PROJECT TOPIC- BUDGETING AS TOOL FOR PLANNING AND CONTROL IN A MANUFACTURING FIRM
The increased complexity of the society and high level of competition in the business world has made it imperative for business organization to do serious planning and control in order to survive volatile business climate. This research work studied budgeting as a tool for planning and control in a manufacturing firm with particular emphasis on Nigerian Bottling Company PLC, Enugu.
The main objective of this study was to x-ray the relevance of budgeting as tool for planning and control in manufacturing firm. And also to ascertain the effect of non-existence of budget on the performance of business organization. The methodology adopted were simple percentage and chi-square statistical methods to deduce general statement about the effect of budgeting on planning and control is relevant for the survival of manufacturing companies.
Also, budgeting is a tool for measuring efficiency and performance in manufacturing firm. The recommendations put forward was that management of every organization should prepare budgeting and adhere strictly to the provisions of the budget. There should also be a regular and periodic review of the budget in order to detect variations. The research work will serve as a template to managers, entrepreneurs, creditors, and employees on how to effectively allocate scarce resources judiciously through budgetary planning and control.
The success of every organization depends largely on effective planning and control. Planning and control are pre-conditions for the attainment of organizational goals. The objectives of organization are realized through a careful plan of action and control. Both public and private organizations are established for the purpose of achieving specific objectives. Budgetary planning and control are managerial functions responsible for setting specific targets or expectation to be met.
Budgeting is not only a management planning device but also a basic accounting model for managerial control. In manufacturing firm, planning and control are used to set profit target, revenue, prices and cost. Hence, planning is the process of deciding ahead of time, what a firm seeks to achieve and how it seeks to achieve them. Planning is future-oriented. Control on the other hand, is the evaluation of performance and the putting in place of corrective measure where necessary. Control seeks to compare plans with actual goal realized. Control entails restrain, supervision, safeguarding, checking or even to correct deviations.
- BACKGROUND OF THE STUDY
In a manufacturing industry, and other business organization, top or line managers are faced with problems of limited resources due to organization policies. Such policies may include income and expenditure policies, raw material utilization policy, purchasing policy, production policy, labour and time limit policies, it is viewed against the above mentioned background that the concept of budgeting as a tool for planning and control is pertinent. It is about making plans for future, implementation, and monitoring of activities to see whether it conforms to the plan.
Budget is thus, a formal expression of managerial plan in quantitative and monetary terms encompassing different phases of operation aimed at assisting management in the realization of organization’s objectives. Budgeting is a financial and quantitative interpretation, prior to a defined period of a policy to be implemented in order to achieve a given objective.
PROJECT TOPIC- BUDGETING AS TOOL FOR PLANNING AND CONTROL IN A MANUFACTURING FIRM
- STATEMENT OF THE PROBLEM
Generally, organizations are faced with limited resources and the allocation of scarce resources to meet competing needs. The problem bedeviling most organization is how the available scarce resources can be allocated effectively and efficiently to achieve organizational objectives.
The problem therefore, is most manufacturing firm do not appreciate the relevance of budgetary planning and control for its survival.
Another glaring issue is the attitude of employees toward budget implementation. Budgeting may create a sense of confusion, frustration, suspicion and even hostilities within organization because employees regard the goals of the organization as alien to their individual goal.
Most often, government establishment feel that budgeting is a mere paper work that can be toyed with, thus, most management executive do not adhere strictly to the budget or implement it religiously. While many private firms feel that there is no enabling law binding on them to prepare a budget. This often makes them to operate without a formal budget.
- OBJECTIVES OF THE STUDY
The objectives of this study shall include:
- To ex-ray the relevance of budgeting as tool for planning and control in manufacturing firm.
- To ascertain the possible effect of non-existence of budget on the performance of business organization.
- To create an opinion as to whether budgeting is actually an effective tool for profitability planning and management control.
- To ascertain the extent to which budgetary planning and control aid management in decision making.
- RESEARCH QUESTIONS
The following research questions are formulated for the study.
- To what extent does the private sector appreciate the relevance of budgetary planning and control?
- What is the attitude of employees towards budget implementation?
- How can budgeting be used as a performance evaluator?
- What are the problems involved in the implementation of budget?
- HYPOTHESIS FORMULATION
The success of this research work depends on the formulation and testing of hypothesis and the drawing of conclusions from it. The hypothesis is as follows:
Ho: Budgeting is not a tool for measuring efficiency and performance in manufacturing firm.
Hi: Budgeting is a tool for measuring efficiency and performance in manufacturing firm.
Ho: That successful business organization does not make use of formal budget as management tool.
Hi: That successful business organization make use of formal budget as management tool.
Ho: Effective budgetary planning and control is not relevant for the survival of manufacturing companies.
Hi: Effective budgetary planning and control is relevant for the survival of manufacturing companies.
- SIGNIFICANCE OF THE STUDY
The significance of this study is that if the aforementioned objectives are achieved, this research work will enable managers and employees of organization to appreciate the relevance of budgeting as a control tool for performance evaluation and measurement.
The study will also aid top management of business organization to work out effective strategies to surpass corporate failure.
Resources to competing alternatives in order to meet organizational goals, small business will be able to evaluate performance and correct deviation where necessary.
- SCOPE OF THE STUDY
This research work shall focus on the “relevance of budgeting as tool for planning and control in manufacturing companies”.
In carrying out this study, the researcher focused attention only on a particular manufacturing firm, even though, there are many others. In Nigeria since the searcher could not visit all the manufacturing firms, he limited the scope of his study only on Nigeria Bottling Company, Enugu.
The decision to study the relevance of budgetary planning and control about Nigeria Bottling Company was borne out of its international outlook. It has gained goodwill in its operating environment in spite of the notable nature of Nigeria’s economy; it has been surviving for many years amidst many competitors. Therefore, references to any other business organization are just for the sake of clarity and emphasis within the scope.
- LIMITATION OF THE STUDY
In the course of carrying out this research work, the researcher encountered a lot of hurdles. Many organizations are not willing to disclose detail information relating to their business operations. This affected the collection of reliable information.
Financial constraint also affected the researcher since much is needed for transportation and the procurement of materials.
The time frame was not also enough to complete a research of this magnitude since the researcher was also involved in his course work, and other official work.
- DEFINITION OF TERMS
- Budget: A budget is a plan quantified in monetary terms prepared and approved prior to a defined period of time, usually showing planned income to be generated and expenditure to be incurred during that period and the capital to be employed to attain a given objective.
- Budgeting: This is the process of making future plan of action formulated by management for the whole organization or a section, expressed in monetary terms.
- Budget manual: Budget manual is an instruction or information manual about the way budgeting operates in a particular organization and the reasons for having budgeting.
- Planning: Planning is the selection of short and long term objectives and the drawing up of tactical and strategic plans to achieve those objectives.
- Efficiency: This is the minimum cost of input required to produce a desired amount of output.
- Effectiveness: This is the extent to which actual performance compares with targeted performance.
- Economic Order Quantity (EOQ): This is the size that minimizes the sum of carrying and ordering cost.
- Cost Centre: This is any location, person or items or equipment for which costs may be ascertained and used for the purpose of cost control.
Profit: This is the difference between revenue and cost.