Controlling Techniques are two types, There are 1. Traditional Techniques and 2. Modern Techniques.
1. Traditional Techniques
Some of the Traditional Controlling Techniques are as follows:
- Personal Observation: This is the most traditional method of control. Personal observation is one of those techniques which enables the manager to collect the information as first-hand information.It also creates a phenomenon of psychological pressure on the employees to perform in such a manner so as to achieve well their objectives as they are aware that they are being observed personally on their job. However, it is a very time-consuming exercise & cannot effectively be used for all kinds of jobs.
- Statistical Reports:Statistical reports can be defined as an overall analysis of reports and data which is used in the form of averages, percentage, ratios, correlation, etc., present useful information to the managers regarding the performance of the organization in various areas.This type of useful information when presented in the various forms like charts, graphs, tables, etc., enables the managers to read them more easily & allow a comparison to be made with performance in previous periods & also with the benchmarks.
- Break-even Analysis: Break even analysis is a technique used by managers to study the relationship between costs, volume & profits. It determines the overall picture of probable profit & losses at different levels of activity while analyzing the overall position.The sales volume at which there is no profit, no loss is known as the break even point. There is no profit or no loss. Break-even point can be calculated with the help of the following formula:Break-even point = Fixed Costs/Selling price per unit – variable costs per unit
- Budgetary Control: Budgetary control can be defined as such technique of managerial control in which all operations which are necessary to be performed are executed in such a manner so as to perform and plan in advance in the form of budgets & actual results are compared with budgetary standards.Therefore, the budget can be defined as a quantitative statement prepared for a definite future period of time for the purpose of obtaining a given objective. It is also a statement which reflects the policy of that particular period. The common types of budgets used by an organization.Some of the types of budgets prepared by an organisation are as follows,
- Sales budget: A statement of what an organization expects to sell in terms of quantity as well as value
- Production budget: A statement of what an organization plans to produce in the budgeted period
- Material budget: A statement of estimated quantity & cost of materials required for production
- Cash budget: Anticipated cash inflows & outflows for the budgeted period
- Capital budget: Estimated spending on major long-term assets like a new factory or major equipment
- Research & development budget: Estimated spending for the development or refinement of products & processes
- Control through Costing: It is another method of controlling. It strives to minimize the wastage and establishes predetermined costs. Costs of an organization can be controlled through setting up the standards and targets and comparing the actual performance against them.
- Operational Audit or Internal Audit: Internal audit refers to the on-going process of evaluating the accounts and operations of a firm by its own internal experts. It provides feedback regarding the organization-wide performance , as it includes all the process and operations of a business.
- External Audit Control
- Financial Statement Analysis
- Profit and Loss Control
2. Modern Techniques
Some of the Modern Controlling Techniques are as follows:
- Return on Investment (RIO): ROI evaluates the relationship between net profit earned and the investments made. It is one of the major techniques for measuring the financial stability of a firm that determines whether adequate returns have been achieved from the investments or not.
- Management Information System (MIS): In MIS, raw data are collected from direct and indirect sources, after that data are classified, on which various analyses are performed to get information regarding the positive and negative positions of the business.
- Responsibility Accounting: Responsibility accounting encompasses developing various responsibility centres by the managers, Which is also called as “profit centre”, “cost centre”, and “investmenr centre”. All units or divisions are assigned a manager to look after his unit or division. This technique is used to measure both inputs and outputs of an organization. This technique involves preparing budgets and recording the costs and presenting into a format of report.
- Critical Path Method
- Management Audit System
- Human Resource Accounting
- Quality Control
- Total Quality Management