Control Mechanisms Paper

Topics: Financial statements, Balance sheet, Cash flow Pages: 5 (1593 words) Published: October 7, 2010
Control Mechanisms paper

RUNNING HEAD: Control Mechanism Paper

In order to understand control mechanisms, it is important to understand what control means in the management world. Control refers to the workings of individuals being directed to achieve organizational goals. This can be the way that managers keep their employees on track and focused toward meeting their goals. The managers are controlling the employees. In order to meet the organizational goals, there are certain control mechanisms that are used. In Wal-Mart, four examples of control mechanisms used include finance control, distribution control, audits, and performance reviews.

Finance control refers to the way that Wal-Mart regulates their finances. This refers to the money they spend and the money they make. Finance control and audits, another type of control mechanism, work together. “Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with accounting principles generally accepted in the United States” (Wal-Mart Annual Report, 2009). This statement came from Wal-Mart’s “Management’s Report to Our Shareholders”. It explains the importance of having finance control. It is important to have proper financial reporting and therefore, Wal-Mart has audits to ensure that they are completing their financial statements properly. Audits are a way to make sure that Wal-Mart is doing their reports correctly. Without audits, finance control could be inaccurate.

Wal-Mart uses strategy when it places its distribution centers. Wal-Mart makes sure that they have a distribution center in a close location to their stores. This is the way that the can ensure that they can have deliveries made to their stores within a day. They also have used technology to its fullest. They are able to communicate among stores, distribution centers, and suppliers. “The system consolidated orders for goods, enabling the company to buy full truckload quantities without incurring the inventory costs” (Wal-Mart Stores, 2). This shows how distribution control helps to regulate finance control as well. Since they are able to communicate quickly and efficiently, they are able to save money.

The fourth control mechanism is performance reviews. Performance reviews are a type of control mechanism that is found in many different organizations. They are set in place to ensure that each employee is working efficiently toward the goals that are set in place. Wal-Mart conducts employee performance reviews. They are done to point out the good work that each employee is doing as well as discuss areas that can be improved. By discussing the areas that can be improved, they will be more likely to succeed at reaching the organizations goals. Wal-Mart has a clear understanding of the financial control of the company, by evaluating and updating the three major financial reports. The first one is the balance sheet; this is effective for Wal-Mart because this report shows the financial position of the company at a specific point in time. By keeping this balance sheet, they can easily see if they are making a profit, losing a profit, or breaking even. This statement shows total assets that the company has such as items that the business owns (assets) or items which the company owes (liabilities). The next statement that Wal-Mart has is the income/profit and loss statement. This statement shows revenue minus the cost of goods sold, minus operating expenses. This may not seem like an important statement, but this statement is effective because this will allow the company to see what goods are moving, and what goods are not, this statement also comes in handy because just having goods, means nothing if you do not have any idea what they are doing for the business. The cash flow statement is the final statement...

References: Achtmeyer, W. F. Center for Global Leadership. Tuck School of Business at Dartmouth . Retrieved from http://from
Burit, Chris, Wolf, Carol, Boyle, Matthew (2010), Wal-Mart Asks Suppliers to Give Up Control of their Deliveries. Retrieved July 16, 2010.
Duke, M. T. & Schoewe, Thomas M. Management’s Report to Our Shareholders. Retrieved from
Wilbert, Caroline.  (April, 2006)"How Wal-Mart Works." 26 June 2010.
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