Kateryna M.
Radchenko
postgraduate
of Kyiv National Taras Shevchenko University, Ukraine
Role and Importance of Control in Enterprise Cost Cutting
Economic control is important in cost cutting.
Unfortunately, scientific literature paid little attention to problems of
economic control in the context of cost
cutting and maximizing profits for companies.
Formally, economic control operates as the system in every enterprise,
but only some of them carry out this control according to its basic rules and
principles that provide such businesses with increase operating efficiency, responsibility
and discipline at all levels of management.
Ukrainian scientists, economists such as A. Bodkzh, T. Butynets, F.
Butynets, A. Vitvytska, N. Vyhovska, I. Honcharuk, V. Rudnytsky, L. Dikan, E.
Kalyuha, G. Kireytsev, S. Levitska , L. Napadovska, V. Panteleev, B. Usach, L.
Shatkovska, V. Shevchuk and others paid much attention to such concepts as
control, economic control and internal control and intercompany control.
Control is an important component of any activity that is why the
scientists constantly pay attention to its organizational order and the
particular differences in definition.
There have been a large number of publications on these issues recently, but
there is no unanimity opinion of scholars, and authors give different
definition to the same economic category. The table shows variations of the
concept "control" defined by various scientists and economists.
Table
|
Source of definition |
Scholars definition of the concept "control"
|
|
M.
Belukha [1] |
Control is a system of supervision and testing of managerial process
of the entity through administrative
decisions, result fixing of managerial influence on the managed entity,
differences made during implementation of these decisions |
|
G.
Kireytsev [2] |
Control should be seen as multi-phenomenon, as a function of both
management and accounting, including harminizational function of business entities |
|
A.
Goncharuk, |
Control
is a managerial function, the system of
supervision and testing of managerial process of the entity to administrative
decisions, result fixing of managerial influence on the managed entity,
drawing out differences made during implementation of these decisions |
|
L. Dikan |
Control
should be considered as a system of relations organized for systematic
supervision and checking progress of a certain entity of a social, industrial
or other process by control
authorities, institutions and authorized persons to determine the differences
of the controlled entity from the
set parameters |
|
E.
Kalyuha [5, p. 29] |
The
control should not be considered as
an accounting and testing activity, but as a function of management
and an important element of the state economic significance |
|
F.
Butynets, N. Malyuga, S. Bardash, N. Petrenko [6, sec. 10] |
Control
is a systematic supervision and
testing of the operating process of a certain entity to determine differences from the set parameters |
|
Robert
Pushkar, N. Tarnawsky [7, p. 234]. |
Control
is the process of achieving organizational goals through assessment and
analysis of the results, strategic
interference in the production process and taking corrective action |
|
N.
Vitvytska [8, p.. 18] |
Control
is a process which should provide appropriate functioning of the entity through adopted managerial decision
and it should be directed to the
successful achievement of this goal |
|
S.
Levitskaya [9, p. 83]. |
Control is an organic system of monitoring certain
issues by controlling authorities, it is not only a source of information,
but also an element of economic entity and processes; indicative factor of
implementing administrative decisions, the system of dynamic development,
especially in issues which provide efficient use of public resources by
persons |
|
L.
Napadovskaya [10, p.19] |
Control
is a process which ensures quality development and effective achievement of
the objectives determined by
organization through the implementation of administrative decisions |
|
B. Usach
[11, p. 10] |
Control means
testing certain economic decisions in order to establish their justice and
liability |
|
O.
Podolyanchuk [12, p. 216]. |
Control
is the final stage of the managerial process, which provides checking the
tasks or planned parameters, allows to reveal the actual state of managerial entities,
shows up weak points in the work and influences over resolving a managerial decision |
|
T.
Karpova [13, p. 334]. |
Control
is checking of specific and detailed plans by a manager |
Generally, the word "control" has French origin (from the word
«controls») and it literally means the list maintained in duplicate. Control
means verification of certain economic decisions in order to ascertain their
legality and feasibility [14, p. 5].
V. Shevchuk said that the term "control" has Latin roots: rola
– a roll of paper records, a document; contra - opposition to those claims that
are in that document [15, sec. 11].
As we see it, control should firstly be considered as one of managerial
functions in every sphere of human activity.
"Economic Encyclopedia"
(vol. 1) defines control as: "1) an element of management of economic entities
and processes, which means their supervision to test their compliance according
to laws, legal regulations and programs , plans, contracts, projects, agreements,
2) entity control, real authority,
concentration of controlling interests in the same hands. " [16, sec. 829,
830].
The
"accounting dictionary" (edited by Professor F. Butynets) considers
control in two dimensions: the first is " systematic supervision and
testing of the operating process of a certain entity to determine its deviation
from the set parameters," and the second is a "decisive influence on
financial, economic and commercial policy of the enterprise with the aim of
obtaining benefits from its activities "[17, p. 94].
Thus,
in her monograph N. Vyhovska states that ".... control is a separate
function of management, but it does not absorb other functions, and does not
interpenetrate into them, but actively influences the effectiveness of their
usage" [18, p. 129].
In the
field of economy control is called economic control. L. Shatkovska defines
economic control as an important part of management. With the help of such control
“actual state of affairs in business is revealed, the causes of difference of
normal working conditions or unused inventories are found out”[19, p. 36].
Modern
economic theory structures the of concept "economic control" around
the following types: domestic, internal and intracompany.
The way
we see it, economic control should be understood as intracompany and external
control of economic and financial activity which is done by representatives of
the state economy control, special state supervisory and administrative
authorities, auditing firms, public and intracompany controllers within their
assigned powers and a program developed beforehand.
The
problem of costs minimizing is one of the main tasks that must be settled in
the process of economic control at the enterprise.
Costs
production control is the control over the processes and factors that affect
production costs, their level, and formation of the self-cost and marketed
commodities.
The
main objective of internal control cost is to provide information about
differences from the norms and standards, identifying ‘bottlenecks’ of the
workplace and unused inventories of enterprises. Main objectives of internal
control of production costs are:
- Reduced usage of direct and extra production materials;
-
Reduced material consumption and energy intensity of production output;
-
Reduced production costs;
-
Prevented shortages and worsening product quality.
Control plays an important role in the process of planning costs cutting, when planned material costs
are being coordinated, wages fund is being formed, planned overhead expenditure
and calculation of coefficients of their distribution are being defined,
norms and standards costs are being calculated, etc.
In the production process control enables to supervise actual costs,
their congruency with planned costs, standards and expenditure rate.
To conclude, the introduction of intracompany control, particularly cost
production control, will provide management with information about the state of
production costs and self-cost of manufactured products, identify and mobilize
production inventory.
References:
19.
ШатковськаЛ.С. Економічний контроль на
сільськогосподарських підприємствах: [навч. посіб.] / Л.С.Шатковська. - К.:
Урожай, 1994. - 272 с.