Mgmt Activities: Controlling: A management activity that measures how well an organisation achieves the goals and objectives that it has set. ​It involves setting standards, measuring the actual performance against these standards and taking corrective action where necessary.

Financial control aims to ensure that the business is profitable and liquid (liquidity is the ability to pay bills as they fall due).​

Quality Control is concerned with reviewing work done to ensure it meets the required standards. It minimises costs and time associated with selling faulty goods to consumers and avoids loss of reputation/lost sales in the future. ​

Credit control means monitoring which customers are given credit, for how long and ensuring they pay on time. The aim of credit control is to make sure all customers pay their bills on time and in full and to avoid bad debts.

Stock Control

A management activity that aims to keep optimum stock levels so that the organisation doesn’t have too much stock or too little stock. Businesses should aim to have the right stock, in the right place, at the right time.

Implications

Too much stock

Too little stock

Inefficient use of money

Lower profts / Excess costs

Stock can become obsolete

Greater risk (damage, theft)

Loss of sales

Production delays

Inefficient use of storage costs

Loss of economy of scale

Benefits

Feedback

Reduced costs

Increased efficiency

Theft identification

(stock is accurately monitored)

(stock surplus/deficiency costs are reduced)

(instant feedback on every item's stock level)

(stock control systems = more accurate than humans)

EDI (Electronic Data Interchange)

Methods of Stock Control

EDI is an automated system . method of processing transactions between suppliers and customers e.g. ordering of stock, invoicing, payment. It is a faster, more cost effective method of
processing transactions.

A more effective stock control system using EDI means less stock needs to be held or too much won’t be ordered, reducing costs e.g.insurance, storage costs etc.

JIT

Quality Circles

Inspections

Quality Awards

Total Quality Management (TQM)

Inspectors carry out tests on finished goods through sampling

Factory employees volunteer to meet regularly to discuss and identify quality issues

Awarded by independent organisations when certain standards are met, e.g. the Q Mark and the ISO 9000

Benefits

Marketing (competitive advantage)

International sales (e.g. ISO 9000)

Increased consumer trust

Increasing prices becomes justifiable

The whole business seeks to improve quality in all areas. Ongoing improvements at every stage of the production process.

Benefits

Quality awards; can be used in marketing and to increase consumer trust

Reduced costs due to increase in product quality (less returns of faulty products)

Increased customer satisfaction

Quality Assurance

System put in place in order to guarantee quality at each stage of production from design to customer sales

Bad debt (when a customer fails to repay their debt e.g. if in financial difficulty)

Ways to avoid bad debts / Credit Control System

Check creditworthiness

Efficient administration (send reminders and invoices)

Credit limits

Collection procedure (discounts for early payments, interest on late)

Benefits of credit control

Lower risk of bankruptcy

Reduces bad debts

Increased sales and profts

Methods

Cash Flow Forecast

Ratio Analysis

Budget Allocation

current assets
-
current liability

Importance of Control

Financial plan setting out future income/expenditure

Maximises resources

Increases employee motivation

Business goals

Increases sales and profits

Budgeting for each department, firm can easily control spending in different areas