Controlling Techniques

What is Controlling in Management?

Control is an essential function of management in every
organization.The management process is incomplete and sometimes
useless without the control function.The management process includes
planning,staffing,organizing,directing and controlling.The control
function is concerned with ensuring that the planning,organizing
,staffing and directing function result in the attainment of the
organizational objectives.In other words,control is a tool that helps
organizations measure and compare their actual progress with their
established plan.
What are controlling techniques?

The tools and techniques used by a manager in an organization to

control the activities of the firm is called controlling techniques

Controlling techniques can be broadly divided into two categories that

are
1. Budgetary techniques
2. Non Budgetary techniques
 Controlling
Techniques

Budgetary Control Non Budgetary Control

Financial Statistical
Budgeting report

Break-even
Operation point analysis
Budgeting
Internal Audit
Zero Base
Budgeting
Special Report

Responsibility
accounting

Cost accounting
and cost control
BUDGET

What is Budget?

Budgets are formal quantitative statements of the resources set aside

for carrying out planned activities over a given period of time and
include figures such as projected income,expenditure and profits.
 MASTER
BUDGET

OPERATIONAL
BUDGET
TYPES OF
BUDGET
CASH FLOW
BUDGET

INCREMENTAL
BUDGET
 Types of Budget

Master Budget
This is a financial forecast of all elements in the business for the accounting year.
This is usually a collection of many sub-budgets which are interrelated to each
other.
Operational Budgets
Operational budgets prepare forecasts for routine aspects such as incomes and
expenses. While budgeted annually, operating budgets are usually broken down
into smaller reporting periods, such as weekly or monthly.
 Types of budget.

● Cash Flow Budget

This budget projects the expected cash inflows and outflows of the business for the upcoming year. The
main purpose of this budget is to ensure that sufficient liquidity is guaranteed for the period

● Incremental Budget
An incremental budget is a budget prepared using the previous period’s budget or actual performance as a
basis with incremental amounts added for the new budget. The allocation of resources is based upon
allocations from the previous accounting year. Here the management assumes that the levels of revenues
and costs incurred during the current year will also be reflected during the next year. Accordingly, it will be
assumed that revenues and costs incurred during the current year will be the starting point for estimations for
the next year.
BUDGETARY CONTROL

What is Budgetary Control?

Budgetary Control is a tool used by management to obtain the

objectives expressed as in the form of budget.The actual figures are
compared with the budgeted figures.If there are any deviation,they can
be remedied by either adusting or correcting the cause of difference.
Difference between Budget and
Budgetary Control.

Budget Budgetary Control

1.Budget is concerned with policy 1.Budgetary control is concerned

making. is with implementation of such
policy.
2.Budget is an end process.
2. Budgetary control is a
continuous process.
TYPES OF BUDGETARY CONTROL
FINANCIAL
BUDGETING

BUDGETARY
OPERATION
CONTROL
BUDGETING
TECHNIQUES

ZERO BASE
Financial Budgeting Operation Budgeting

1. Cash Budget 1. Sales/Revenue Budget

2. Capital Budget 2. Expenses Budget
Zero Base Budgeting

Zero-based budgeting (ZBB) is a method of budgeting in which all

expenses must be justified for each new period. The process of zero-
based budgeting starts from a "zero base," and every function within an
organization is analyzed for its needs and costs. Budgets are then built
around what is needed for the upcoming period, regardless of whether
each budget is higher or lower than the previous one.
Example of Zero Base Budgeting

Suppose a company making construction equipment implements a zero-based

budgeting process calling for closer scrutiny of the expenses in its
manufacturing department. The company notices that the cost of certain parts
used in its final products and outsourced to another manufacturer is increasing
5% every year. The company has the capability to make those parts in-house
and with its own workers. After weighing the positives and negatives of making
the parts in-house, the company finds that it can make the parts cheaper than
the outside supplier.
 Non Budgetary Controls
There are many other traditional control devices not connected with budgets
since various methods are used by the management for controlling various
deviations in the organisation.Amongst the most important of these are:-

● Statistical control reports

● Break-Even point analysis.
● Special control reports
● Internal audit
● Responsibility accounting
.
Statistical control reports

These type of reports are prepared and used in large organizations.

Reports are prepared in quantitative terms.Then, the variations
from standards are easily measured. In this way, control is
exercised by the management. A periodical report of sales volume
is an example of statistical control report
.
Break-Even point analysis.
It analyses relationship amongst cost of production,volume of production,volume of
sales and profit.Here, the total cost are divided amongst two i.e. fixed cost and
variable cost.Fixed cost will never change according to the changes in the
volume of production .Variable cost will change according the volume of
production.This analyses helps in determining the volume of production or sales
and the total cost which is equal to the revenue.The excess of revenue over
total cost is termed as ‘profit’.The point at which sales is equal to the total cost
is known as ’Break Even Point’.In other words, break-even point is the point at
which there is no profit or loss
. Special control reports.

This report may or may not contain statistical data.Using this

technique ,a particular operation is investigated at a specified time
for a particular purpose.This is done according to requirement of
management but not in regular basis.The deviation from standard
are paid additional attention and corrective action is taken.Handling
complaint for damage is an example of this type of control
technique
Internal audit

Internal audit report is prepared at regular intervals , normally by

months. It covers all the area of operation. This report is sent to the
top management. The management takes steps to control the
performance on the basis of the report Internal audit report
emphasizes the degree of deviation from the expectations. It is
very useful to attain the objectives on timely basis
Responsibility Accounting.

The performance of various people are judged by assessing how far

they have achieved the predetermined objectives. The objectives
are framed section wise, department wise, division wise and
assessed similarly. Cost are allocated department wise rather than
product-wise. Each department ,section or division is fixed as
responsibilities centre. An individual is responsible for his area of
operation in a particular section, department or division
Thank you.
Amit Chavan