Business Admin. and Management | BUDGETING SYSTEM AND BUDGETING CONTROL: AS A MEANS OF IMPROVED PERFORMANCE IN PU...

BUDGETING SYSTEM AND BUDGETING CONTROL: AS A MEANS OF IMPROVED PERFORMANCE IN PUBLIC LIMITED COMPANY

65 pages | 1-5 chapters | ₦3,000 - price | 130 people found this post useful.

  ABSTRACT

The need for effective and proper planning necessitated the adoption of budgeting and budgetary control system. It is hoped that effective budgeting and budgetary would enhance effective performance, thereby, help in the attainment of the organization’s goals. This research will examine the role of budgeting and budgetary control towards effective planning in an organization as a whole, with specific objective of examining the need for sound budget preparation and implementation process. In going about this research work, primary and secondary methods will be used in data collection and sample methods were used in data analysis. This research work has become so important since organization performance is directly and indirectly dependant on how well an organization make use of budgeting and budgetary control system. From the finding of this research, it was revealed that periodic review of budget would go a long way in improving the policy formulation on and implementation of future plans for the department and the whole organization. And that budget also assist planning by estimating the income and expenditure, which must be incorporated in planning. Based on the finding, some useful recommendations were made and it was therefore concluded that there was a need for lendget manual to suite it preparation instead of the usual mere guidelines.

CHAPTER ONE

The rapid environmental changes that companies face today affect not only production system, equipment changes and new technology usage but also organizational performance and management philosophies, therefore this report will consist of the background to study, the statement of the problem, purpose of the study, scope, objectives and the significant the study has on business organizations as far as budgetary control and performance are concerned.

1.1   Background to the study

Budget and Budgeting are concepts traceable to the Bible days, precisely the days of Joseph in Egypt. It was reported that nothing was given out of the treasure without a written order. History has it that Joseph budgeted and stored grains which lasted the Egyptians throughout the seven years of famine.

Budgets were first introduced in the 1920s as a tool to manage costs and cash flows in large industrial organizations.

John (1996), states that it was during the 1960s that companies began to use budgets to dictate what people needed to do. In the 1970s performance improvement was based on meeting financial targets rather than effectiveness companies then faced problems in the 1980s and 1990s when they were not willing to spend money on innovations in order to stay with the rigid budgets, they were no longer concerned about how customers were being treated, only meeting sales targets became essential.

It is a requirement as per Serena Group of Hotels Finance policy that each unit has got to prepare budgets from where financial statements prepared on a monthly basis can be compared with. However effective budgetary control has been a problem. What is forecasted monthly is not actually met. In business organizations, budgeting are formally associated with the advent of industrial capitalization for the revolution of the eighteenth century, which presented a challenge for industrial management.

However, budgeting at the early state of its development was concerned with preparing and to permit correct performance evaluation and consequently rewards.

Information that management accounting control system helps managers, by monitoring company‟s changing environmental circumstances, to compare opportunities and threats in the market so that they can obtain added value against competitors because it is important in facilitating the preparation of budgets, since budgeting and accounting are closely related (Bromwish,1990).

Budgets are known to have an important role to transmit the expectation of top management to lower levels. According to Bremser (1988) budgets are used to communicate top management‟s expectations to managers and employees.

According to Lucey. (1993), it is a quantitative expression of plan of action prepared in advance of the period to which it relates, expressed in money terms approved prior to the period.

Lucey (1993) further urges that performance is influenced by many factors which includes planning and coordination, clarification of authority and responsibility, effective communication both internal and external, control of resources available, both human and non human and motivation of both the lower and middle management.

If the actual numbers delivered through the financial year turn to be close to the budget, this actually demonstrates that the organization‟s management understand its business and has been successfully driving it in the direction they had planned. On the other hand, if the actual results diverge wide from the budget, this sends out an „out of control‟ signal. For this reason, budget based control means manager‟s evaluation according to budgetary goals.

In this context, budgeting benefits and its possible negative effects on attitudes and behaviors of managers on performance are still among the subjects of strategic management control systems that are being researched presently nearly all large businesses reforecast their forecast their activities, as months pass, the actual income achieved and expenses incurred can be compared to the budget and forecast

1.2. Statement of the problem.

Many business firms recognize the need to have a developed and comprehensive budgetary control system in order to minimize budget variances, costs and maximize efficiency. Budgetary control is as crucial as cash itself and any theft, waste, excessive use or stock out could lead to the business‟s poor performance. Obajana cement factory has acknowledged that its performance is influenced by budgetary control systems. This is evidenced by a budgetary deficit of shillings Fifty three million point four (53,458,363) for the last half of the year of financial statements, July-December, 2010. It is against this scenario, that the researcher picked interest in analyzing the effect of budgetary controls on business performance.

1.3 Purpose of the study

The purpose of the study will be to establish the effectiveness of budgetary controls on performance of Obajana cement factory particularly in the administration of revenue and operating costs through activity planning, coordination and communication between departments, help to allocate resources, motivation to objectives, assessment and control of results and performance evaluation of departments or managers.

1.4  Research objectives

Main objective

The general objective of the study will be to analyze the role of budgetary control on the performance of public enterprise organizations.

Specific objectives

1 To establish the levels of budgetary controls in Obajana cement factory.

  1. To establish the levels of performance in Obajana cement factory.
  1. To establish the relationship between budgetary control and performance in Obajana cement factory.

1.5 Research questions

  1. What are the levels of budgetary controls in Obajana cement factory?
  1. What are the levels of performance in Obajana cement factory?
  1. What is the relationship between budgetary controls and performance in Obajana cement factory?

1.6 Scope of the study

This will be looked at in three dimensions:

1.6.1 Study scope

The study will be limited to the performance as a dependent variable and budgetary controls as an independent variable. The researcher will consider strategies used towards budgetary controls and the way they are manipulated to influence the performance of the organization.

1.6.2 Geographical scope

The study will be carried out in kogi state, at Obajana cement factory on plot 16/18 Nile Avenue, one of the Dangota Group of company in East and Central Nigeria.

1.6.3 Time scope.

In terms of time scope, the study will cover the period between January, 2010 to March, 2014.

1.7 Significance of the study

The study was intended to establish the correlation between budgeting and budgetary controls with business performance to assist managers improve their operational efficiency.

The study will also intend to facilitate the researcher acquire skills on how to conduct research findings and generate solutions to business problems encountered in business life and also enable him fulfill the requirement for the award of a Higher National Diploma in Accountancy .

Lastly, the study will also intend to add to the existing literature on budgeting and business performance, to help future researchers interested in the subject matter and as a basis for further reference.

1.8       DEFINITION OF TERMS

The following terms have been considered necessary to be defined in order to explain their meaning with the content of this work.

Goal congruence: This means that, the aims and objectives of all the workers in an organization should be focus towards achieving the aims and objectives of the organization.

Tertiary institution: The tertiary institution includes all federal and state government owned universities, polytechnic and colleges of education.

Managerial effort: This is the physical and mental exertion made by mangers towards set goals, managerial function like planning, organizing, supervision, co-coordinating etc. these tools and techniques are applied by managers of organization both private and public on managerial effort to solve their business decision problems.

Responsibility accounting: This is based on the recognition of individual areas of responsibility as specified in a firms structure. This implied that cost and revenue are controlled as applicable by using responsibility accounting.

Management: This is also a series of activities that a firm engages it managers to guide, plans and equally handle responsibilities and changes that will be ahead.

Budget: A budget can be defined as a quantitative expression of the operational plans for an organization for a future according period.

BUDGETARY CONTROL: It has been severally defined. J. Batty says “budgetary control in its complete form involves a predetermined plan in financial terms, to cover all phase of business activities and the operation of that plan in such a way that anticipated profit is, as near as possible, achieved.

Share on social media:

Get Complete Project Material(s) Now! »


Not what you were looking for? Perform a search

Quick Project Search


Drop a comment: