF CONTROL
d. Employee discipline - is control challenge for
managers. Enforcing discipline in the workplace is not
easy.
e. Project management - control ensures that the
task of getting and projects activities done on time, within
the budget, and according to specifications, is
successfully carried out.
 Lesson 4
Application of Management
Control in Accounting and
Marketing Concepts and
Techniques
• Management control in accounting and finance is the control that
makes use of the balance sheet, income statement, and cash flow
staterment to analyze and examine financial statements in oredr to
determine the company's financial soundness and viability, as well as
financial ratios to determine the company's stability.
• Sales is the considered to be the “lifeblood of the business”.
Accounting/ Financial Control Ratios
• The goal of business is to gain profits. In order to achieve this,
managers need accounting/financial controls. Managers must also
analyze the organization's financial condition, which is done with the
help of the following financial ratios.
Liquidity ratio - test the organization's abiulity to meet short term
obligations; it may also refer to acid tests done when inventories turn over
slowly or are different to sell.

current ratio = current assets ÷ current liabilities

Accounting/ Financial Control Ratios
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

In addition to the above ratios, asset management is also practiced to

achieve organizational goals. Asset management is the ability to use
resources efficiently and operate at minimum cost.
inventory turnover = sales ÷ average inventory
Benchmarking
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 of improvement. It is widely used and
well-accepted approach because it helps organizations gather data and
information against which performance can be measured and
controlled.
According to Weihrich and Koontz, 3 types
of benchmarking:
• Strategic Benchmarking - which compares various strategies and
identifies the key strategic elements of success.
• Operational Benchmarking - which compares relative costs or
possibilities for product differentiation.
• Management Benchmarking - which focuses on support functions
such as market planning and information systems, logistics, human
resource management.
 LESSON 5
ROLE OF BUDGETS IN
PLANNING AND CONTROL
 ROLE OF BUDGETS IN PLANNING AND CONTROL

• An organization's ability to have a good contol system is also

dependent on it's budgets process. Budgets are plans to
monitor,control,and implement the resource of the firm on its
operation based on its objectives of goals.Adjustments are
made by top level management on periodic basis, if neccessary,
remedy conflicts, difficult situation , or unrealistic settings , or
when unforeseen events transfire.
 STEPS TOWARD BETTER BUDGET
MAKING
1. Collaborate and communicate with organization
administrations and selected members so that the budget
becomes more acceptable to all.
2. Practice flexibility as the budget adapts to the organization's
needs.
3. Relate the budget to company goals since their achievement is
the primary objective of the firm.
4. Coordinate the budget with all company departments.
5. Use computer software or applications when needed to
facilitate accurate computations and proper dissemination of
infromation related to the budget.