CONTROL

1. CONTROL 3rd Management Activity

2. 3. Controlling • Controlling is a management activity that involves measuring performances to make sure the required standards are being reached. • Principals of Effective Control: • Controls must be set up according to the nature of the job to eb carried out. • It must be feasible to measure and record actual versus expected output. • All deviations should be reported to the manager whom must take appropriate action,

3. Steps in Controlling

4. Controls used in business Quality Control Stock Control Business Control Financial Control Credit Control

5. 1. Stock Control • The aim of stock control is to make sure that the business has the right amount of stock available. • Too much stock = wasted money by stock going off.out of date • Too little stock = business will run out and will be unable to fulfil orders/demand

6. 1. Stock Control • Just-in-Time: The aim of this system is to keep the minimum amount of stock possible in the factory while at the same time not running out of stock. • It involves buying from a supplier who delivers exactly the right amount of perfectly made stock at exactly the right time. • Materials come into a factory only when they are needed – not before and not after.

7. Advantages of Stock Control • Having lower amounts of stock will help reduce stock insurance costs. • Lower amounts of stock will make it easier to eradicate theft. • The business will always have the right amount of stock in the shop. This will keep customers happy. • If there is the right amount of stock, it will not lose money because of deterioration or obsolete stock or excessive storage costs.

8. 3. Credit Control • This is control over the amount of credit a firm gives to its customers who are known as debtors. • Firms sell goods on credit to: • Attract new customers and increase sales • Historical patterns – may have always given credit • Competitive advantage over competitors who do NOT give credit • To increase profits.

9. Credit Controller • The person responsible for keeping control of all credit given to customers and ensuring payments are made is call the credit controller. • Functions of the Credit Controller: • Should credit be given to a customer? • Review credit given to existing customers • To ensure credit terms are not exceeded. • To offer incentive for debtors to pay on time (discounts) • Reservation of Title – ownership lies with the seller until goods are paid for in full. • To ensure that the trader has a written copy of the trading terms (credit days, amount, interest of overdue balances)

10. Bad Debts • When debtors go bankrupt and cannot pay their bills. • Reduce Bad debts by: • Having an efficient credit control dept. • Offer incentives to pay early • Outsource debt collection to expert firm • Penalise for overdue balances (high interest rates) • Have an insurance policy for Bad debts • Make sure goods are sold with Reservation of Title • Investigating Credit status by: • Bank reference • Trade reference from another supplier • The Status Enquiry Agency - €100 for each enquiry for a report on mgmt, trading history, credit status and their recommendations. • Check the Companies Register Office • Interview/question the customer

11. 2. Quality Control • Quality control involves making sure that the quality of a business’s products meets the expectations of consumers. • There are various quality controls such as: • Physical Inspections • Quality Circles • The Quality Mark (Q-Mark) • ISO 9000 Awards

12. 1. Physical Inspections • A trained inspector can physically examine finished products before they leave the factory. • Example: Waterford Crystal inspectors examine every single product to that each lives up to the brand image of perfect Crystal. • Otherwise the inspector uses a technique called sampling:

13. 2. Quality Circles • These involve employees spotting quality problems and come up with suggestions to solve these problems. • The discuss these solutions with the manager. • If the manager decides to go ahead with the solution, the members of the Quality Circle help to implement the solutions. • Advantages: • Eliminates mistakes and quality problems. • Tries to ensure products are perfectly made. • Quality Circle employees feel involved and motivated and committed to the business.

14. 4. ISO 9000 Series • Recognised international series of standards for quality. • Developed by the International Standards Organisation and is administered by the NSAI – National Standards Authority of Ireland. • Must be thoroughly audited to obtain an ISO 9000. • Ongoing assessments are required – at least four unscheduled audits per year. Benefits of having the ISO 9000 • High levels of efficiency • Competitive advantage • Overall sales and profits increase • Qualification of government grants • Workforce and more focused and motivated

15. Financial Control • Is used to monitor the financial affairs of the business to ensure it always has sufficient finance to pay its bills. 1. Cash flow forecasting- to control expenditure & manage cash flow and ensure that the business does not run out of cash to met its day to day needs. 2. Ratio analysis-to monitor the financial performance of the business 3. Cost controls-to ensure that costs do not rise beyond planned levels 4. Break Even Analysis - to identify the sales point at which the business breaks even, no profit/loss. This helps control profitability and sales.

16. Budgeting is a financial plan for specified period which is agreed in advance. It shows where money is coming in and out. • Objectives of a Budget: • To prepare a financial plan • To aid in the allocation of resources to ensure targets are met • To allocate budgets to each departments • When seeking finance, extra capital • To motivate people to achieve certain targets

17. Budgets • Budgetary Control: • Managers must operate within budgets and monitor them closely – usually after every quarter. • The Sales budget – Budgeted versus Actual sales targets which are reviewed every month, quarter and year. • Actual sales < Budgeting sales = negative variance • New competition • Decline in economy – less spending power • Price reductions from competition • Unrealistic budget to begin with • Benefits of Budgetary Control: • A negative deviation can be identified and rectified. • In order to evaluate each departments progress and contribution. • Judge each departments performance.

18. Advantages of Controlling • Controlling ensures the business achieves its objectives- the purpose of controlling is to periodically check the progress of the business to ensure that it is on target to achieve goals set out in planning. If the business is off target steps can be taken to correct this and get the business back on track to achieve its goals. 2. Controlling reduces waste - An effective quality control system ensures that excellent top quality products are produced first time, which lower costs as no materials wasted or no repairs necessary or no refunds to dissatisfied customers.

19. 3. Controlling improves cash flow • An effective credit control system- offering discounts, ensuring payment on time- means the business receives plenty of cash in time and can pay its own bills on time. Therefore there is no risk of bankruptcy. 4. Controlling increases sale and profits • Quality control ensures top quality, stock control ensures always enough stock to meet demand so no lost sales. When customers know that a certain business can guarantee availability they will always shop there , leading to higher sales and profits.