1. Controlling
Prof. Smita.Verma

2. What is Controlling?
 Controlling consists of verifying whether
everything occurs in confirmities with the
plans adopted, instructions issued and
principles established. Controlling ensures
that there is effective and efficient
utilization of organizational resources so
as to achieve the planned goals.
Controlling measures the deviation of
actual performance from the standard
performance, discovers the causes of
such deviations and helps in taking
corrective actions

3. According to Brech,
“Controlling is a systematic exercise
which is called as a process of
checking actual performance against
the standards or plans with a view to
ensure adequate progress and also
recording such experience as is
gained as a contribution to possible
future needs.”

4. According to Donnell,
“Just as a navigator continually takes
reading to ensure whether he is
relative to a planned action, so should
a business manager continually take
reading to assure himself that his
enterprise is on right course.”

5. Controlling has got two basic
purposes
◦ It facilitates co-ordination
◦ It helps in planning

6. Features of Controlling Function
 Controlling is an end.
 Controlling is a pervasive function.
 Controlling is forward looking.
 Controlling is a dynamic process.
 Controlling is related with planning.

7. Importance of Controlling
 Coping with uncertainty.
 Detecting Irregularities.
 Identifying Opportunities.
 Handling complex situations
 Decentralizing Authority .
 Minimizing Costs.

8. Basic Control Process
 Determine areas of control
 Establishing Standards
 Measuring performance
 Comparing performance against
standards
 Recognizing good or positive
performance
 Taking corrective action when
necessary
 Adjusting standards and measures
when necessary

9. Organizational Control Techniques
 Financial controls
 Budget controls
 Quality Control
 Inventory Control
 Other types of control
 Marketing controls
 Human resource controls
 Computers and information controls

10. Financial controls
 Financial Statements.
 Balance sheets .
 Income statement
 Cash flow – Sources and uses of funds
statements.
 Ratio – Analysis
◦ Liquidity ratio .
◦ Asset Management Ratio.
◦ Debt Management Ratio.
◦ Profitability Ratio.

11. Financial Statements
 A financial statement facilitates the
monitoring of an organization's
liquidity ,general financial
condition, profitability etc .
 Financial statements contains
information that is necessary to
maintain financial control over
organization.

12. Balance sheets .
 A balance sheet shows the financial
condition of a business at a given
point of time.
 Balance sheet is a snapshot of the
financial position of an organization

13. Income Statement
 Balance sheet focuses on the overall
financial worth of the organization at a
specific point of time , the income
statement summarizes the company’s
financial performance over a given
interval of time

14. Cash Flow –
Sources and uses of funds statements
 The statement of cash flow
summarizes the financial performance
of an organization in terms of the
sources of origin of cash or funds
during the year and areas where they
were utilised

15. Ratio Analysis
 It is a process of determining and
evaluating financial ratios.
 It is used by managers to assess the
significance of financial data collected
from various sources by studying the
ratios between various items in a
financial statement.
 A ratio is an index that measures one
variable relative to another and is
generally expressed in terms of
percentage or a rate

16. Liquidity ratio
 Liquidity ratio are the financial ratios
that measures the ability of an
organization to meet its short term
obligations ( current liabilities ) by sing
its current assets .
 Some of the liquidity ratios used by
organizations are acid test ,working
capital ,tangible net worth and current
ratios.

17. Asset management ratio
 It is also called as activity ratios.
 It measures effectiveness of an
organization in managing its assets .
 Activity ratio is a test of the
relationship between the sales and
various assets of the firm .
 The higher the activity ratio ,the better
the profitability and lesser the
investment needed in assets .

18. Debt management ratios
 Debt management ratio also called as
leverage ratios.
 It determines the extent of debt used
by a company to finance its
investment.

19. Profitability ratios
 The operating efficiency of an
organization and its ability to ensure
adequate returns to its shareholders
,depends on the profits it earns .
 Profitability ratios measures the
profitability of an organization in
relation to variables such as sales and
assets

20. Budget controls
 Budgeting is the process of
formulating future plans for the
organization for a given period of time
and estimating the amount of
resources required to carry out the
planned activities.

21. Financial controls
 Responsibility Centers –
◦ Standard Cost Centers.
◦ Discretionary expense centers .
◦ Revenue Centers.
◦ Profit centers .
◦ Investment centers .

22. Requirement for effective
Controls
 Control should reflect plans, positions
and structure.
 They should be understandable .
 They should be const-effective
 They should identify only important
/major expectations.
 Control systems should be flexible .
 Control system should provide
accurate information.