1 Meaning of Controlling
Controlling includes evaluation of real overall performance with the deliberate performance.
If there is any distinction or deviation, then discovering the motives for such distinction and taking corrective measures to cease these motives so that they don ‘t re-occurs in future and that organizational targets are fulfilled efficiently.
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Business Studies Class 12 Notes Financial Management
2. Importance of Controlling
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A. Controlling helps in reaching organizational goals: The controlling characteristic measures growth closer to the organizational desires and brings to light/indicates corrective action.
B. For Evaluating/Judging accuracy of standards: A correct manage machine allows administration to confirm whether or not the requirements set are correct or no longer by way of cautious test on the modifications taking location in the organizational environment.
C. Making environment friendly use of resources: By the system of control, a supervisor seeks to limit wastage of resources.
D. Improves personnel motivation: A right manage machine ensures that personnel recognize properly in boost what they are predicted to do & additionally, the preferred of performance.
For this reason, motivates & helps them to provide higher performance.
E. Facilitating Coordination in action: In controlling every branch and worker is ruled by using predetermined requirements which are nicely coordinated with one another.
Control presents solidarity of direction.
F. Ensuring order and discipline: Controlling creates surroundings of order and self-discipline in the company through maintaining a shut test on the things to do of its employees.
3 Nature of Controlling/Features of Controlling
A. Goal oriented: Controlling is directed in the direction of accomplishment of organizational dreams in the quality viable manner.
B. Pervasive: Controlling is a quintessential characteristic of each supervisor and exercised at all ranges of management.
C. Continuous: It is no longer an undertaking to be pursued in the give up only; it has to be executed on a continuous basis.
D. Controlling is searching back: Controlling entails size of real overall performance and its assessment with the preferred performance. It is the manner of checking and verification.
E. Controlling is ahead looking: It is associated to future due to the fact it seeks to enhance future outcomes on the groundwork of ride won in the past.
F. Depends on planning: It pre supposes existence of planning due to the fact except planning no manage is possible.
G. Action oriented: Control has no that means if no corrective motion is taken; So well timed motion ought to be taken to forestall deviations.
H. Primary Function of Management – controlling is carried out at all stages and in all kinds of organizations.
I. Brings returned administration cycle again to planning: Control must now not be seen as the remaining function. In truth its hyperlinks returned to planning. Controlling involves
4 Relationship between Planning and Controlling
Planning and controlling are interrelated and in truth toughen every different in the feel that-
A. Planning is pre-requisite for controlling. Plans supply the trendy for controlling.
Thus, besides planning, controlling is blind. If the requirements are no longer set in increase managers have nothing to control.
B. Planning is meaningless barring controlling. It is fruitful when manage is exercised.
It discovers deviations and initiates corrective measures.
C. Effectiveness of planning can be measured with the assist of controlling.
D. Planning is searching in advance and controlling is searching back: Planning is a future oriented feature as it entails searching in strengthen and making insurance policies for the most utilization of sources in future that is why it is viewed as ahead searching function.
In controlling we seem again to the overall performance which is already performed by using the personnel and examine it with plans.
If there are deviations in true and well-known overall performance or output then controlling features makes certain that in future true overall performance fits with the deliberate performances.
Therefore, controlling is additionally a ahead searching function. Thus, planning & controlling cannot be separated.
The two are supplementary characteristic which aid every different for profitable execution of each the function.
Planning makes controlling advantageous whereas controlling improves future planning.
5 Controlling Process
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A. Setting Performance Standards: Standards are the standards in opposition to which genuine overall performance would be measured.
Thus, requirements emerge as groundwork for assessment and the supervisor insists on following of standards.
B. Measurement of Actual Performance: Performance need to be measured in a goal and dependable manner which consists of private observation, pattern checking.
Performance need to be measured in identical phrases in which requirements have been established, this will facilitate comparison.
C. Comparing Actual Performance with Standard: This step includes contrast of real overall performance with the standard.
Such contrast will disclose the deviation between proper and preferred performance.
If the overall performance fits the requirements it may additionally be assumed that the whole thing is underneath control.
D. Analyzing Deviations: The deviations from the requirements are assessed and analysed to become aware of the motives of deviations.
E. Taking Corrective Action: The last step in the controlling system is taking corrective action.
No corrective motion is required when the deviation is inside the applicable limits. But the place great deviations appear corrective motion is taken.
6 Limitations of Controlling
A. Difficulty in putting quantitative standards: Control device loses its effectiveness when requirements of overall performance can’t be described in quantitative terms.
This makes contrast with requirements a tough take. areas like human behavior, worker morale, job pride can’t be measured quantitatively.
B. Little manage on exterior factors: A business enterprise can’t manage exterior elements like authorities’ policies, technological changes, competition. etc.
C. Resistance from employees: Control is resisted by using the personnel as they experience that their freedom is restricted.
E.g. personnel might also withstand and go in opposition to the use of cameras to examine them minutely.
D. Costly: Control entails a lot of expenditure, time and effort.
A small business enterprise can’t manage to pay for to deploy a high priced manipulate system.
Managers ought to make sure that the value of putting in and working a manipulate machine have to no longer exceed the advantages derived from it.
Short Answer Type Questions
1. Explain the which means of controlling?
Ans– Controlling skill making sure that things to do in an enterprise are carried out as per the plans.
Controlling additionally ensures that an enterprises asset is being used efficiently and effectively for the success of favored goals.
Controlling is, as a result an intention-oriented function.
Controlling is a very vital managerial function. Because of controlling supervisor is capable to evaluate genuine overall performance with the deliberate performance.
In order to manage the things to do at all range’s supervisor wishes to operate controlling function.
2. Planning is searching in advance and controlling is searching lower back comment?
Ans– Planning and controlling are inseparable. Planning is the fundamental feature of each company it is the wondering process, which skill searching beforehand or making plans that how favored purpose is done in future accordingly it is referred to as a shaped searching feature on the different hand controlling is a systematic feature which measures the proper overall performance with the deliberate performance.
It in contrast and analyzed the complete system of a corporation and take correcting actions.
Thus, it is a backward searching characteristic however the announcement “Planning is searching beforehand and controlling is searching back” is partly right due to the fact it must be understood that planning is glided by means of past experiences and the corrective motion initiated via manipulate characteristic which goals to enhance future performance.
Thus, planning and controlling are each backward searching as properly as an ahead searching functions.
Q3. ‘An effort to manage the entirety may additionally cease up in controlling nothing’. Explain.
Ans– It’s a properly recognized reality that “Jack of all grasp of none” when we begin controlling the whole thing it consequences in controlling nothing due to the fact it is now not viable at one time to manage a variety of things to do as this method may also neither be low cost nor easy.
Control hence focal point on KRAs (Key Result Areas). Its skill rather of controlling all activities, manipulate the place the fundamental factors goes incorrect and via which employer suffers.
Thus, KRAs are set as fundamental factors and one have to be conscious that he has to manipulate what.
Q4. Write a brief observe on budgetary manipulate as an approach of managerial control.
Ans– Budgetary manage is an approach of managerial manipulate in which all operations are deliberate and this will assist us in understanding how a good deal we have to spend in order to obtain the future result.
It in contrast the real end result with budgetary standards. This evaluation displays the vital movements to be taken so that the organizational targets are accomplished. Budgeting affords the following advantages
(i) Budgeting focuses on unique and time certain targets.
(ii) Budgeting is a supply of motivation to the personnel they set the requirements towards which their overall performance will be appraised and thus, permits them to function better.
(iii) Budgeting helps in most efficient utilization of assets by means of allocating them in accordance to the necessities of distinct departments.
(iv) It helps the administration in placing standards.
Q5. Explain how administration audit serves as an advantageous method of controlling.
Ans– Management audit is a method which helps in measuring the effectivity and effectiveness of management.
It is a complete and optimistic review. Thus, we can say it is described as the assessment of the functioning overall performance and to enhance its effectivity in future length subsequently it serves as a nice method of controlling following factors are proving the same.
(i) It helps to come across existing and viable deficiencies in the overall performance of administration functions.
(ii) It helps to enhance the manipulate device of an enterprise via continually monitoring the overall performance of management.
(iii) It ensures updating of present managerial insurance policies and techniques in the mild of environmental changes.
This consequences in environment friendly controlling of management.
Long Answer Type Questions
Q1. Explain a number steps concerned in the method of control.
Ans– Controlling is a systematic technique involving following steps
(i) Setting Performance Standards: the first step in the controlling method is putting up of overall performance standards.
Standards are the standards towards which proper overall performance would be measured.
Standards can be set in each quantitative as nicely as qualitative term.
Some of the qualitative requirements are—cost to be incurred, product gadgets to be produced, time to be spent in performing a mission etc.
Improving goodwill and motivation stage of personnel are examples of qualitative standards.
(ii) Measurement of Actual Performance: Once overall performance requirements are set; the subsequent step is dimension of proper performance.
Performance need to be measured in a goal and dependable manner.
Some of the strategies used for measuring the overall performance are non-public observation, pattern checking overall performance reviews etc.
(iii) Comparing Actual Performance with Standards: This step entails contrast of proper overall performance with the standards.
Such assessment will disclose the deviation between genuine and favored results.
Comparison turns into less complicated when requirements are set in quantitative terms.
For instance, overall performance of an employee in phrases of gadgets produced in a week can be effortlessly measured in opposition to the trendy output for the week.
(iv) Analyzing Deviations: Some deviations in overall performance can be predicted in all activities.
It is therefore, essential to decide the suitable vary of deviations. Also, deviations in key areas of enterprise want to be attended extra urgently as in contrast to deviations in sure insignificant areas.
Critical point manages and administration with the aid of exception ought to be used through a supervisor in this regard.
(v) Taking Corrective Action: The ultimate step in the controlling technique is taking corrective action.
No corrective motion is required when the deviations are inside perfect limits.
However, when the deviations go past the suitable range, particularly in the essential areas, it needs instant managerial interest so that deviations do now not appear once more and requirements are accomplished.
In case the deviations can’t be corrected via managerial action, the requirements may also have to be revised.
Q2. Explain the strategies of managerial control.
Ans– A variety of methods of managerial manipulate might also be categorized into categories
(i) Traditional Techniques: Those methods which have been used with the aid of the agencies for a lengthy time now are normal techniques.
However, these have no longer grow to be out of date and are nonetheless being used via companies.
(a) Personal Observation: Personal statement allows the supervisor to accumulate firsthand information.
It additionally creates a psychological stress on the personnel to function properly as they are conscious that they are being discovered individually in their job.
(b) Statistical Reports: Statistical evaluation in the structure of averages, percentages, ratios, correlation etc.
Present beneficial facts to the managers related to overall performance of the employer in a variety of areas.
Such data when introduced in the shape of charts, graphs, tables and so on allows the managers to study them extra effortlessly and permit an assessment to be made with overall performance in preceding intervals and additionally with the benchmarks.
(c) Break-even Analysis: It is an approach used with the aid of managers to learn about the relationship between costs, quantity and profits.
It determines the in all likelihood earnings and losses at one-of-a-kind ranges of activity.
The income quantity at which there is no profit, no loss is regarded as break-even point.
It is a beneficial approach for the managers as it helps in estimating income at extraordinary degrees of activities.
(d) Budgetary Control
It is an approach of managerial manipulate in which all operations are deliberate in boost in the shape of budgets and real outcomes are in contrast with budgetary standards.
This assessment displays the critical movements to be taken so that organizational desires are accomplished.
A price range is a quantitate declaration for a particular future duration of time for the motive of acquiring a given objective.
It is additionally a declaration which displays the coverage of that precise period.
It will include figures of forecasts each in phrases of time and quantities.
(ii) Modern Techniques: Modern methods of controlling are these which are of current foundation and are comparatively new in administration literature.
They grant a new questioning on the methods in which a number factors of an enterprise can be controlled.
(a) Return on Investment: Return on Investment (ROI) is a beneficial approach which presents the fundamental yardstick for measuring whether or not or now not invested capital has been used correctly for producing real looking quantity of return.
It can be calculated as under ROI affords pinnacle administration a high-quality capacity of manage for measuring and evaluating overall performance of unique departments.
It additionally allows departmental managers to locate out the trouble which influences ROI in an unfavorable manner.
(b) Ratio Analysis: It refers to evaluation of monetary statements via computation of ratios. The most frequently used ratios are
*Liquidity Ratios: Liquidity ratios are calculated to determinedly quick time period solvency of business.
*Solvency Ratios: Ratios which are calculated to decide the lengthy time period solvency of enterprise are regarded as Solvency ratios.
*Profitability Ratios: These ratios are calculated to analyses the profitability role of a business.
*Turnover Ratios: They are calculated to decide the effectivity of operations based totally on high-quality utilization of resources.
(iii) Responsibility Accounting: Responsibility accounting is a device of accounting in which one-of-a-kind sections, divisions and departments of an organization are set up as ‘responsibility center’s’.
The head of the Centre is accountable for accomplishing the goal set for his Centre. Responsibility centers can also be of the following types
(a) Cost Centre
A value or fee Centre is a section of an enterprise in which managers are held accountable for the fee incurred in the Centre however now not for the revenues e.g., manufacturing department.
(b) Revenue Centre
An income Centre is held accountable for producing revenue, e.g., advertising department.
(c) Profit Centre
An earnings Centre is accountable for each price and income e.g., restore and renovation department.
(d) Investment Centre
A funding Centre is accountable now not solely for earnings however additionally for investments made in the Centre in the shape of assets.
(iv) Management Audit
Management audit refers to systematic appraisal of the universal overall performance of the administration of an organization.
The cause is to evaluation the effectivity and effectiveness of administration and to enhance its overall performance in future periods.
It is beneficial in figuring out the deficiencies in the overall performance of administration functions. The important blessings are
(a) Helps to hit upon weaknesses.
(b) It helps to enhance manipulate system.
(c) Ensures updating of current managerial insurance policies and techniques in the mild of environmental changes.
(v) PERT and CPM: Programmed comparison and evaluation method and vital direction technique are vital community methods beneficial in planning and controlling.
These methods are especially beneficial in planning, scheduling and imposing time sure tasks involving overall performance of a range of complex, numerous and inter-related activities.
These strategies deal with time scheduling and aid allocation for these things to do and pursuits at tremendous execution of initiatives inside given time table and shape of costs.
(vi) Management Information System: MIS is a laptop based totally data machine that presents statistics and aid for fantastic managerial decision-making.
A choice maker requires up-to-date accurate and well-timed information. MIS affords the required facts to the managers by using systematically processing a large statistic generated in an organization.
Thus, MIS is a necessary conversation device for managers.
Q3. Explain the significance of controlling in an organization. What are the issues confronted by means of the agency in imposing an nice manage system?
Ans– Control is an imperative feature of management. Without manipulate the excellent of plans can go away. A excellent manage machine helps an company in the following way
(i) Accomplishing Organizational Goals: The controlling feature measures growth toward the organizational dreams and brings to mind the deviations.
If any, and shows corrective action. It thus, publications the enterprise and continues it on the proper song so that organizational desires would possibly be achieved.
(ii) Judging Accuracy of Standards: A true manipulate device permits administration to confirm whether or not the requirements set are correct and goal an environment friendly manipulate machine continues a cautious take a look at on the adjustments taking area in the business enterprise and in the surroundings and helps to assessment and revise the requirements in mild of such changes.
(iii) Efficiently use of organizational resources: Controlling is very much helpful in efficiently use of manpower and productive resources effective controlling helps in reducing the unnecessary wastage of resources
(iv) Improving Employee Motivation: A suitable manage machine ensures that personnel comprehend properly in strengthen what they are anticipated to do and what are the requirements of overall performance on the foundation of which they will be appraised.
It, therefore motivates them and helps them to supply higher performance.
(v) Ensuring Order and Discipline: Controlling creates an ecosystem of order and self-discipline in the organization.
It helps to minimize dishonest behaviors on the phase of the personnel through retaining a shut take a look at on their activities.
(vi) Facilitating Co-ordination in Action: Controlling gives route Jo al! things to do and efforts for accomplishing organizational goals.
Each branch and worker are ruled by way of pre-determined requirements which are nicely co-ordination with one another. This ensures that common organizational goals are accomplished.
# Although controlling is an essential feature of management. It suffers from the following barriers also
(i) Difficulty in Setting Quantitative Standards: Control device loses some of its effectiveness when requirements can’t be described in quantitative terms.
This makes size of performance and their contrast with requirements a tough task.
Employee morale, job pride and human behaviors are such areas the place this trouble may arise.
(ii) Little Control on External Factors:Generally,a company can’t manipulate exterior elements such as authorities’ policies, technological modifications opposition etc.
(iii) Resistance from Employees:Control is provide resisted via employees.
They see it as a limit on their freedom. For instance, personnel would possibly object when they are saved beneath a strict watch with the assist of Closed-Circuit Televisions (CCTVs).
(iv) Costly Affair: Control is a high-priced affair as it includes a lot of expenditure, time and effort.
A small organization can’t have enough money to installation a highly-priced manipulate system.
It can’t justify the fees involved. Managers should make certain that the fees of putting in and working a manipulate device must now not exceed the advantages derived from it.
Q4. Discuss the relationship between controlling and planning.
Ans– controlling and Planning are inseparable; they are management twins.
A machine of manipulate pre-supposes the existence of sure standards.
These requirements of overall performance which serve as the groundwork of controlling are furnished through planning.
Once a design will become operational controlling is fundamental to screen the progress, measure it, find out deviations and provoke corrective measures to make certain that occasions conform to plans.
Planning is honestly a pre-requisite for controlling. Controlling can’t be completed with planning.
With planning there is no pre-determined appreciation of the favored performance, planning seeks consistent, built-in and articulated programmed whilst controlling seeks to compel occasions to conform to plans.