Management Activities 3: Controlling

Question 1

Controlling

Answer 1

A management activity that measures how well an organisation achieves the goals and objectives that it has set.

Question 2

Steps in the management activity control

Answer 2

1. Set the standard: Organisation set the standard to be achieved.
2. Measure performance: Actual performance is measured.
3. Compare performance with standard: Management compares actual performance with he standards set.
4. Take corrective action: Take action to avoid the same issues
   happening again.

Question 3

Types of management control

Answer 3

1. Stock Control: A management activity that aims to keep optimum
   stock levels so the business does not have too little or too much stock
2. Credit control: Ensures that customers who use credit facilities pay
   their bills in full and on time.
3. Financial control: Financial control aims to ensure that the business is
   profitable and liquid.

Question 4

Types of stock

Answer 4

1. Raw materials: For a manufacturing business these are the raw
   materials used to make products.
2. Work in progress: Stock of goods that are partially completed.
3. Finished goods: Goods that have been made in the manufacturing
   process but not sold.
4. Merchandise: Goods bought by the firm to be sold on to the
   consumers

Question 5

Methods of managing stock levels

Answer 5

1. Manual stock take: Employees physically count and record all stock in
   the business.
2. Edi: Using Edi has a number of benefits like quicker re-ordering
   process and lower costs.

Question 6

Debtor

Answer 6

A customer who owes a business money.

Question 7

Bad debt

Answer 7

When a debtor fails to pay the amount they owe.

Question 8

Benefits of stock control

Answer 8

1. Increased efficiency: Modern stock control systems are computerised
   and are often more accurate than humans.
2. Feedback: Instant feedback on all stock levels for each item.
3. Reduced costs: The costs associated with having too much stock.
4. Theft: Easier to identify theft.

Question 9

Benefits of Credit control

Answer 9

1. Lower Risk of bankruptcy: A business that collects and pays its debts
   on time should avoid cash flow problems that lead to bankruptcy.
2. Reduces bad debts: The business gives only the most reliable
   customer credit terms.
3. Increased sales and profits: By selecting the best and most reliable
   customers for credit purposes e.g maintain, build and increase
   profits.

Question 10

Methods of Financial control

Answer 10

1. Cash flow forecast: Is a financial plan that sets out planned future
   income and expenditure.
2. Ratio analysis: Can obtain a quick indication of an organisation’s
   financial performance and state of affair.
3. Budget Allocation: The business sets a budget for each department.

Question 11

The importance of control

Answer 11

1. Business goals: Control is used to compare actual performance with
   the standards set.
2. Employee Motivation: Employees who are involved in increasing
   quality at the firm tend to have higher motivation.
3. Increased sales and profits: Customers are loyal to firms that
   produce high quality goods.