POM Unit-4

Course: BCA Class: I Subject Name: Principles of Management Unit No.: 04 Lecture No.
: Topic:
Unit-4
Controlling And budgeting
CONTROLLING
Controlling can be defined as that function of management which helps to seek planned results from the
subordinates, managers and at all levels of an organization. The controlling function helps in measuring the progress
towards the organizational goals & brings any deviations, & indicates corrective action.
Controlling helps managers monitor the effectiveness of their planning, organizing, and leading activities. Controlling
determines what is being accomplished — that is, evaluating the performance and, if necessary, taking corrective
measures so that the performance takes place according to plans.
Control is a primary goal-oriented function of management in an organisation. It is a process of comparing the actual
performance with the set standards of the company to ensure that activities are performed according to the plans
and if not then taking corrective action.
Every manager needs to monitor and evaluate the activities of his subordinates. It helps in taking corrective actions
by the manager in the given timeline to avoid contingency or company’s loss. Controlling is performed at the lower,
middle and upper levels of the management.
Controlling is one of the important functions of a manager. In order to seek planned results from the subordinates, a
manager needs to exercise effective control over the activities of the subordinates. In other words, the meaning of
controlling function can be defined as ensuring that activities in an organization are performed as per the plans.
Controlling also ensures that an organization’s resources are being used effectively & efficiently for the achievement
of predetermined goals.
 Controlling is a goal-oriented function.
 It is a primary function of every manager.
 Controlling the function of a manager is a pervasive function.
IMPORTANCE OF CONTROLLING
After the meaning of control, let us see its importance. Control is an indispensable function of management without
which the controlling function in an organization cannot be accomplished and the best of plans which can be
executed can go away. A good control system helps an organization in the following ways:
1. Accomplishing Organizational Goals
The controlling function is an accomplishment of measures that further makes progress towards the organizational
goals & brings to light the deviations, & indicates corrective action. Therefore it helps in guiding the organizational
goals which can be achieved by performing a controlling function.
Session: 2024-25 ; Name of the Subject Teacher: Mr. Abhishek Vaishnav Page 1
Course: BCA Class: I Subject Name: Principles of Management Unit No.: 04 Lecture No.: Topic:
2. Judging Accuracy of Standards
A good control system enables management to verify whether the standards set are accurate & objective. The
efficient control system also helps in keeping careful and progress check on the changes which help in taking the
major place in the organization & in the environment and also helps to review & revise the standards in light of such
changes.
3. Making Efficient use of Resources
Another important function of controlling is that in this, each activity is performed in such manner so an in
accordance with predetermined standards & norms so as to ensure that the resources are used in the most effective
& efficient manner for the further availability of resources.
4. Improving Employee Motivation
Another important function is that controlling help in accommodating a good control system which ensures that each
employee knows well in advance what they expect & what are the standards of performance on the basis of which
they will be appraised. Therefore it helps in motivating and increasing their potential so to make them & helps them
to give better performance.
5. Ensuring Order & Discipline
Controlling creates an atmosphere of order & discipline in the organization which helps to minimize dishonest
behavior on the part of the employees. It keeps a close check on the activities of employees and the company can be
able to track and find out the dishonest employees by using computer monitoring as a part of their control system.
6. Facilitating Coordination in Action
The last important function of controlling is that each department & employee is governed by such pre-determined
standards and goals which are well versed and coordinated with one another. This ensures that overall organizational
objectives are accomplished in an overall manner.
FEATURES OF CONTROLLING
 An effective control system has the following features:
 It helps in achieving organizational goals.
 Facilitates optimum utilization of resources.
 It evaluates the accuracy of the standard.
 It also sets discipline and order.
 Motivates the employees and boosts employee morale.
 Ensures future planning by revising standards.
 Improves overall performance of an organization.
 It also minimises errors.
Controlling and planning are interrelated for controlling gives an important input into the next planning cycle.
Controlling is a backwards-looking function which brings the management cycle back to the planning function.
Planning is a forward-looking process as it deals with the forecasts about the future conditions.
Process of Controlling
Control process involves the following steps as shown in the figure:
 Establishing standards: This means setting up of the target which needs to be achieved to meet organisational
goals eventually. Standards indicate the criteria of performance.
Control standards are categorized as quantitative and qualitative standards. Quantitative standards are expressed in
terms of money. Qualitative standards, on the other hand, includes intangible items.
 Measurement of actual performance: The actual performance of the employee is measured against the target.
With the increasing levels of management, the measurement of performance becomes difficult.
 Comparison of actual performance with the standard: This compares the degree of difference between the actual
performance and the standard.
 Taking corrective actions: It is initiated by the manager who corrects any defects in actual performance.
Controlling process thus regulates companies’ activities so that actual performance conforms to the standard plan.
An effective control system enables managers to avoid circumstances which cause the company’s loss.
TYPES OF CONTROL
There are three types of control viz.,
1. Feedback Control: This process involves collecting information about a finished task, assessing that information
and improvising the same type of tasks in the future.
2. Concurrent control: It is also called real-time control. It checks any problem and examines it to take action before
any loss is incurred. Example: control chart.
3. Predictive/ feedforward control: This type of control helps to foresee problem ahead of occurrence. Therefore
action can be taken before such a circumstance arises.
TECHNIQUES OF CONTROLLING:
There are many controlling techniques which were also commonly known as controlling aids.
Generally these controlling techniques can be categorized into two types i.e., Traditional Techniques and Modern
Techniques. Now in this article we can concentrate on both the techniques in detail. So that one can understand
them well and can practice well in their organizations to achieve their predetermined objectives.
1. Traditional Control Techniques:
The essence of control function is to confirm whether the actions are going according to plans or not. If they are not
accordance with the plans then management should take a corrective action to overcome such deviations. For this
purpose management should determine standards so that they can easily be compared with them.
For this purpose many techniques have been developed. Among them traditional such as Budgeting and Budgetary
Control, Cost Control, Production Planning and Control, Inventory Control etc. are the best examples. Though modern
techniques have been developed to improve the quality of controlling process but still today these techniques are
being used extensively in the organizations.
I. Budgeting and Budgetary Control:
Budgeting:
A widely used tool for management control is budget. It is a quantitative expression of plan of action. It refers to the
plan of an organization expressed in financial terms. It determines financial estimations relating to various activities
of an organization for a fixed period of controlling actual performance.
The following are the important definitions of a budget:
“A budget is pre-determined statement of management policy during a given period provided a standard for
comparison with the results actually achieved”. — J. L. Brown & L.R. Howard
“A budget is a financial or quantitative statement prepared prior to a defined period of time of the policy to be
pursued during that period for the purpose attaining a given objective”.— I. C. W. A England
From the above definitions the following characteristics can be summarized:
(1) A budget generally relates to a given future period
(2) It differs from objectives or policies because it is set down in specific numerical terms
(3) It should be flexible
(4) It is fundamental to the organization and hence, it receives the attentions and support of the top management.
Importance of Budgeting:
(1) Budgeting involves drawing up budgets based on well-defined plans of action.
(2) It serves another important purpose i.e., coordinating plans and activities of various departments and sections.
(3) It facilitate control over expenses, income, costs and profits.
Types of Budget:
There are many types of Budgets which are generally used in an organization.
They are:
(i) Sales budget – It represents the plan of sales for a given period.
(ii) Purchase budget – It presents the quantities of raw materials and other consumable items to be purchased by a
manufacturing company.
(iii) Cash budget – It is a statement of the anticipated receipts and payments for a given period along with the
resulting surplus or deficit.
(iv) Expense budget – It lays down the estimates of the standard or norm of operating expenses of an enterprise for a
given period.
(v) Capital budget – This type of budget outlines the anticipated expenditure on plant, machinery, equipment and
other items of a capital nature.
(vi) Revenue budget – It indicates the income or revenue expected to be earned from sale of goods produced or
purchased for re-sale.
(vii) Production budget – It shows the volume of production to be undertaken for a given period together with the
material, labour and machinery requirements sometimes production budgets also show the anticipated cost of
production.
(viii) Labour budget – It indicates the types of skills of labourers and the numbers in each category estimated to be
required in a given period along with the standard wages payable.
(ix) Master budget – This is prepared for the whole enterprise by compiling the different sectional budgets which is
finally adopted and worked upon.
Budgetary Control:
It is the process of preparing various budgeted figures for the organization for the future period and then comparing
with the actual performance for finding out variances. This enables management to find out deviations and take
corrective measures at a proper time. Hence, a budget is a means and budgetary control is the end result.
(1) “Budgetary control is system which uses budget as a means of planning and controlling all aspects of producing
and or selling commodities or services”.
(2) “Budgetary control is the planning in advance of the various functions of business so that the business as a whole
can be controlled”.
From the above two definitions, the following characteristics of budgetary control can be extracted:
(1) It implies the planning of activities for each department.
(2) It involves recording of actual performance for sake of comparison and control.
(3) It involves taking the necessary steps to improve the situation and to prevent further deviations.
(4) It involves the co-ordination among various department plans and budgets.
Advantages:
(1) The budgetary control aims at the maximization of profits of an organization.
(2) It provides the management with a means of control over planned programmes.
(3) It facilitates co-ordination among various activities of an organization.
(4) Wastage is minimized and hence efficiency can be achieved.
(5) Budgetary control enables the introduction of incentives schemes of remuneration.
(6) It creates consciousness among the employees.
(7) The national resources will be used economically and wastage will be eliminated.
(8) It provides an effective means by which top management can delegate authority and responsibility without
disturbing overall control.
Limitations of Budgetary Control:
(1) The future uncertainties reduce the utility of budgetary control system.
(2) Budgetary control may lead to conflicts among functional departments.
(3) The lack of co-ordination among different departments results in poor performance.
(4) The cost of employing additional staff for budgeting increases the expenditure of an organization which generally
cannot be afford by small enterprises.
II. Cost Control:
The cost of production is an important factor in calculating the income of an organization. Hence, every organization
tries it level best to keep the cost within the reasonable limits. The techniques of cost control involve the setting of
cost standards for various components of cost and making comparison of actual cost data with standard cost. This
process is known as standard costing. This standard costing refers to a pre-determined estimate of cost with can be
used as a standard.
This standard cost forms the basis of control under standard costing. Actual cost is compared with the standards,
variations are analysed and suitable action are taken to overcome such variations. Thus standard costing may be
regarded essentially as a tool of cost control.
Advantages:
(1) It helps in discovering efficient and inefficient activities in an organization.
(2) It provides valuable information for submitting tenders or quoting prices of products and services.
(3) It reduces cost of an organization.
(4) Cost records become a basis for planning future production policies.
(5) The reasons for variations in profit can be ascertained.
Limitations:
(1) It is very expensive to apply.
(2) The success of this method depends on the reliability and accuracy of standards.
III. Production Planning and Control:
It is an important function of production manager. This is the function of looking ahead, estimating difficulties to be
occurred and remedial steps to remove them. It guides and directs flow of production so that products are
manufactured in a best way.
Following techniques are helpful in production planning and control:
(i) Routing – It is the determination of exact path which will be followed in production. It determines the cheapest
and best sequence of activities to be followed.
(ii) Scheduling – It is the determining of time and date when each operational activity is to be started and completed.
(iii) Dispatching – It refers to the process of actually ordering the work to be done.
(iv) Follow up and Expediting – It is related to evaluation and appraisal of work performed.
(v) Inspection – It is to see whether the products manufactured are of requisite quality or not.
IV. Inventory Control:
It refers to the control of materials in an efficient manner, which ensures maximum return on working capital. It is
very important for the smooth functioning of production department. Its main objective is to maintain a suitable
supply of material at the lowest cost.
This control is exercised at three phases:
(i) Purchasing of materials
(ii) Storing of materials
(iii) Issuing of materials.
This can be exercised by establishing various criteria such as:
(i) Safety inventory level
(ii) Maximum inventory level
(iii) Reordering level
(iv) Danger level
V. Profit and Loss Control:
It is a simple and commonly used overall control tool to find out the immediate profit or cost factors responsible for
either the success or failure of business. As a controlling device it enables the management to influence in advance
revenues, the expenses and consequently even profits.
The sales, expenses and profit of different departments are compared. The department becomes a cost centre. The in
charge of the department is responsible for its performance. Even historical comparison is done to assess the
performance. In case there are deviations in performance than immediate steps are taken to rectify them.
VI. Statistical Data Analysis:
It is an important control technique. This analysis is possible by means of comparison of ratios, percentages,
averages, trends etc., of different periods with a view to find out deviations and causes. This method is applicable in
case of inventory control, production control and quality control. The minimum and maximum control limits are fixed
and deviations with in these limits are allowed.
It variations go beyond limitations then immediate steps are taken to correct them. Statistical control charts are
prepared with the help of collected data and permissible limits are plotted. This chart will give an idea whether
everything is going as per the plans or not. Hence, analysis of data is important device of control.
2. Modern Techniques:
Besides the traditional techniques which were discussed above, there are many other techniques which have been
evolved in modern times. These techniques are also called non-budgetary techniques.
I. Return on Investment Control (ROI):
One of the most successfully used control technique of measuring both the absolute and the relative success of a
company is by the ratio of net earnings to investment the company has made. This approach often referred to a ROI.
If the rate of return on investment is satisfactory, it will be considered as good performance. The return on
investment can be compared over a period of time as well as with that of other similar concerns.
II. Programme Evaluation and Review Techniques (PERT):
The success of organization depends on its activities for the accomplishment of an objective within stipulated time
and cost. Management should determine activities to be performed and their inter-relationships so that estimated
resources and time needed to complete these activities as per schedule and to monitor and control the time and cost
of the project.
Through network analysis technique the time can be minimized to complete the project and also overall project cost
can be minimized. For this purpose PERT and CPM are the two important types of network analysis used in modern
management.
It is a technique of project which is used in the following managerial functions:
i. Planning:
The planning of project includes the listing of different jobs that has to be performed to complete the venture. Here,
requirements of men, material and equipment are determined along with the costs and duration for the various jobs,
in the process of planning.
ii. Scheduling:
It is the arrangement of the actual jobs of the project according to sequence of the time in which they have to be
performed. At this stage calculation of manpower and materials required are calculated along with the expected time
of completion of each job.
iii. Control:
The process of control starts with comparison of the difference between schedules and actual results. They analyse of
difference and the corrective action taken is the essence of control process.
The most important condition for implementing PERT is the breaking up of the project into activities and determining
the order of occurrence of these activities i.e., deciding activities which are to be completed before. The next step is
to draw graph, which explains the activities outlining the predecessor and successor relations among them. A
thorough understanding of the steps associated with the construction of the graph is important for understanding of
PERT.
Advantages:
The following are the important advantages of PERT are:
(1) It forces managers to chalk-out a plan to integrate all the activities as a whole.
(2) It is instrumental for concentrating attention on critical elements that may need modifications.
(3) It is helpful in solving problems of scheduling the activities of one-time projects i.e., the projects which are not
taken on routine basis.
(4) It helps in completing a project on schedule by coordinating different jobs involved in its completion.
Limitations:
(1) The expected time for each activity of any programme cannot be determined with certainty.
(2) It is suitable for programmes where time is essential consideration.
III. Critical Path Method (CPM):
The technique is helpful in finding out the more strategic elements of a plan for the purpose of better designing,
planning, coordinating and controlling the entire project. It was developed by walker of Dupont Company in 1950s,
under this technique a project is broken into different operations or activities and their relationships are determined.
These relations are shown with the help of diagram known as network diagram. The network diagram may be used
for optimizing the use of resources and time. This technique is based on the assumption
that activity times are proportional to the magnitude of resources allocated to them and by making a change in the
level of resources, the activity times and the project completion time can be varied.
Objectives of CPM Analysis:
The following are the main objectives of critical path analysis in a network:
(1) To estimate a route or path between two or more activities which maximizes some measures of performance.
(2) To locate the points of hurdles and difficulties in the implementation of any project.
(3) To determine starting and ending times for each activity.
(4) To determine the slack associated with each non-critical activity.
Advantages:
The application of CPM leads to the following advantages:
(1) It determines most critical elements and pays more attention to these activities.
(2) It results in the maximum utilization of resources and facilities.
(3) It provides standard method for communicating project plans, schedules and costs.
(4) It concentrates on the timely completion of the whole project.
(5) It improves the quality of planning and controlling.
(6) It eliminates waste of time, energy and money on unimportant activities.
Limitations:
CPM is having two major limitations:
(1) It has limited use and application in routine activities for recurring projects.
(2) Time given for different activities may prove to unrealistic.
PERT and CPM Compared:
PERT and CPM as techniques of planning and control have certain similarities as well as differences.
The two techniques are similar in the following respects:
(1) Both CPM and PERT use the project network as their basis.
(2) The concept of critical paths and activity slack are common to both.
(3) Both the techniques are basically time-oriented. They are now used for cost control as well.
The differences between the two techniques are the following:
(1) PERT is used for new industries with rapidly changing technology having more uncertainties, while CPM is used for
construction projects where uncertainties are limited.
(2) CPM is activity-oriented while PERT is event-oriented.
(3) CPM lays stress on the element of costs whereas PERT is concerned essentially with the time factor
Management Audit:
This audit reveals irregularities and defects in the working of management. It also suggests the ways to improve the
efficiency of the management. It examines and the reviews various policies and functions of the management on the
bases of certain standards. It emphasis to evaluate the performance of various management processes of an
organization.
According to Taylor and Perry, “Management audit is the comprehensive examination of an enterprise to appraise its
organizational structure, policies and procedures in order to determine whether sound management exists at all
levels, ensuring effective relationships with the outside world”.
According to the Institute of Internal Auditors, Management audit is a “future oriented, independent and systematic
evaluation of the activities of all levels of management for the purpose of improving organizational profitability and
increasing the attainment of the other organizational objectives”.
Hence, from the above two definitions it can be concluded that management audit concentrates on the examination
of policies and functions of the management on the basis of certain standards and norms.
Objectives:
The following are the main objectives of management audit:
(i) It assists management in achieving co-ordination among various departments of the organization.
(ii) It detects any irregularity in the process of management and also it suggests improvement to achieve best results.
(iii) It assists all levels of management through constant watch of all activities of the organization.
(iv) It suggests changes in the policies and procedures for a better future.
(v) It ensures most effective relationship with the outsiders and the most efficient internal organization.
(vi) It concentrates on performance of the management through close observation of inputs and outputs.
(vii) It ensures the establishing good relations with the employees and to elaborate duties, rights and liabilities of the
entire staff.
(viii) It recommends better human relation approach, new management development and overall organizational
plans and objectives.
Importance:
Management audit is very important for its usefulness and is outlined as follows:
(i) It assesses the soundness of plans adopted and the adequacy of control system for making plans successful.
(ii) It is useful in giving advices to the prospective investors.
(iii) It is very much useful in reviewing plans and policies.
(iv) It gives proper advice to the management to perform their functions well.
(v) Financial institutions may get management audit conducted to ensure that their investment in the company
would be safe and secured in the hands of the management.
Advantages of Management Audit:
It provides us following advantages:
(i) It helps the management in preparing plans, objectives and policies and suggests the ways and means to
implement those plans and policies.
(ii) Proper management audit techniques help the business to stop capital erosion.
(iii) Management audit increases the overall profitability of a business through constant review of solvency,
profitability and efficiency position of the concern.
(iv) Management audit eradicates the inefficiencies and ineffectiveness on the part of the management.
(v) The techniques of management audit are not only applicable to all factors of production but also to all elements of
cost.
(vi) It helps the top management to take effective decisions in time.
(vii) It helps the management in strengthening its communication system within and outside the business.
(viii) It helps management in preparation of budgets and resources management policies.
(ix) It helps management in training of personnel and marketing policies.
Disadvantages:
The disadvantages of management audit can briefly be stated as follows:
(i) The installation of this audit technique involves heavy expenditure.
(ii) Due to ineffectiveness and inefficiency of the management auditor, management audit cannot provide result
oriented service.
(iii) Management auditors may be engaged in some activities detrimental to social objects of auditing for example
evasion of tax.
Advantages of controlling
 Saves time and energy
 Allows managers to concentrate on important tasks. This allows better utilization of the managerial resource.
 Helps in timely corrective action to be taken by the manager.
 Managers can delegate tasks so routinely chores can be completed by subordinates.
On the contrary, controlling suffers from the constraint that the organization has no control over external factors. It
can turn out to be a costly affair, especially for small companies.
Limitations of Controlling:
The defects or limitations of controlling are as following:
1. Difficulty in Setting Quantitative Standards:
It becomes very difficult to compare the actual performance with the predetermined standards, if these standards
are not expressed in quantitative terms. This is especially so in areas of job satisfaction, human behaviour and
employee morale.
2. No Control on External Factors:
An organization fails to have control on external factors like technological changes, competition, government policies,
changes in taste of consumers etc.
3. Resistance from Employees:
Often employees resist the control systems since they consider them as curbs on their freedom. For example,
surveillance through closed circuit television (CCTV).
4. Costly Affair:
Controlling involves a lot of expenditure, time and effort, thus it is a costly affair. Managers are required to ensure
that the cost involved in installing and operating a control system should not be more than the benefits expected
from it.
Controlling and Budgeting:
1. Nature of Control
Control is a fundamental management function that ensures that actual performance aligns with the organization's
planned objectives. It involves monitoring activities, measuring performance, and implementing corrective actions
when necessary.
 Continuous Process: Control is ongoing and not limited to one stage of the management process.
 Goal-Oriented: It ensures that organizational activities are directed toward the achievement of goals.
 Pervasive: Control is applied at all levels of management and across all departments of the organization.
 Dynamic: Control must adapt to changes in the environment and internal dynamics.
 Forward-looking: Effective control is based on future projections and prevents deviations before they occur.
2. Relationship Between Planning and Control
Planning and control are closely linked functions of management:
 Complementary Functions: Planning sets the goals, and control ensures these goals are achieved by
monitoring progress.
 Control Measures Against Plans: The control process compares actual performance against the plans set
during the planning phase.
 Feedback Loop: Control provides feedback to planners, allowing for adjustments in plans or operations based
on actual performance and environmental changes.
 Proactive Control: Effective control mechanisms allow management to anticipate problems and take
corrective actions before performance deviates significantly from plans.
3. Need for Control
Control is essential for ensuring that organizational objectives are met and resources are used efficiently. Key reasons
include:
 Alignment with Goals: Ensures that the actions of individuals and departments are aligned with
organizational goals.
 Resource Efficiency: Helps in the efficient use of resources like time, money, and materials.
 Error and Fraud Prevention: Identifies deviations early, preventing significant errors or fraud.
 Improves Coordination: Facilitates better coordination between departments and individuals.
 Adaptability: Helps organizations adapt to environmental and market changes by regularly reviewing
performance.
4. Significance and Limitations of Control
Significance of Control:
 Performance Measurement: Control helps in assessing employee performance against set standards.
 Motivation: Proper control systems motivate employees by providing clear standards and offering feedback
on their performance.
 Cost Efficiency: Helps in reducing waste and controlling costs by identifying inefficiencies.
 Improved Decision-Making: Continuous monitoring of activities provides management with valuable data for
making informed decisions.
Limitations of Control:
 Costly: Control systems, such as surveillance, audits, and detailed reports, can be expensive.
 Resistance from Employees: Employees may perceive control mechanisms as invasive, which could lead to
dissatisfaction.
 Focus on Quantifiable Metrics: Some controls emphasize measurable aspects while ignoring qualitative
factors like creativity and employee satisfaction.
 Time-Consuming: The control process requires a lot of time and resources to monitor, measure, and correct
deviations.
5. Types of Control
There are several types of control based on timing, function, and focus:
A. Based on Timing:
 Feedforward Control: Also called preventive control, it anticipates problems before they occur by focusing on
inputs and planning.
 Concurrent Control: Takes place while the activities are in progress, monitoring ongoing operations and
allowing for immediate corrections.
 Feedback Control: Focuses on the outputs or results after the activities have been completed, assessing
whether goals were met and learning from past experiences.
B. Based on Function:
 Operational Control: Focuses on the day-to-day activities and ensures that tasks are being executed as
planned.
 Financial Control: Monitors financial performance, including budget adherence, cash flow, and profitability.
 Quality Control: Ensures that products or services meet specific standards of quality.
C. Based on Focus:
 Behavioral Control: Involves monitoring the behaviors and actions of employees to ensure they comply with
organizational norms.
 Output Control: Focuses on the results or outcomes, rather than the processes, allowing flexibility in how
objectives are achieved.
6. Process of Control
The control process consists of the following steps:
1. Establishing Standards: Set clear performance standards and benchmarks. These can be quantitative (e.g.,
sales targets) or qualitative (e.g., customer satisfaction).
2. Measuring Actual Performance: Collect data and measure the actual performance of employees, teams, or
the organization against the established standards.
3. Comparing Performance with Standards: Analyze whether there is a significant deviation between the actual
performance and the set standards.
4. Taking Corrective Actions: If deviations are found, corrective actions must be taken. These can include
changes in processes, employee training, or adjusting targets.
5. Feedback: Continuous feedback from the control process helps in refining both standards and the control
system itself.
7. Budgetary Control
Budgetary control is a method of controlling financial performance by comparing actual results with budgeted
figures. It involves creating detailed financial plans and then using them as a control tool.
 Budgets as Standards: Budgets serve as performance benchmarks.
 Variance Analysis: Any deviation from the budget (variance) is analyzed, and corrective measures are taken if
necessary.
 Resource Allocation: Budgets help in efficient allocation of financial resources across departments.
Key Advantages:
 Helps in cost control and waste reduction.
 Promotes financial discipline across the organization.
 Facilitates planning by setting clear financial targets.
8. Performance Budgeting
Performance budgeting focuses on the relationship between the financial inputs and the outcomes or results of an
organization's activities. It measures not only how much money is spent but also what is achieved with that spending.
 Output-Oriented: Performance budgeting links funds to the outcomes of programs and activities.
 Goal Alignment: Ensures that resources are used efficiently to achieve strategic goals.
 Evaluation of Programs: Allows management to assess the effectiveness of various programs by comparing
costs to outcomes.
Advantages:
 Encourages accountability by linking spending to performance.
 Helps in resource prioritization based on results.
 Facilitates performance measurement and tracking.
9. Zero-Based Budgeting (ZBB)
Zero-based budgeting is a budgeting method in which all expenses must be justified for each new period, starting
from a "zero base."
 No Automatic Renewal: Unlike traditional budgeting, ZBB does not rely on previous budgets and instead
requires justification for every expense.
 Efficiency-Oriented: ZBB helps in eliminating wasteful or obsolete expenditures by reevaluating all activities.
 Prioritization: It forces managers to prioritize expenditures, focusing on essential programs and activities.
Advantages:
 Promotes cost savings by removing unnecessary spending.
 Improves efficiency by focusing on activities that provide value.
 Increases managerial accountability as every expenditure needs justification.
Disadvantages:
 Time-consuming, as every department must justify their budgets from scratch.
 Difficult to implement in large organizations with many departments.
10. Management Audit
A management audit is a comprehensive and independent examination of an organization’s policies, processes, and
managerial practices to evaluate their effectiveness and efficiency.
 Evaluates Performance: Management audits assess how well management has utilized resources to achieve
organizational objectives.
 Focus on Efficiency: It focuses on managerial efficiency, productivity, and adherence to organizational

standards.
 Non-financial Audit: Unlike financial audits, management audits are more concerned with managerial
practices and processes than with financial statements.
Key Benefits:
 Identifies inefficiencies in managerial processes.
 Offers recommendations for improving management effectiveness.
 Helps in strategic planning by providing insights into operational performance.
11. Network Techniques
Network techniques are tools used in planning, scheduling, and controlling large projects. They help in visualizing the
sequence of activities, dependencies, and project timelines.
Common Network Techniques:
 Critical Path Method (CPM): A technique used to determine the longest sequence of dependent tasks in a
project, which determines the project's completion time.
 Program Evaluation and Review Technique (PERT): A technique used for planning and controlling uncertain
activities by estimating the shortest, longest, and most likely time to complete each task.
Benefits of Network Techniques:
 Project Control: Helps in better project planning and control by identifying critical tasks.
 Resource Optimization: Helps in allocating resources efficiently to complete the project on time.
 Risk Management: Assists in identifying potential bottlenecks or risks that could delay the project.

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Course: BCA Class: I Subject Name: Principles of Management Unit No.: 04 Lecture No.

Controlling And budgeting

 Controlling is a goal-oriented function.

 It is a primary function of every manager.

 Controlling the function of a manager is a pervasive function.

1. Accomplishing Organizational Goals

2. Judging Accuracy of Standards

3. Making Efficient use of Resources

4. Improving Employee Motivation

5. Ensuring Order & Discipline

6. Facilitating Coordination in Action

 An effective control system has the following features:

 It helps in achieving organizational goals.

 Facilitates optimum utilization of resources.

 It evaluates the accuracy of the standard.

 It also sets discipline and order.

 Motivates the employees and boosts employee morale.

 Ensures future planning by revising standards.

 Improves overall performance of an organization.

 It also minimises errors.

Control process involves the following steps as shown in the figure:

There are three types of control viz.,

1. Traditional Control Techniques:

I. Budgeting and Budgetary Control:

The following are the important definitions of a budget:

From the above definitions the following characteristics can be summarized:

(1) A budget generally relates to a given future period

(3) It should be flexible

(1) Budgeting involves drawing up budgets based on well-defined plans of action.

(3) It facilitate control over expenses, income, costs and profits.

(1) It implies the planning of activities for each department.

(1) The budgetary control aims at the maximization of profits of an organization.

(3) It facilitates co-ordination among various activities of an organization.

(4) Wastage is minimized and hence efficiency can be achieved.

(5) Budgetary control enables the introduction of incentives schemes of remuneration.

(6) It creates consciousness among the employees.

Limitations of Budgetary Control:

(2) Budgetary control may lead to conflicts among functional departments.

II. Cost Control:

(1) It helps in discovering efficient and inefficient activities in an organization.

(3) It reduces cost of an organization.

(5) The reasons for variations in profit can be ascertained.

(1) It is very expensive to apply.

III. Production Planning and Control:

Following techniques are helpful in production planning and control:

IV. Inventory Control:

This control is exercised at three phases:

(i) Purchasing of materials

(ii) Storing of materials

(iii) Issuing of materials.

This can be exercised by establishing various criteria such as:

(i) Safety inventory level

(ii) Maximum inventory level

(iii) Reordering level

(iv) Danger level

V. Profit and Loss Control:

VI. Statistical Data Analysis:

I. Return on Investment Control (ROI):

II. Programme Evaluation and Review Techniques (PERT):

It is a technique of project which is used in the following managerial functions: