Management Control System

-Ranpreet kaur
Management Control System
Management
Control System
Management control System:-

Management control system is a process of assuming that resources
are obtained and used effectively and efficiently in the
accomplishment of the organizations objectives.

According to Billy, E. Goaz:- Management control seeks to compel
event to conform to plans.

According to William Travers Jerome:- Some sort of systematic
effort to compare current performance to a predetermined plan or
objective, presumably in order to take any remedial action required.

Characteristics of Management Control System:-

The main characteristics of Management Control system are as
following:-

1. A total system
2. Monetary standards
3. Definite pattern
4. Coordinated system
5. function of every manager
6. Existence of goals and plans
7. Forward looking
8. Continuous process
9. People oriented



10. Understandable
11. Reporting deviations quickly
12. Critical activity of organization
13. Behavioral implications
14. Emphasis








SCOPE OF MCS
Managerial control is an important process in which accounting information is used
as to accomplish the organizations objective. Therefore the scope of control is
very wide that covers a broad range of management activities.

According to Holden, Fish and Smith the main areas of control are as follow:-

Policies control
Control over organization
Control over personnel
Control over wages and salaries
Control over cost
Control over technique
Control over capital expenditure
Production control
Overall control
Control over External relations
Control over Research and Development

Nature of Management Control:-
Control is an important element of the process of managing. It ensure work
accomplishment according to plans. It is the process that guides and controls
operations towards some predetermined goods.
According to Prof. R.N. Anthony Management control is the process by which
manager assures that the resources are obtained and used effectively and
efficiently in the accomplishment of the organizations objectives.
It is a process by which people in the organization are made to work properly
and most efficiently with a view to obtain best results.
It is concerned with measuring and evaluating performance so as to secure the
best results under the circumstances.
An effort is made to compare the current performance to a predetermined
objective or plan.
Thus control is fundamental function of the management to ensure work
accomplishment according to predetermined plans and standards.
Most controls can be classified as:-
Preventive Controls are designed to
discourage the errors and
irregularities.
E.g.
1. A managers review of purchase
prior to approval prevents
inappropriate expenditures of
office funds.
2. A computer program which ask
for password prevent
unauthorized access to
information.
Defective controls are designed to identify
an error or irregularity after it has
occurred.
E.g.
1. An exception report that detects and
list incorrect or incomplete
transactions.
2. A managers review of long distance
telephone charges will detect improper
or personal calls that should not have
charged to the account.
Types of control
Preventive Control Defective Control

Process of Control:-


1. Well defined objective
2. Determination of strategic point of control( Planning)
3. Establishment of control standards
4. Determination of controllable costs and control period
5. Measurement of performance (Actual)
6. Comparison of Actual Performance with Standard
7. Corrective Actions



Adequate or Effective Control System:-

Efficiency and Effectiveness-

The following are the important requirements for making any control system
effective in application:-
1. Control by objectives 6. Flexibility
2. Direct Control 7. Economy
3. Forward looking control 8. Feedback
4. Managerial self control
5. Simple and balanced control

Control by objective: -
the control must be goal oriented and by objectives .
As objectives classify the expected results in meaningful and realistic terms,
they provide the control standards by which actual performance can be
measured.
The control system should be according to the nature and need of the
organization.

Direct control:-
Control should be exercised on people who work on machines and material.
It should be employee oriented rather than work oriented.

Forward looking Control :-
Control should always be forward looking.
It should bring out the deviation in light as soon as possible.
It must focus on strategic point with exception.

Managerial Self- Control:-

Control should be enforced through managerial positions in the organizational
structure.
Each manager must be vested with adequate authority for exercising control and
taking decisions.



Simple and Balanced Control:-

To be effective control must be simple and well balanced.
Any control device which is not intelligible cannot be put into practice.
So the control lines must be simple and intelligible both to the controller and the
controlled.


Flexibility:-
The control procedure should not be rigid.
Even the best plans and other predetermined criteria need to be changed form
time to time to meet a particular situation.
However , an effective control system should retain its basic structure.
Economy:-
A simple control system is bound to be economical .
It should not be cumbersome and expensive .
Economy is the basic requirement of any good control system.

Feedback:-
Feedback is the process of adjusting future actions based upon information
about past performance.
This proves the worth and utility of control process.

Control should not be negative . It should be positive , constructive and helpful .
Control is not a command, it is guidance. The system is really concerned with
the arrangement for implementing decision made in strategic planning.


Control Environment

An effective control environment supports and strengthen the
other control elements, whereas a weak control environment
undermines the other elements, rendering them useless.

In an effective control environment , employees know that
doing the right thing is expected and will be supported by upper
level management, even if it hurts the bottom line.

In a weak environment control procedure are frequently
overridden or ignored , providing an opportunity for fraud.