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