Controlling

Definition

Controlling is the management function that involves monitoring and evaluating organizational performance to ensure that goals and objectives are being met efficiently and effectively. It is a critical component of the managerial accounting process, as it enables managers to identify and address any deviations from the planned course of action.

5 Must Know Facts For Your Next Test

1. Controlling is one of the three primary responsibilities of management, along with planning and organizing.
2. Effective controlling helps managers identify and address problems before they become too severe, enabling them to make timely adjustments to their plans and strategies.
3. Controlling involves setting performance standards, measuring actual performance, and taking corrective action when necessary.
4. Variance analysis is a key tool in the controlling process, as it helps managers understand the reasons for deviations from planned performance.
5. Feedback loops are essential in the controlling process, as they allow managers to continuously refine and improve their plans based on the results of their actions.

Review Questions

• Explain how the controlling function of management relates to the responsibilities of managerial accounting.
  • Managerial accounting plays a crucial role in the controlling function of management by providing the necessary information and tools to monitor and evaluate organizational performance. Managerial accountants are responsible for gathering, analyzing, and reporting financial and non-financial data that managers can use to assess progress towards goals, identify variances, and take corrective action. This feedback loop between managerial accounting and the controlling function is essential for ensuring the efficient and effective use of organizational resources.
• Describe how the controlling function of management is connected to the planning and organizing responsibilities.
  • The controlling function of management is closely tied to the planning and organizing responsibilities. Effective planning involves setting clear goals and objectives, and the controlling function ensures that these plans are being executed as intended. Organizing resources and activities in a way that supports the achievement of goals is also crucial, and the controlling function helps managers evaluate the effectiveness of their organizational structures and processes. By monitoring performance and making adjustments as needed, the controlling function helps ensure that the planning and organizing efforts are aligned and contributing to the overall success of the organization.
• Evaluate the importance of feedback loops in the controlling function of management, and explain how they contribute to continuous improvement.
  • Feedback loops are essential to the controlling function of management, as they enable a continuous cycle of evaluation and improvement. By comparing actual performance to planned or expected performance, managers can identify areas for improvement and make necessary adjustments to their plans, strategies, and organizational processes. This feedback loop allows for ongoing refinement and optimization, helping managers ensure that the organization is achieving its goals efficiently and effectively. The ability to learn from past performance and make informed decisions about the future is a key advantage of the controlling function, and feedback loops are the mechanism that facilitates this continuous improvement.

Related terms

Variance Analysis: The process of comparing actual results to planned or budgeted results and identifying the differences, or variances, to determine the causes and take corrective action.

Feedback Loop: The process of using information about past performance to adjust future plans and actions, creating a continuous cycle of improvement.

Performance Measurement: The systematic process of quantifying the efficiency and effectiveness of organizational actions, often using key performance indicators (KPIs) to track progress towards goals.