TECHNIQUES OF

CONTROLLING
 Controlling

 It is an important function of management. It is a
process through which managers assure that actual
activities conform to planned activities.


Controlling is checking current performance against

predetermined standards.
 Techniques of Controlling

 A variety of tools & tecniques has been used
over the years to help managers to control the activities in
the organization.

We may classify them as follows..

1. Traditional Techniques.
 2. Modern Tecniques.


 TECHNIQUES
TECHNIQUESOF
OFCONTROLING
CONTROLING

Traditional Modern
Traditional Modern
 Budgeting Control  PERT & CPM
 Standard Costing  Human Resource A/C
 Production Control  Return on Investment
 Break Even Analysis  Management Audit
 Inventory Control
 Standard Costing

 The cost of production determines the
profits of the firm. This device is used for the purpose of
cost reduction and cost control.
 Here, setting of the cost standards for the
various components of cost – such as raw materials ,
labour and overheads and then measurement of the actual
with the standards.
 Production Control
 \
 This is the technique of controlling which
lays down the quantity of units to be produced during a
given period of the time.
 The main purpose of this is to maintain an
optimum balance b/w sales and production and inventory
of the firm.
 Break Even Analysis

 BEA is the another control device. It
involves the use of chart to depict the overall volume of
sales necessary to cover costs. It is that point at which the
cost and revenue of the enterprise are exactly equal.
 BEA can be used both as an aid in decision
making and as a control tool.
 Inventory Costing

 Inventory is the stock material that are used to
facilitate production or to satisfy customers demand.
 Inventory control helps to deal with
uncertainties in demand and supply. The different tools
used in inventory control are as follows…

 1. EOQ
 2. Just in Time.

 Budgeting Control

 A budget is a statement of anticipated results
during a given period of time expressed in financial or non
financial terms.
•
 It covers a time period i.e a year.
 Prepared at regular intervals.
 From top mgnt to lower mgnt.
 It typically involves the use of cost standards.
 Types of Budgets

 There are different types of budgets.
Important types of budgets are ..

 Sales Budget.
 Selling & Distribution Budget.
 Production Budget.
 Production Coat Budget.
 Cash Budget.
 Zero-Base Budget
 Master Budget.
 Sales Budget

 Sales Programmes and Plan for developing sales.
 Prepared by sales Manager.
 Sales forecasting is the basis for preparing it.


 Selling & Distribution Budget

 Lays down the cost of the S&D of the Product.
 It includes Ads cost, R&D cost, Transport cost.
 Prepared by Sales and S&D manager jointly.
 Production Budget

 Quantity of units to be produced….??
 Optimum balance b/w sales and production.
 it is also known as OUTPUT budget.

 Production Cost Budget

 It shows the cost of carrying out production plans.
 Raw material Budget, Labour Budget etc…
 It gives a estimation of all the inputs used.
 Cash Budget

This budget gives the anticipation receipts and

disbursements for the budget period and shows the the cash
position arising from it. It indicates the cash requirement at
various point of time.
It helps mgnt in controlling and coordinating the
activities which involve receipt & payment of cash.
 Master Budget
 Master budget gives a summary of all the functional
budgets and shows how they affect the business as a whole. It
is the combination of all the different budgets.
 it provides the detailed particulars regarding
production, sales, cash, assets, liabilities, etc…..

 Zero-Base Budget
 It is the budget in which the responsibility center
starts with ZERO in preparing their Budget request rather than
focus on last year budgets.
 Advantages

 It clearly indicates the limits for expenses & also
the results to be achieved in a given period of time.
 They make it possible to coordinate the work of
entire organization.
 It promotes cooperation & team spirit among the
employees.
 The mgnt is enabled to take corrective action
immediately.
 They improve the communication and helps people
to learn from past experiences.
 Disadvantages

 Budgets are used to evaluate results, insufficient
employees do not wholeheartedly cooperate with the
system.
 Budgets estimates sometimes prove to be grossly
inaccurate.
 Ineffective.
 Inflexible & rigid.
 They do not respond to internal and external
change.
 A expensive one.
 PERT & CPM
 PERT stands for Programme Evaluation and
Review Technique.
 CPM stands for Critical Path Method.

 Both are primarily oriented towards achieving
better managerial control of TIME spent in
completing a project.
 Under both, project is decomposed into activities
and then all activities are integrated in a highly logical
sequence to find the shortest TIME required to
complete the entire project.
 Differences b/w PERT & CPM

 The basic difference b/w them lies in the treatment
of time estimates.
 PERT was created to handle R&D projects in which
time spans are hard to estimate. Time spans are based
on probabilistic estimate.
 CPM is usually concerned with projects that the
organization has had some previous experiences with.
Time estimates can be made accurate.
 Human resources A/C

 The concept is of recent origin. Working on
the idea that human assets in an organization are no less
important than its material assets, human resources a/c
refers to the method of reflecting the rupee value of the
human assets in the company's B/s.
 Human resources is important to the firm
because the present and the future earning of the company
depends upon the workers of the organization.

 Return on Investment

 Also known as Duo pont system of financial
analysis. It is the financial control approach which helps
in finding out the exact return on investment. ROI is
found with the following formulae…

 ROI = Sales Profits
 Investment Sales
 Management Audit
 This is another modern control technique
which consists of internal and external audits.
 Internal audit :
 conducted by internal auditor
 Appraisal of financial
operation.
 Appraisal of company's plans
& policies
 External audit :
 conducted by external auditor.
 After examining the p&L a/c, B/S…
 To protect the interest of the stakeholders


 Q&A
Thank you !!