CHAPTER 2:

THE CONTROL PROCESS

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LEARNING OUTCOMES
 At the end of this chapter, the students will be able to:

 Define control and provide examples of its

significance in food and beverage department.
 Cite eight control techniques
 Describe the steps involved in preparing an operating
budget.
 List the four steps in the control process.
 Expalin why the cost-benefit ratio is significant when
making control decisions.
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IMPORTANT CONTROL DEFINITIONS
 Control: Process used by managers to direct,
regulate and restrain the actions of people so that
the established goals of an enterprise may be
achieved.

 Cost Control: Process used by managers to

regulate costs and guard against excessive costs.

 Control system: Collection of interrelated and

interdependent control techniques and procedures
in use in a given food and beverage operation.

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CONTROL TECHNIQUES AVAILABLE
TO A MANAGER INCLUDE THE
FOLLOWING:-

1. Establishing standards.
2. Establishing procedures.
3. Training personnel.
4. Setting examples.
5. Observing and correcting employee actions.
6. Requiring records and reports.
7. Disciplining employees.
8. Preparing and following budgets.
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1. ESTABLISH STANDARDS
 Standards : rules or measures established for making
comparisons and judgments.

 Quality standards : used to define the degree of

excellence of raw materials, finished product and
work.

 Quantity standards : defined as measures of weight,

count, or volume, are used to make comparisons and
judgments.

 Standard cost: cost of goods and services identified,

approved and accepted by management.
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2. ESTABLISHING PROCEDURES
 Procedures – methods used to prepare products or
perform jobs.

 Standard procedures: Procedures that have been

established as the correct methods, routines and
techniques for day-to-day operations.

3. TRAINING PERSONNEL
 Training – a process by which managers teach
employees how work is to be done, given the
standards and standards procedures established.
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4. SETTING EXAMPLES
 Employees in an operation follow the examples set by
the manager – behavior, manner, responses to
questions, and even failure to speak or take action.

 Manager must be consistent in setting examples, as

well as in directing, regulating and restraining
employees and their actions.

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5. OBSERVING AND CORRECTING
EMPLOYEE ACTIONS
 Important to observe the actions of all employees
continually as they go about their daily jobs, judging
those actions in the light of the standards and
standards procedures established for their work.

 If any employees are failing to follow the standard,

it is a manager’s responsibility to correct the
performance to the extent necessary at the
appropriate time.

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6. REQUIRING RECORDS AND
REPORTS
 No manager can be in all places at all times to
observe employees’ actions.

 The larger the establishment, the more likely it is

that managers’ observations must be indirect.

 Their “observation” must be abstracted and inferred

from a variety of records and reports.

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7. DISCIPLINING EMPLOYEES
 Defined as action taken to admonish, chastise or
reprimand an employee for work performance or
personal behavior that is incompatible with
established standards.

 To change or modify employees’ job performance or

personal behavior – to improve performance so that
the work done in line with the standards and
procedures that management has identified as those
most likely to achieve the organization’s goals and
objectives.

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8. PREPARING AND FOLLOWING
BUDGETS
 Budget: a financial plan and described as a realistic
expression of management’s goals and objectives
expressed in financial terms.

 Operating budget – a forecast of sales activity and

an estimate of costs that will be incurred in the
process of generating those sales.

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 THE CONTROL PROCESS CONSISTS
OF FOUR STEPS:-

1. Establish standards and standard procedures for

operation.
2. Train all individuals to follow established standards
and standard procedures.
3. Monitor performance and compare actual
performances with established standards.
4. Take appropriate action to correct deviations from
standards.

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ADDITIONAL TERMS:-
 Control process – the means employed by
managers to institute control, consisting of four
essential steps.

 Flexible budget – a budget prepared for more than

one level of business activity.

 Sales control – the several processes used by

managers to optimize numbers of customers, to
maximize profits and to ensure all sales result in
appropriate revenue.

 Static budget – a budget prepared for one level of

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business activity.
THE BUDGET
 The budget, or financial plan, will detail the
operational direction of your unit and your expected
financial results.
 The budget should not be a static document. It
should be modified and fine-tuned as managerial
accounting presents data about sales and costs
that affect the direction of the overall operation.
 Just as the P&L tells you about your past
performance, the budget is developed to help you
achieve your future goals.
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Budgeted Revenue - Budgeted Expense = Budgeted Profit

To prepare the budget and stay within it assures you

predetermined profit levels.
The effective foodservice operator builds his or her
budget, monitors it closely, modifies it when necessary,
and achieves the desired results.

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 DEVELOPING THE BUDGET
 To establish any type of budget, you need to have the
following information available:
1. Prior period operating results.
2. Examine the external environment to assess any
conditions that could affect sales volume in the coming
year.
3. Review any planned changes in the operation that
would affect sales volume.
4. Determine the nature and extent of changes in cost
levels.
5. Have the projections for sales, costs and profits
approved by management. 16
Monitoring the Budget
In general, the budget should be monitored
in each of the following three areas:
1. Revenue
2. Expense
3. Profit

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 As business conditions change, changes in the budget
are to be expected. This is because budgets are based on
a specific set of assumptions, and as these assumptions
change, so too does the budget that follows from the
assumptions.
 Budgeted profit must be realized if the operation is to
provide adequate returns for owner and investor risk.
 The primary goal of management is to generate the
profits necessary for the successful continuation of the
business. Budgeting for these profits is a fundamental step
in the process.

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COST/BENEFIT RATIO

• The cost/benefit ratio : the relationship between the

costs incurred in instituting and maintaining a single
control or control system, and the benefits or savings
derived by doing so.

• Benefits must always exceed costs. Before instituting

any new procedures for control, management should
first determine that the anticipated savings will be
greater than the cost of the new procedures.

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