THE NATURE OF

CONTROLLING
CELINE AND
THERESE
MEANING OF CONTROLLING :

Controlling is an ongoing process that involves all organizational

members, who share the responsibility to address issues beyond their
specific roles. It serves both anticipatory and retrospective functions—
proactively allowing for immediate corrective actions and retrospectively
reviewing past operations for improvement. Effective control systems
must be applicable at all levels, accepted by employees, and involve
quantifiable, reasonable, and cost-efficient corrective actions. Managers
should balance instinctual decision-making with data-driven
approaches, ensuring collaboration is central to successfully
implementing these measures.
 THE CONTROL PROCESS
INVOLVES FOUR MAIN STEPS.
THESE ARE AS FOLLOWS:
 ESTABLISHMENT OF STANDARDS

The establishment of standards begins by developing criteria

to measure performance. These can be non-measurable, like
customer loyalty and goodwill, or measurable, such as output,
money, or time. Time standards focus on task duration, cost
standards cover expected expenses, and income standards
refer to financial gains. Standards may also involve market
share, productivity, profitability, effort, product quality, or
quantity produced.
 MEASURE OF PERFORMANCE
Measure of performance. Performance is measured by
identifying strategic control points. These include indicators
such as income, expenses, inventory, product quality, and the
number of work hours put in by employees. Employee
performance can be measured through actual observation. It
can also be measured by using devices that analyze machine
operations and production processes. Financial ratios can also
be employed as a measure of performance, where analysts
take information from a company's financial statement and
compare it with its main competitors. Financial ratios can also
compare the performance of the company with the industry
average.
 COMPARISON OF THE ACTUAL PERFORMANCE
WITH THE STANDARDS

Comparison of the actual performance with the standards.

Management can gather data from performance
measurement and compare it with the established standards.
The company can also conduct benchmarking by comparing
their performance with exemplary practices from other
companies in the industry. Management can also determine
the degree of variation between the standard and the actual
performance and check whether the variation falls within
acceptable limits.
 TAKING CORY HAS DETERMINED END REALINING
PROCESES WHEN NECESSARY

When the company has determined that its performance has

deviated from the standard, corrective actions should be taken
and applied. Deviations from the standards may be a result of
incorrect planning, a lack of coordination in the conduct of
tasks, or the misinterpretation of instructions. Some companies
allow their employees to make necessary corrective measures
to their work. Other employees get directives from
management on how to implement necessary corrections to
their jobs.
 THE LINK BETWEEN
PLANNING AND CONTROLLING
 THE LINK BETWEEN
PLANNING AND CONTROLLING
Planning and controlling are closely related management functions. Planning
identifies the goals and standards that an organization should aim for while
controlling ensures that the performance of the whole organization conforms to the
outlined plans. Controlling also provides management with vital information that
can be used in the formulation of new plans for the company.

During the planning stage, the company sets its goals, develops its vision and mission
statements, and identifies strategies that will be implemented. Once the company implements
its plans, the controlling function becomes the mechanism that ensures that all plans are
realized. Planning provides the baseline of the company’s future while controlling becomes the
tool that ensures the company’s success. The link between planning and controlling can be
summarized by the diagram below.
 THE LINK BETWEEN PLANNING AND CONTROLLING
CAN BE SUMMARIZED BY THE DIAGRAM BELOW.

1. Do the plans. Carry out the plans

2. through strategies
Correct deviations formulated.
4. and return to no. 2; or
improve future plans
by going back to no.1.
Monitor and compare
3. actual performance
with plans.
CONTROL METHODS AND
SYSTEMS
 CONTROL METHODS AND SYSTEMS

In implementing control methods and techniques,

the manager must be aware of the timeliness by
which they can apply certain control techniques.
Certain control measures may be applied before,
during, and after a certain task or operation. The
appropriate measure must be applied at the
correct time to ensure the smooth conduct of
operations.
 THE CONTROL MEASURE BASED ON TIMELINESS ARE
AS FOLLOWS:

BEFORE DURING AFTER

INPUTS PROCESSES OUTPUT

CONCURRENT FEEDBACK
FORWARD
CONTROL CONTROL
CONTROL
 FEEDFORWARD CONTROL
This proactive control occurs before an activity begins. It anticipates potential problems and implements
preventive measures to avoid issues. Commonly used in industries like airlines, it ensures all equipment
(e.g., airplanes) is in proper working order to prevent accidents. This method requires investment in
resources to ensure effective implementation.

CONCURRENT CONTROL
This control is applied during an activity. Managers monitor operations as they happen,
addressing problems in real-time. For example, in office settings, concurrent control might
involve ensuring employees remain productive by limiting distractions like surfing the web
during work hours.

FEEDBACK CONTROL
This control is applied after an activity is completed. Managers gather information
to assess whether the activity was successful. Managers analyze operations and
take corrective actions if a company does not meet its goals (e.g., a 5% sales
increase).
 APART FROM IMPLEMENTING CONTROLS
DURING THE CONDUCT OF SPECIFIC TASKS
AND BUSINESS OPERATIONS, ORGANIZATIONS
ALSO APPLY VARIOUS CONTROL METHODS
AND SYSTEMS IN MONITORING AND
CONTROLLING THE GENERAL CONDUCT OF
COMPANY OPERATIONS. EXAMPLES OF THESE
ARE AS FOLLOWS:
 ADMINISTRATIVE CONTROL
Focuses on implementing policies and procedures to ensure efficiency and safety in
company operations. Examples include safety protocols in industries handling
hazardous materials, rotating workers to avoid injury, and providing breaks in hot
environments to prevent heat-related illnesses. Specific examples include the
following:

A. Maintenance operations C. Workers who work in hot areas

are required to take regular
involving toxic substances are
breaks to enable them to cool
done during night time when
down. They are also given
most employees are not
present. B. Worker assignments are
fluids to prevent dehydration
and heat stroke.
regularly rotated to ensure
that they will not experience
repetitive motion injuries.
 DELEGATION
Managers assign tasks to employees, granting them authority
and responsibility over their duties. This empowers employees to
manage their own work while being held accountable for the
outcomes. Although managers give employees control, they
continue to monitor their performance to ensure tasks are
completed accurately and efficiently, reducing the chance of
mistakes.

EVALUATION
This control method involves collecting and analyzing data,
such as marketing results, sales figures, and project
evaluations, to make informed decisions. The data sources may
include logbooks, official records, surveys, and interviews.
Evaluation helps identify areas in operations that require
adjustments and highlights problems that need immediate
attention.
 FINANCIAL REPORTS
Financial figures provide information on how money is spent and how profits are
maximized by the company. Financial reports include balance sheets, income
statements, and cash flows. A company implements control through regular financial
audits that ensure that financial management practices follow generally accepted
standards. Managers also use financial ratios to monitor the company's overall financial
performance.

THE FOLLOWING ARE THE COMMON FINANCIAL RATIOS UTILIZED IN

MONITORING COMPANY PERFORMANCE:

a. Liquidity ratio - measures the company's ability to meet its current debt
obligations.
b. Leverage ratio - assesses the organization's use of debt to finance its assets and
meet the interest payments on debts.
c. Activity ratio- measures the efficiency of the company in using its assets to meet
its various financial obligations and convert its various accounts to cash.
d. Profitability ratio - measures the efficiency of the company in generating profits.
 PERFORMANCE APPRAISAL

This process gives a general impression of employee performance and

allows supervisors and employees to discuss how to improve subpar
performance and maintain exemplary work. Appraisals also offer
opportunities to reward good performance and identify training needs
for those performing poorly. Managers use several tools for appraisal,
including the intuitive approach, which is based on perception and is
subjective; the self-appraisal approach, where employees evaluate
themselves; the trait approach, which assesses specific traits like
honesty and punctuality; the achievement-based approach, which
compares performance against company goals; and the group
approach, where a group of people evaluates an employee.
 POLICIES AND PROCEDURES

These form part of the internal control of an organization as they

guide behavior in the workplace. Procedures and policies ensure
that employees carry out tasks in an effective and efficient
fashion and that directives and instructions are consistent.
Policies and procedures are used to implement control activities
in all positions and at all levels in the organization. These activities
include approvals, authotizations, procurements, verifications,
performance reviews, and segregation of duties. Policies and
procedures are effective control activities when they are
implemented consistently in the organization.
 This control method relies on the quality of products and services as a
basis for establishing performance standards, monitoring results, and
comparing results with the standards. Quality control is defined by the
International Organization for Standardization (ISO) as "the operational
techniques and activities that are used to satisfy quality requirements."
An essential component of quality control is quality assessment, which
QUALITY consists of activities designed to find out if quality control activities are
effective. Quality control is primarily a preventive measure, but if errors
CONTROL arise, the control systems should check and evaluate activities to trace
the source of the error. The five Ws guide managers and quality control
specialists in analyzing an error and determining its cause.

THE FOLLOWING WS ARE AS FOLLOWS:

a. What error was made? c. When was it made?
b. Where was it made? d. Who made it?
e. Why was it made?
MANAGEMENT CONTROL
APPLICATIONS
 MANAGEMENT CONTROL
APPLICATIONS

Control is applied to many functional areas in the

business organization, particularly in accounting and
marketing. These two departments generate
important information regarding the overall
performance of the company. The accounting
department provides financial information that can
help determine the financial stability of the
organization. The marketing department, meanwhile,
provides data on the company's sales performance.
 ACCOUNTING OR FINANCIAL
CONTROLS

Financial controls are important tools that

determine whether the company is on track toward
achieving its financial goals. Financial ratios are one
of the control methods utilized in financial control.
These rely on the information gained from financial
statements, which are formal records of the
financial activities of the organization. The main
types of financial statements are the balance sheet
and the income statement.
 BALANCE SHEET

The balance sheet provides a summary of the

company's financial position over a period of time. The
balance sheet indicates financial information as of a
certain period or date. For example, a company may
issue a balance sheet dated December 31, 2015
reflecting all the transactions made by the firm until
that particular date. A balance sheet is beneficial not
only for the company's management, but also for
creditors, suppliers, customers, and other stakeholders.
 THE THREE MAJOR PARTS OF A
BALANCE SHEET ARE THE FOLLOWING:
1. Assets are things or resources that
the company owns. These include
KNOW YOUR JARGON
Equity-the value of
things that the company has
the shares issued by a purchased or acquired. It also includes
company.
Receivables - assets
costs paid in advance but have not
considered as debt, been used like prepaid rent and
unsettled transactions,
prepaid insurance. There are three
or other monetary
obligations owed to a classifications of assets: current
company by its
assets; property, plant and equipment;
debtors or customers.
and intangible assets.
 THREE CLASSIFICATIONS OF ASSETS:
a. Current Assets include cash on hand, cash deposited in banks,
prepaid or advance payments not yet used, accounts receivable,
and inventory. Accounts receivables refer to the sales of goods or
services that are not yet collected, or sales still on credit. Inventory
includes the cost of raw materials, work-in-process, and finished
goods.

b. Property, plant, and equipment include assets such as land,

buildings, leasehold improvements, equipment, furniture and
fixtures, delivery trucks, machinery, and other capital owned by the
company. These are examples of non-current assets or assets
that cannot be easily converted to cash.

c. Intangible assets refer to assets that do not have physical

substance and may be hard to evaluate. They include patents,
copyrights, goodwill, and the popularity of a trademark or
company name.
 Some companies add another classification
called other assets in their balance sheets. These
refer to assets that cannot be classified under the
main classifications of assets, or acquisitions that
do not conform with the usual transactions of the
company. Some companies also put a separate
classification for short-term investments in their
balance sheets.
EXAMPLE OF A BALANCE SHEET:
 THE THREE MAJOR PARTS OF A
BALANCE SHEET ARE THE FOLLOWING:

2. Liabilities are the obligations of the company to

creditors for past transactions such as the acquisition
of raw materials and other debts. Liabilities are
classified as either current or long-term liabilities.
Current liabilities are usually due within one year while
long-term liabilities have a prescribed period of more
than a year. Several accounts are placed under current
or long-term liabilities depending on the duration of the
obligation.
 THESE ARE AS FOLLOWS:
a. Notes payable -It is the amount of loans due based on a written
agreement or promise to pay. A bank loan is an example of notes
payable. This is a long-term liability.

b. Accounts payable -It refers to the obligations of the company

to suppliers without a written promissory note and is classified as
a current liability.

c. SSS/Philhealth payable- This is a current liability that is specific

to the Philippines. It is the amount of contributions from the
company and its employees that have not been remitted to SSS
and PhilHealth.

d. Income taxes payable - It shows the amount the company

should remit as taxes to the government. This is also a current
liability.
 There are other accounts classified as current
liability such as salaries or wages payable and
interest payable. Salaries payable are the
amount due to the employees but are not yet
given as of the date of the balance sheet. Interest
payable is the amount of interest the company
owes from the proceeds of a loan that is due as of
the date of the balance sheet.
 THE THREE MAJOR PARTS OF A
BALANCE SHEET ARE THE FOLLOWING:

3. Owner's equity or stockholder's equity shows the

amount of capital the owners of the business have
invested. Owner's equity is applicable for sole
proprietorship while stockholder's equity is applicable
for corporations.
Several terms describe the composition of stockholder's
equity:
 THE COMPOSITION OF STOCKHOLDER'S EQUITY:

a. Common stock - This represents ownership of the corporation. Possession

of common stock in a company enables stockholders to elect the board of
directors, which is the governing body of the corporation, and share in the
profits of the firm in the form of dividends.

b. Preferred stock-This is a special class of stock whose holders are given

preference in the distribution of dividends before the common stockholders.
Because of this preferential treatment, preferred stockholders do not share
in the company's earnings but are only given a fixed dividend.

c. Retained earnings - This is the net income of the corporation less

dividends.
 In the actual balance sheet, assets are listed on
one side, while the liabilities and owner's equity
are listed on the other. Ideally, the sum of both
sides should be identical so that the sections are
"balanced." The balance sheet is an important tool
in determining the financial standing of the
company in terms of comparing the company's
assets against its liabilities. The standard formula
for determining the financial status of a company
using a balance sheet is Assets = Liabilities +
Owner's Equity.
 INCOME STATEMENT

The income statement reports profits earned or losses

incurred by the company over a given period. The time
interval is specified in its heading such as "For the
Month Ended, January 31, 2015"; "For the Three Months
Ended, March 31, 2015" (which means from January 1 to
March 31, 2015); or "For the Year Ended December 31,
2015".
 THE INCOME STATEMENT CONSISTS OF
THREE MAIN PARTS:
1. Revenue-Income from primary activities like the production and selling
of goods by manufacturers. Sales revenue is from the sale of goods by
retailers, distributors, manufacturers, and wholesalers. Other revenue
comes from secondary activities unrelated to the main business, like rent
from an idle warehouse or garage.

2. Expenses- Costs incurred in the operation of the business, such as salaries

and wages of employees; utilities like electricity, water, and telephone; sales
commissions; and expenses in advertising and promotions.

3. Net Income-The income statement lists revenue and expenses incurred

by the company. Total expenses are subtracted from total revenues,
resulting in net income, which may be expressed as a profit or loss. A profit
indicates expenses are less than income or total revenue. If expenses are
greater than revenue, the company has incurred a loss. The formula for net
income is Net Income = Revenues - Expenses.
EXAMPLE OF A INCOME STATEMENT
FORMULA:
MARKETING
CONTROL
 MARKETING CONTROL
Control is applicable in the marketing function, as
setting performance standards is crucial for
developing marketing objectives. To determine the
effectiveness of marketing plans and strategies, sales
performance is monitored and compared to
established standards. Corrective actions are
implemented if there are deficiencies in sales
performance. Many companies employ a marketing
controller who is knowledgeable in both finance and
marketing processes.
 THERE ARE FIVE TYPES OF MARKETING CONTROLS:

1. Strategic Control - This refers to processes

implemented to control the formulation and
execution of strategic plans. The organization
evaluates its activities to determine if it is
taking advantage of opportunities regarding
target markets and marketing channels. This
responsibility lies with top management and
the marketing auditor. There are two tools
used to implement strategic control.
 TWO TOOLS USED TO IMPLEMENT STRATEGIC CONTROL:
a. Marketing Effectiveness -This tool evaluates the extent and quality of
customer relations, integration of the marketing function with other
organizational functions, and coordination of marketing activities. It
assesses the marketing information system, quality of current marketing
strategies, communication of marketing plans, effective use of marketing
resources, and responsiveness to new marketing developments. Reviewing
marketing effectiveness is a complex endeavor that utilizes various data-
gathering instruments, such as questionnaires.

b. Marketing Audit -This is a detailed and systematic analysis of past and

present marketing activities of the organization. It provides a forecast of
market growth aligned with changing market conditions and offers
suggestions to improve sales performance. It evaluates the total marketing
operation, including its objectives and policies, and assesses the procedures
and employees involved. The audit is conducted periodically based on the
organization's needs. Managers performing a marketing audit also conduct
SWOT analysis and environmental scanning.
 THERE ARE FIVE TYPES OF MARKETING CONTROLS:
2. Annual plan control - This method uses annual marketing targets
as performance standards to determine whether the planned results
or outcomes were achieved.

THE FOLLOWING ARE THE TOOLS USED IN ANNUAL PLAN CONTROL:

a. Sales Analysis- This involves analyzing a company's sales data to
determine trends and changes in sales figures and identify any discrepancy
or variance in performance. This helps managers plan and direct sales efforts
and enables sales personnel to evaluate and improve their performance.

b. Market Share Analysis- This determines the overall standing of the

company against its competitors. The company gathers information on
market characteristics, key players, and segments to identify saturated areas
and opportunities. This data helps managers develop strategies and
marketing plans and identify corrective measures if market share declines.
 THE FOLLOWING ARE THE TOOLS USED IN ANNUAL PLAN CONTROL:

c. Marketing Expenses to Sales Ratio -This entails comparing

marketing expenses with the achieved sales of the company.
Marketing expenses require a marketing budget for planned
expenditures needed to achieve targeted sales. Common
expense areas include sales force, promotional, distribution,
and market research expenses, each allocated a specific
amount for various activities. At the end of the period,
managers measure the ratio of total marketing expenses to
sales. If expenses exceed control limits, managers must
determine the reason for these deviations.
 THERE ARE FIVE TYPES OF MARKETING CONTROLS:

3. Customer tracking - These are methods that

determine customer behavior and their
reactions to marketing activities. These include
consumer panels, collecting data on returns and
complaints, customer surveys, and sales force
reports. Customer tracking provides a good
basis for direct consumer feedback on
satisfaction with the products and services
offered.
 THERE ARE FIVE TYPES OF MARKETING CONTROLS:

4. Profit Control -This determines the profitability

of company activities and identifies areas where
the company is making or losing money.
Profitability is analyzed by product, segment,
territory, customer, and other factors. It helps
managers decide which customers to focus on
and develop strategies to increase profitability
across different groups.
 THERE ARE FIVE TYPES OF MARKETING CONTROLS:

5. Efficiency Control- This monitors the

efficiency of marketing expenditures, including
sales force, advertising, sales promotion, and
distribution. It analyzes these elements to ensure
they are used effectively to achieve company
objectives. For example, the sales force is
evaluated based on factors like the number of
sales calls, orders, and success rate. The overall
selling effort's efficiency is determined by the
contributions of the sales personnel.
BUDGETING
 BUDGETING
Budgets are quantitative expressions of management plans for a specific period.
Budgeting plays a crucial role in planning and controlling, contributing to the
company’s success.
As a planning tool, it translates company plans into financial terms (e.g., sales
targets, expenses like hiring, advertising, equipment repair).
All resources (materials, personnel, equipment, etc.) are assigned a monetary value
to implement plans and achieve results.
As a controlling tool, budgeting helps track costs, expenses, and sales targets,
ensuring they are within set limits.
It helps regulate expenses to align with sales targets and sets standards for
resource use.
Communication of plans and coordination among employees is encouraged
through budgeting.
Budgeting also helps in future planning by setting the organization’s direction and
developing new policies.
 BUDGET PLAN
A budget plan is essential to the realization of the plans of
the organization. This summarizes the costs required for
the resources or inputs needed to implement plans,
programs, and activities. These inputs include human
labor and skills, equipment, facilities, supplies, and raw
materials.
A budget plan consists of two parts. These are direct costs
and indirect costs. Direct costs are expenses directly
related to the project or activity. Indirect costs are costs
that are not directly related to a project or activity but are
needed for the smooth flow of operations of the business
 THE SPECIFIC COSTS TO BE ESTIMATED IN A BUDGET PLAN ARE THE
FOLLOWING:
1. Operational costs - These are the direct costs of doing the actual work,
activity, or project. Examples are the supplies or raw materials needed in
the production of a good.

2. Organizational costs - These are indirect costs that refer to activities that support
operational plans, like the maintenance of the office workspace, the plant or
manufacturing area, and utilities such as telephone, and electricity. These also include
the costs of the people who perform functional tasks that are unrelated to the
production of goods.

3. Staffing costs-These are also called labor costs and refer to the wages or salaries of
people who perform the actual work.

4. Capital Costs - These are fixed, one-time costs for large investments such as heavy
equipment, facilities, land, and buildings.
THANK
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