Controlling

Controlling

1. Situation:

   • Sterling may do everything right to meet its delivery commitments, it relies on commercial airlines to transport its parcels, and occasionally fails to meet its deadlines
     • To control the damage created by such delays, Sterling had to take some corrective measures.

2. Meaning

   • Controlling is one of the important functions of a manager. In order to seek planned results from the subordinates
   • means ensuring that activities in an organisation are performed as per the plans.
   • Tecchniques of Managerial Control
     • Traditional Techniques
       • Personal observation: enables the manager to collect first hand information. It also creates a psychological pressure on the employees to perform well.
       • Statistical analysis: in the form of averages, percentages, ratios, correlation, etc., present useful information to the managers regarding performance of the organization in various areas.
       • Breakeven analysis: Is a technique used by managers to study the relationship between costs, volume and profits.
       • Budgetary control: Is a technique of managerial control in which all operations are planned in advance in the form of budgets and actual results are compared with budgetary standards.
     • Modern Techniques
       • Return on Investment (RoI): is a useful technique which provides the basic yardstick for measuring whether or not invested capital has been used effectively for generating reasonable amount of return
       • Ratio Analysis refers to analysis of financial statements through computation of ratios. Profitability Ratios, Solvency Ratios,Liquidity Ratios

3. Importance of Controlling

   • From the different ways
     • Accomplishing organisational goals
     • Judging accuracy of standards
     • Making efficient use of resources
     • Improving employee motivation
     • Ensuring order and discipline
     • Facilitating coordination in action

4. Controlling Process

   • 1.Setting performance standards
   • 2.Measurement of actual performance
   • 3.Comparison of actual performance with standards
   • 4.Analysing deviations
   • 5.Taking corrective action

5. Responsibility accounting

   • Responsibility accounting is a system of accounting in which different sections, divisions and departments of an organisation are set up as ‘Responsibility Centres’.
     • Cost Centre
     • Revenue Centre
     • Profit Centre
     • Investment Centre