UNIT VII

CHECKING
PROCESS
GROUP 2
Mt. Dulang-dulang
OVERVIEW
A manager is focused on organizational
performance. Good performance is usually
expressed in terms of well managed cost,
efficiency, increased sales, improved
product quality, timely delivery, office
productivity, among others. These
outcomes are specific targets set forth by
plans which needs to be achieved if the
organization were to atleast survive the
challenges posed by the changing times.
A manager carries out the managerial
function of control by checking on the
progress of activities to see if things are
happening as planned or if corrections
have to be made to address deviations
from plans. There are several approaches
to control.
Depending on the approach, he adopts a
system that uses tools that help him
regulate organizational performance.
This chapter introduces the concepts and
mechanisms for controlling organizational
performance. It features the manager's use
of the budget as a numerical device that
serves as standard against which
expenditures are compared
LEARNING OBJECTIVES
After studying this unit, you should be able to acquire the following
competencies :
1. Discuss the nature of controlling
2. Describe the link between planning and controlling
3. Distinguish between control methods and systems
4. Prepare a budget plan
5. Apply management control in accounting and
marketing concepts and techniques
PLANNING
AND
CONTROLL
ING
PLANNING AND CONTROLLING
are closely related. Controlling provides the link back to
planning because through it, goals and targets can be assessed
and future actions can be determined accordingly. Objectives
related to efficiency, productivity, sales growth, quality, etc are
used as to define the level of performance four standards for
adequate organizational performance. A control system is
effective to the extent that it ensures that activities can be
carried in any ways that attain organizational objectives.
DID YOU KNOW
THAT ?
Control systems can be
designed through this
approaches namely
bureaucratic control, market
control, and clan control.
They differ in mechanisms
they use to guide
organizational performance.
CONTROL SYSTEMS
1. Bureaucratic Control
- makes use of rules, regulations and formal authority
to check on progress in the attainment of organizational
objectives
2. Market Control
- makes use of market mechanisms such as pricing
market share to establish standards used to guide
performance.
3. Clan Control
- makes use of shared values, norms and goals to
regulate employee behavior.
The
Control
System
The Control System
The design of the control system incorporates 3
components : Feedforward, Concurrent, and Feedback.
There are various tools or methods used by managers to
control. When tools for control are used before the
activity, it is known as feedforward control. When used
during the activity, it is called concurrent control.
Feedback control on the other hand, is the use of tools
after the activity is completed.
 THREE TYPES OF CONTROL

INPUT PROCESS OUTPUT

FEED FORWARD CONCURRENT FEEDBACK

CONTROL CONTROL CONTROL

ANTICIPATES CORRECT CORRECT PROBLEM

PROBLEM PROBLEM AS THEY AFTER THEY OCCUR
HAPPEN
BUDGET AS A CONTROL METHOD OR
DEVICE
The most widely used method for managerial control is the
budget. A budget is a statement of expected results in numerical
terms. It can be financial or non-financial. Financial budgets
pertain to revenues, costs, cash and capital. While non-financial
budgets pertain to direct labor hours, materials, sales volume or
units of production. Through budgetary control, a manager gets a
sense of what is being done and is able to compare results with
the relevant budget data to verify accomplishments or remedy
differences.
PREPARATION OF FINANCIAL
BUDGETS
As a plan that defines the level of organizational expenditures
to be targeted that are aligned with organizational goals,
budgets are prepared by individuals responsible for specific
activities. Top managers prepare and use budgets for the
organization as a whole while middle managers focus on
budgets for a department or division. In small enterprises, the
owner manager prepares the budgets and uses them to monitor
performance. In general, budgets are financial planet showing
money that comes into and outside the organization.
KINDS OF FINANCIAL BUDGET
 A revenue budget sets revenue
targets and lists them against
actual revenues. A cash budget
estimates receipts and
expenditures of money on a daily
basis to ensure an adequate supply
of cash for operations. An expense
budget incorporates anticipated
and actual expenses while the
capital budget is a list of planned
investments in major assets.
 In preparing specific financial
budgets, budgets are broken down
into groups representing activities
where certain amounts are
allocated. The identification of
activities help a manager manage
the finances of the business by
determining the amount of money
needed to cover costs and control
expenditures as well as monitor
income on business activities.
Continuing
Case on
Charlotte's
Designer and
Tailoring Shop
THE IMPACT OF EXPANSION
Charlotte's Designer and Tailoring Shop earned a modest profit
at the end of the first year. This is beyond the breakeven
perfomance Charlotte was expecting for her business.
Financial reports show good performance can be attributed to
revenues that unexpectedly increased from service requests for
mothers in the ASEAN region. For the second year, with
prospects of an increasing local and foreign customer base,
Charlotte hired more employees. Her expenses for the first
year were categorized under the following titles :
THE FOLLOWING TITLES:
1. Salaries Expense

2. Sewing Supplies Expense

3. Utilities Expense

4. Depreciation Expense

5. Miscellaneous Expense
CONTROL
ACROSS
ORGANIZATION
AL FUNCTIONS
CONTROL ACROSS ORGANIZATIONAL
FUNCTIONS
Control can also be exercised using methods other than budgets. Through
the use of financial ratios, for example, managers realize the strengths and
weaknesses of company operations. Financial ratios are financial measures
of performance called from accounting records, as summarized by financial
statements.

Through profit ratio, managers are able to determine how efficient they are
in converting resources to profits

Liquidity Ratios indicate how well managers protect resources to meet

short term obligations.
CONTROL ACROSS ORGANIZATIONAL
FUNCTIONS
Leverage Ratios are indicative of how much debt is used to finance operations.

While Activity Ratios reflect the efficiency with which managers create value from the use of
assets.

Setting target for and measuring performance in organizational functions, other than finance is
also being done nowadays. Specifically, the Balanced Scorecard looks at other areas that
contribute to company areas. Aside from the financial aspect, it looks into how customer,
internal processes and people contribute to company performance. Depending on the areas that
drive organizational success, managers tend to focus on certain areas. Those which are market-
driven, for example, have scorecards that is dominated by customer satisfaction. As much as
possible, however, the scorecard is designed to establish the synergy among the different areas
of organizational performance being measured.
WHAT IS BALANCE SCORECARD?

● A balanced scorecard is a strategic

performance management tool used
by organizations to monitor and
measure their key performance
indicators (KPIs) across various
perspectives such as financial,
customer, internal processes, and
learning/growth. It helps in aligning
business activities with the
organization's strategy and ensures a
holistic view of performance.
THANKS
FOR
LISTENING
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