THE ROLE OF BUDGETING IN MANAGERIAL PLANNING AND CONTROL A CASE STUDY OF GUINNESS NIGERIA PLC BENIN EDO STATE AND NIGERIAN BREWERIES PLC AMA ENUGU STATE

ABSTRACT

This study is on the Role of Budgeting in Managerial Planning and Control: A case study of Guinness Nigeria Plc. Benin, Edo State and Nigerian Breweries Plc. Ama, Enugu State. This is with a view to identifying some of the factors that has hindered management plans. Budgeting both at managerial level and operational level looks at the future and lay down what is to be achieved. Control checks whether or not the plans are realized and puts into effect corrective measures where deviation or shortfall is occurring.  The methodology adopted involves the use of primary data, through structured questionnaire collected from samples of 126 respondents, randomly selected and determined through Bowley’s rule.    The  data obtained were analyzed using the  descriptive method to express the relationship among variables. The data were further subjected to chi-square statistical tool in testing the hypotheses from which the position of the research study was established.   The result obtained showed that there exists an inseparable relationship between budgeting and managerial planning and control-in both Breweries.  The study concludes that budgeting is an important tool in managerial planning and control. In view of this, the researcher recommend that managers and business operators should pay more attention to budgeting because it aids good managerial planning and control.

CHAPTER ONE INTRODUCTION

1.1    BACKGROUND OF THE STUDY

The world is getting more exposed. Recently, people have started seeing the need to start planning. Some draw plans on how to meet some of their goals in the future. Corproate bodies are not left out. The first process in management and handling problem is to draw a proper plan on how to tackle such a problem. Thus a budget is actually a management plan of action expressed quantitatively, mostly but not exclusively in financial terms (Kodjo,

2009).

Globalization has influenced the plans that organizations make in that information required to drawing up such plans are at managers door steps.    Now we talk about management information system with the use of software packages like the ERP, so that managerial planning are just very timely and relevant in  decision  making  which  is  the  primary function/responsibility facing every manager at all managerial levels.

As regards technological advancement and competition, which characterized the business terrain, planners are winners

while non-planners lose out. Some managerial planning is an essential ingredient for business survival (Ezeh, Onodugo, 2002).

Budgeting forms part of management tool.  It is a traditional way  of  managing  and  controlling  companies  (Bergstrand  and Olue, 1996).  Organizations use budget to plan and co-ordinate in the following year. To motivate employees, allocate resources and co-ordinate operations within an organization has been the primary purpose of budgeting.

For operation purposes, budget is always quantified in financial terms. It is aimed to facilitate responsibility distribution and used to evaluate performance (Tibby and Lindsay Part 1,

2003).

According to Welsch, Planning is the only comprehensive approach to managing so far developed and if utilized with sophistication and good judgement, there would be provision of framework for implementing such fundamental aspect of scientific management as management by objectives, effective communication, participate management,

dynamic control, continuous feedback, responsibility accounting, management   by   exception   and   the   managerial   flexibility. Budgeting helps administrative officials to make careful analysis of all existing operations, thereby justifying expansion, eliminating or restricting wrong practice (Musselman and Hughes, 1981).

In the process of planning and control, budgeting entails a distinct pattern of decisions in the organization which are capable of determining its objectives, purposes or goals, and how these goals are achieved by establishing principal policies. However, the inability to recognize the problem concerned and fixing a boundary of investigation creates an obstacle for the successful implementation of planning and control. Some organization only look for narrow ranges of alternatives which they arrive at from their past experience  and present situation. Other management levels even avoid long term planning and budgeting in favour of today’s problem thereby making the problem of tomorrow more severe (Steward, 1993).

The foregoing reflects on the need for organizations to set up a formal mechanism for scanning its environment for

opportunities and gives early signs of future problem. This course of action will improve the system of budgeting in managerial planning and control resulting to an optimal performance.

1.2    STATEMENT OF THE PROBLEM

The role of budgeting in managerial planning and control is with a view to enhancing optimal performance and productivity in manufacturing companies.   It has further become necessary in views   of   poor   management   system   in   other   to   enhance productivity and proper functionality of manufacturing companies.

In Nigeria especially in the area of production, we have experienced a situation where various policies, effect and measures  have  been  used  all  towards  making  sure  that  the defects and economic failures of the past years as a result of lack of proper planning and control are corrected, further plans are taken to ensure that future plans and objectives are thoroughly set out and implemented.

The problem of choice and resource allocation is the core cause of business disequilibrium. Most manufacturing firms

have problem with allocation, distribution and control of resources in their production floor. Is it that proper check are not in place? Or that managers are not competent enough in drawing out budgets?

1.3OBJECTIVES OF THE STUDY

This study seek to achieve the following objectives:

1.To assess the relationship between budgeting and managerial planning and control.

2.To highlight the consequences of poor budgetary on managerial planning and control.

3.To determine the role of budgeting in management’s decision making.

1.4RESEARCH QUESTIONS

The following research questions was formulated to giude our investigation.

1.What  is  the  relationship  between  budgeting  and managerial planning and control?

2.What are the consequences of poor budgeting on managerial planning and control?

3.What is the role of budgeting in management’s decision making.

1.5    HYPOTHESES

The following hypotheses form the basis of carrying out this

study.

1.Ho:There is no relationship between budgeting and managerial planning and control.

H1:There is relationship between budgeting and managerial planning and control.

2.Ho:Poor Budgeting has no effect on  managerial planning and control

H1:Poor Budgeting has effect on managerial planning and control

3.Ho:Budgeting is irrelevant in management’s decision making. H1:Budgeting is relevant in management’s decision making.

1.6    SIGNIFICANCE OF THE STUDY

The significance of the study derives from its usefulness to the following:

1.      The Researcher

This work will enable the researcher understand budgeting and its effectiveness on managerial decision making. Besides it will enable the researcher fulfill the necessary requirement for the award of master of Business in management, of University of Nigeria Enugu Campus.

2.      The Companies

If the objectives of the study is achieved as stated, it will tend to point  out  explicitly how  budgeting  can  be used  by both breweries  to ensure the success of their organization in terms of profit making and management tool.

3.      Academic

The research will also be useful to the teaching and learning of issue affecting budgeting as a complement to other textbooks and journals that treated budgeting in  managerial planning and control.

4.      Investors

The research work will be useful to investors who need to assess the viability of firms to ensure the safety of their fund before investing onthe company.

5.      Managers

The research will provide information as to how resources would be properly allocated and performance evaluated through budgets and management planning and control in order to achieve a set goal.

6.      Business Owners

Business owners will learn to properly allocate resources, evaluate performance and control to ensure success and business growth.

1.7SCOPE OF THE STUDY

For the purpose of this research study, the researcher’s effort will be concentrated on the role of budgeting in managerial planning and control using Guinness Nigeria Plc Benin, Edo State and Nigerian Breweries Plc. Ama Enugu State as case study.

1.8    LIMITATIONS OF THE STUDY

The limitations of the study includes:

1.      Time

The researcher had time constraints in course of the work, because the research was undertaken at the same time as when the course work was going on.

2.      Finance

The high cost of transportation encountered in travelling to both Guinness Nigeria Plc. Benin, Edo State and Nigerian Breweries Plc, Ama, Enugu State respectively.

3.      Research Materials

Refusal of some staff of the establishment to complete the questionnaires given to them and  the refusal of some staff of audit themselves for interview for fear of revealing company’s secret limited the research work.

1.9    DEFINITION OF TERMS

!Budgeting

The institute of cost and management accountants of England defined budgeting as a plan quantified in monetary terms, prepared and approved prior to a

defined period usually showing planed income that will be generated and expenditure to be incurred during that period and capital to be employed to attain that objective.

!Budgetary Control

Can be used as a means of control whereby actual state of affairs can be compared with that planned for by the management in the formulation and execution of economic policy.

!Control

Comparing actual results achieved over a period with budget/standard and highlighting deviation from budget or standard into favourable and advise variances.

!   Feedback

The return of part of the output of a system to its source, so as to modify it.

!   Goals

this is the objective of efforts expected by an individual or organization.

Participation

Extent to which an organization’s members take part in developing the budget of a responsibility centre.

!   Performance

How well the objectives of an endeavour have bene attained.

!   Planning Objective which the compay intends to achieve are set for the future and ways of achieving those objectives and considered.

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