Cash Budget: a Tool for Decision Making in an Organization (a Case Study of Nigeria Bottling Company, Onitsha)
Chapter One
OBJECTIVE OF THE STUDY:
The main objective of this study is to investigate cash budget as a tool for decision-making in an organization specifically, the researcher wants to:
- Determine where cash budget is actually a basis for decision making in an organization.
- Know the impact of conducting continuous cash budget
- The level of which cash budget has help organizations increasing more wealth and effective management
- How cash budget allows management to establish the amount of credit that it can extend to customers without beginning to have problem’s with liquidity.
- Know how cash budget help the organization to avoid having a cash shortage during when you have numeral expenses.
- To know how management manages it inflow and out flow
CHAPTER TWO
LITERATURE REVIEW
CONCEPTUAL DEFINITION OF BUDGET:
A budget is a comprehensive formal plan that estimates the probable expenditures and income for an organization over a specific period. Budgeting describes the over all process of preparing and using a budget since budgets are such valuable tools for planning and control of finances, budgeting affects nearly every type of organization from government and large corporation to small business as well as families and individuals.
According to Adeniyi (2002) budget is a financial statement or a quantitative course of action prepared and approved prior ot a defined priod of tiem further it is the formal qualification of management plan and prediction, it is a plan quantified in monetary terms prepared and approved prior to a defined period of time.
Abubaka (2005) in Okoye and Ani (2014) broadly defined budget as a conscious and systematic allocation of resources prepared in advance, relating to the future kperiod and on a forecast of key zawable to achieve certain policy objectives which may not set explicit performance larget for the achievement of objectives, relates anticipated revenue and from the based against which actual expenditure and revenue can be measured and controlled.
According to Oxford Advanced Learner’s dictionary (2000) budget is defined as the money that is available to a person or an organization and a plan of how it will be spent over a period of time.
According to chartered institute of management
Accountant (CIMA) (2006), budget is a plan expressed in money. It is prepared and approved prior to the budget period and may show income, expenditure and the capital to be employed. A budget is a plan expressed in financial terms. It is also defines a budget as a plan quantified in monetary terms, prepared prior to a defined period of time to attain a given objective.
Lucy (2003) explain budget as a “quantitative statement for a defined period of time which may include planned revenues, expenses, assets, liabilities and cash flows.
A budget provides a focus for organization, aids the coordination of activities and facilitates control planning is achieved by means of fixed master budget where as control is generally exercised through the comparison of actual costs with a flexible budget. it can also be defined as a pre-determined statement of a management policy during a given period which provides a standard for company.
A comprehensive budget is made up of functional or sub-budget. some of these include sides budget production budget, selling and administrative expenses budget, research and development budget, capital expenditure budget etc.
All functional budgets are summarized in one budget called the master budget, this is defined as a total budget package effectively combined in one statement. The sales, expenses, production, equipment, cash budget, budgeted profit and loss account and budgeted balance sheet.
Cash budget
According to e-economic world website defined cash budget as an estimation of the cash inputs and outputs of a person or a business over a specific period of time.
According to investopedia explains cash budget thus: it is extremely important, especially for small business because it allows a company to determine how much credit liquidity problems.
A cash budget is one of the most important budget prepared in an organization. It shows in summary form the expected cash receipts and expected cash payment during the budget period, liquidity and cash flow management are key successful operations of any organization and it is with good reason that the cash budget should receive close attention from both accountants and managers.
Cliffs Note (2012) defined cash budget as a budget that is prepared after the operating budget manufacturing expenses or merchandize purchase, selling expenses and general and administrative expenses and capital expenditure budget are prepared.
Wise Greek (2014) defined a cash budget as an accounting device that used to effectively monitor and manage the immediate cash flow of a business budget.
Business Dictionary (2009) explain cash budget as a financial plan that is summary of estimated cash inflow and cash out flow of a business or individual for a specific period of time, cash budgets are often used to assess whether the entity have sufficient cash to fulfil regular operation and / or whether too much cash is being left in unproductive capacities.
Cash budget show the effect of budget activities like selling, buying, paying wages, investigation in capital equipment and so on the cash flow of an organization.
Cash budget is prepared in order ot ensure that there will be sufficient cash in had not care adequately with budgeted activities. cash budget may show that there is likely to be a deficiency of cash in some future period in which case over draft or loans will have to be arranged or activities curtailed or alternatively-the budgeted may show that there is likely to be a cash surplus in which is appropriate investment or use for the surplus can be planned rather than merely leaving cash idle in a current account.
Cash budget may be for almost any period of time provably monthly period are used frequently because hey take into account seasonal variation in cash flow. A cash budget indicates not only the total amount fo finance required but its timing as well. Cash budget is an indication of the company\s liquidity or ability to met its current obligation and therefore is a very useful tool for effective management.
CHAPTER THREE
RESEARCH METHODOLOGY
This chapter consists of the design, area of study population, sample and sampling procedures, instrument for data collection, validation and reliability of the instrument, method of data analysis.
Design of the Study
Survey design was considered appropriate for this stud y at the appraisal of cash budgeting as a basis for decision making in business organizations this method proved benefit of cash budgeting at the period of time required in obtaining information primary sources of data were collected through questionnaires administered on the accountants and manager respondents administered the questionnaires personally.
Area of the study
This research was carried out in Nigeria Bottling Company Onitsha in Anambra state as area of the study.
POPULATION OF THE STUDY:
The population of the study consists of 100 employee consisting of lower, middle, and top management of the major department of Nigeria bottling Company Plc, Onitsha.
CHAPTER FOUR
DATA PRESENATION AND ANALYSIS
Tabulation of Response
Question One:
Does your company think that adopting cash budgeting decision techniques would help to make the company grow and achieve their objective goals?
CHAPTER FIVE
SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS
SUMMARY OF FINDINGS
The study ahs clearly revealed that budget is one of the basic tools of management control. The objective of the research has to find out whether managerial decisions have been affected positively by cash budgeting, with Nigeria Bottling Company Onitsha as a case study of which the researcher found out that some establishment kwho based their decisions making on budgeting, achieved their goals and objectives as hey planned it. But those establishments, who embarked on some capital project without realistic and attainable budget did not achieve their objectives
In the cause of this study, some research questions were asked and it was discovered after data collection and analysis that: Budget assists management co-ordination, budget establishes standard against which actual performance could e measured.
A good budgeting system improves the communication network withn the organization.
The responses and the answer relieved form responded clearly indicate that budget is a strong basis to decision making in business organization and establishment.
CONCLUSION
With particular reference to the result obtained in chapter four (answer to question 3 and 10) the researcher concluded without any fear by saying that:
Cash budget is an important public and private sectors management tool. It is used to allocate resources among various users. The performance of this instrument, through not 100% to efficient especially as regards the public sector is encouraging.
According to Ogundele (2004) “An inefficient or losing public enterprise may continue in operation indefinitely without any automatic discipline operation”.
The researcher finally concluded that cash budget is a basis for decision making in an organization and is still a managerial instrument.
RECOMMENDATIONS
In ordr ot assist management to derive he full benefits of cash budgeting, the following recommendations were made:
i That management should organize orientation programmed for all new staff in account department on budget activities.
ii Monthly cash budgeting should be introduced to take care of the in fluctuation in he economy.
iii That modern accounting equipment should be bought and put into use e.g photocopying machine and counting machine etc for effectiveness and efficiency.
iv That management should install effective financial reward as motivations towards meeting organization budgeted objectives.
v That the preparation of the budget should involve all concerned rather than restricting to the top management, with a view of reducing or remaining completely the aspiration distortions. The reason is that with greater participation in the preparation and implementation, there will be objectives, targets and performance because those who prepare also execute in any case.
LIMITATION OF THE FINDING
In carrying out this work the researcher encountered a lot of problems. The first was money a huge amount of money was needed in shuttling the questionnaires and in collecting them back. Another limitation or constraints was time factors, the time allotted for the researcher work was not enough as to enable the researcher to give in-depth treatment to it.
The third and finally prominent problem was that respondent would tell you to come and collect the questionnaire in two days time, on getting their you found out that they are not on site on that appointed day.
REFERENCES
- Abaubaka (2005) in Okoye and Ani (2014): Public sector financial Records management Rex Charles and Patrick Limited publishers.
- Adeniyi A.A. (2005): Studies in cost and management Accounting value Analysis publishers.
- Business dictionary (2009): www.business dictionary.com cash budget.html
- Chartered Institute of management Accountants (2000): Management Accounting: official terminology,
- Cliffs Notes (2012): Principles of management cost Accounting 11: Vol 1 issue & publisher
- Egbuonu, P.I (2012): Principle and practice of Research methodology: Eric prints Ltd Onitsha 2nd published.
- Lucey T. (2003) Costing D.P. Publication, London 3rd Edition
- Muonwuba A.O. (2009) Principles and practice of lost Accounting 3rd Edition: Onitsha, Adson publishers.
- Ogundele (2004); The development of Accounting in Nigeria practice education and Training Global Journal of Accounting (Vol 1 N0 1. Jan) 1-8
- Osisioma, BC (2006) studies in accounting Test and Reading, Revised and Enlarged Enugu, Acena press.
- Osuala E.C (2004) Introduction to Research methodology. Onitsha: Africa Feb, publishers.
