BUDGETING A KEY TO PLANNING, CONTROLLING AND DECISION MAKING

Amount: ₦5,000.00 |

Format: Ms Word |

1-5 chapters |




ABSTRACT

This study discusses budgeting as a key to planning, controlling and decision making. The contribution of budgeting, as a planning, controlling and decision making tool cannot be over emphasized. A good budgeting system could aid management in decision-making, performance, control and planning functions. It does seem that this very important element of work is not efficiently used by many mangers, especially those in the private sector. The effect is that corporate efficiency has declined, profit maximization opportunity thrown overboard, while planning and managerial inefficiency are stalled. Because of the above reasons, this researcher intend to looked into budgeting as a key for panning, controlling and decision making tool with particular reference to Champion Breweries budgetary system, in their panning, controlling and decision-making in the company.

 

 

 

 

                                         CHAPTER ONE

                                       INTRODUCTION

  • BACKGROUND OF THE STUDY

Over the years the budgeting system has been a traditional way of managing and controlling companies and manufacturing industry. For any organization to operate meaningfully there has to be clear direction of where it is leading to or what it is aiming to achieve the standard of objectives and a means of monitoring derivatives from standard requires. These considerations can only be met through budgeting, planning as well as controlling.

Budgeting and accounting in public sector management were previously seen as a means of planning and reporting. However, through the management reforms, these processes are now regarded more as a controlling device (Olson et al., 1998). Especially, the emphasis on accounting systems has contributed to the construction of more rational organizations; in which individuals can be defined as being in control and having responsibility (Miller, 1992; Roberts and Scapens, 1985). The trend now is for public services to be controlled to a large extent by means of accounting systems and/or evaluation procedures that compare objectives to results (Power, 1997).

A budget has been defined as a quantitative plan usually in monetary terms for the fourth coming accounting year of the ensuring period. Budgeting planning/short term planning is the process of preparing detailed, short term (usually 1 year) plans for the function, activities and departments of the organization thus converting the long term co-operate plan into yearly action. Budgeting services as a very important tool for planning and control increase in productivity, in that budgeting aids planning for the future, if services as a control function through management by exception which is the assessment of performance for the purpose of controlling. It helps in co-coordinating of the work management in order to coordinate the activities of the organization.

Wants are numerous while resources are limited but there is every tendency to waste or under-utilise the limited resources by the human factor involved in the production of goods and services. With various companies competing with one another, only few that are able to produce at least possible cost will survive the growing competition in the market.  Therefore, it is paramount for every serious business undertaken to produce at that possible minimum cost so as to remain in business and also achieve the corporate objectives of profitability and stability.  In view of this, there is every need to do a realistic planning of the activities of the firm taking into consideration the limiting factors and the long term objectives of the firm. In order to achieve this, budgeting – a tool of planning and control becomes indispensable. Budgeting is ubiquitous and has long been considered as a necessary tool in managing a company.

Kendall (2005) posited that 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.

A budget has been defined by Chartered Institute of Management Accountants [CIMA] (2004), as a financial or qualitative statement prepared and approved prior to a defined period of time for the purpose of attaining a given objective.  It may include income, expenditure and the employment of capital. CIMA also defined budgetary control as “the establishment of budgets relating the responsibilities of executives to the requirements of a policy and the continuous comparisons of actual with budgeted results, either to secure by individual action the objectives of that policy or to provide a basis for its revision.

Budgets are known to have an important role to transmit the expectation of top management to lower levels. According to Bremser (2008) budgets are used to communicate management’s expectations to managers and employees. According to Lucey (2003), 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 (2003) further urges that performance of small and medium sized organization 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.

  • STATEMENT OF PROBLEM

Budgets are necessary to prudently manage scarce financial resources and at the same time serve as means of expenditure authorization, control and evaluation base. Profit making organizations consider budgets and budgetary controls important elements in their policy making. It has however been observed that many manufacturing company do not care about budget or budgetary control. The success of organizations depend largely on good budget preparation and effective budgetary controls.

In spite of the benefits derived from properly made budgets, certain problems arise during budgeting.

There are different budgeting systems, each with its own associated problems. Some systems are more effective than others.

Managers and employees who operate systems also vary in efficiency. Therefore different results and benefits will occur from each system. Moreover, there may be problems.

According to Batty (1976) the following problems are associated with budgeting.

  1. Absolute accuracy is impossible to attain and inaccurate figures imposes limitations. If we remember that a budget is a plan, then, we can imagine the impact of inaccuracies.
  2. Responsibilities for budget heads or items may overlap, example when costs are incurred jointly by more than one department or units. As far as possible a system should permit putting the appropriate responsibilities squarely on the shoulders of the person responsible.
  3. Inflexible structure may cause problems care should become so rigid that it loses its usefulness; increased efficiency should be the aim, but this will not be forthcoming if the system will not permit plans to be changed.
  4. There is a danger of excessive administrative costs installing and operating a budgetary control system. Everything possible should be done to keep cost within reasonable limits.

The study will therefore be focused on budgeting as a key to planning, controlling and decision making.

  • OBJECTIVES OF THE STUDY

In view of the above glaring problems the researcher’s main purpose of this research is to look carefully at the system of budgeting. This will enable the researcher to discover and bring to light any loop hole and lapses that may contribute on their little ways to aggregate private sector problem. Therefore, the objectives of the study are as follows:

  1. To evaluate budgeting as a key to planning, controlling and decision making in Champions Breweries Uyo.
  2. To examine the system of budgeting, planning and control in order to assess adequacy in productivity.
  • To examine the extent at which budgeting serves in planning and increasing productivity in champions breweries Uyo.
  1. To examine facts about the organization and it mode of operation with regards to productivity.
    • SIGNIFICANCE OF THE STUDY

The significance of this study is essential on its benefit and contribution to individual and organization first and foremost. This study will serve as important objectives reference to top executive of organization who wants to achieve efficiency in production. It will also be significant to students who want to carry out further research on the area of study secondly, the finding of this study will be useful to both the organization and any other similar organization as well as general public in the field as it depicts the nature of problem associated with budgeting in this part of the country. Finally, this study will also cover the public as an essential requirement for the award of bachelor’s degree.

1.5 RESEARCH QUESTIONS

The following research questions were formulated by the researcher to guide the study;

  1. Is there budget and budgetary control system in Champions Breweries Company?
  2. Is there any significant relationship between budgeting and managerial planning and control?
  3. Does budgeting planning and control influence the productivity of Champions Breweries Uyo?
  4. Are there consequences of poor budgeting on managerial planning and control?
  5. What is the role of budgeting in management’s decision making

1.6 RESEARCH HYPOTHESIS

In order to achieve the stated objectives for this study, the following research hypotheses are stated so that they can be tested with analytical tools and inferences could be drawn on them.

H0: There is no budget /budgetary control system in champions brewery

H1: There is budget /budgetary control system in champion’s brewery

H0: Budget and budgetary control have no significant impact on the profitability of Champions Breweries in Uyo.

H2: Budget and budgetary control have a significant impact on the profitability of Champions Breweries in Uyo.

1.7 SCOPE AND LIMITATION OF THE STUDY        

This study is on budgeting, a key to planning,  controlling and decision making with Champions Breweries Uyo, Akwa Ibom State serving as the case study.

However the research has some constraints which are;

The study limitation was inability of management to divulge certain information which they consider sensitive and fear of publication which might be detrimental to their operation.

Time: the time at the disposal of the researcher which is allocated for the study was a major limitation as the researcher has to combine other academic work with the study.

Finance: The finance at the disposal of the researcher in the course of the study does not allow for wider coverage as resources are very limited as the researcher has other academic bills to cover.

1.8 DEFINITION OF TERMS

Budgeting: Budgeting is the process of creating a plan to spend your money. This spending plan is called a budget. Creating this spending plan allows you to determine in advance whether you will have enough money to do the things you need to do or would like to do. Budgeting is simply balancing your expenses with your income.

Planning: Planning (also called forethought) is the process of thinking about and organizing the activities required to achieve a desired goal. It involves the creation and maintenance of a plan, such as psychological aspects that require conceptual skills. There are even a couple of tests to measure someone’s capability of planning well. As such, planning is a fundamental property of intelligent behavior.

BUDGET CENTRE: this is a center or section of the organization identified and known as a budget or cost center. The center should be the responsibility area of the manager so that the manager is aware of the actual performance expected from the center and aware of the acted performance as at when it occurs.

CASH BUDGET:  a cash budget is prepared to show the expected receipts, payment and periodic cash balances during the budget period or control period.

FIXED BUDGET:  this is a budget, which shows several levels of activity. It is similar to a series of flexible budget. The flexible budget recognize the different behavioral pattern of cost in relation to various out-put level.

MASTER BUDGET: a comprehensive overall financial and operating plan for the organization, comprising a sales forecasts, estimated cost of goods sold, operating expenses, capital expenditure and projected financial statements.

PRODUCTION BUDGET: this requires production to meet sales budget requirements and changes in stock. It includes an estimate of the number of units to be produced during a budget period.

SALE BUDGET:  this shows the individual products sales units, sales value and total value. It includes the estimated goods to be sold and revenue to the derived from sales.

BUDGETARY PLANNING: is the process of preparing detailing short term (usually one year) plans for the functions activities and departments of the organization, this covers the long term corporate plan into action. In general, plans are developed using physical values, for example, the number of units to be produced, the number of hours to be worked, the amount of materials to be consumed and so on.

CONTROLLING:  is the managerial function concerned with the plan; which in turn was formulated on the basis of an analysis of fundamental organizational goals.

BUDGET AS A MANAGEMENT TOOL: the budget has grown to be for more than financial tool. It is a tool around which an experienced manager organizes all planning activities. It is the best tool for making sure that key resources and especially the resource of performing people are assigned to priorities and to results. It is equally a tool at integration for managers in the organizations. And it is a tool that enables the manager to know when to review and revise the plans; either because results are different from what is expected.

DECISION:   from management view, a decision involves making a choice among alternative course of action. Without decision no business can operate since all business actions are the consequences of some management decisions. Even in action it is the result of a decision. In many ways decision-making is the purpose, the specialization and the end product of the manager. In fact, it is the very reason for his existence as a manager.

1.9 ORGANIZATION OF THE STUDY

This research work is organized in five chapters, for easy understanding, as follows. Chapter one is concern with the introduction, which consist of the (background of the study), statement of the problem, objectives of the study, research questions, research hypotheses, significance of the study, scope of the study etc. Chapter two being the review of the related literature presents the theoretical framework, conceptual framework and other areas concerning the subject matter.     Chapter three is a research methodology covers deals on the research design and methods adopted in the study. Chapter four concentrate on the data collection and analysis and presentation of finding.  Chapter five gives summary, conclusion, and recommendations made of the study.



This material content is developed to serve as a GUIDE for students to conduct academic research


BUDGETING A KEY TO PLANNING, CONTROLLING AND DECISION MAKING

NOT THE TOPIC YOU ARE LOOKING FOR?



A1Project Hub Support Team Are Always (24/7) Online To Help You With Your Project

Chat Us on WhatsApp » 09063590000

DO YOU NEED CLARIFICATION? CALL OUR HELP DESK:

  09063590000 (Country Code: +234)
 
YOU CAN REACH OUR SUPPORT TEAM VIA MAIL: [email protected]


Related Project Topics :

Choose Project Department