Budgeting and Budgetary Control in a Business Organization (A Case Study of Soltrag and Destiny Hotel Agbara)
Chapter One
OBJECTIVES OF THE STUDY
The objective of budgeting and budgetary control in a business organization
includes;
- PLANNING – To produce detailed operational plan for the different sectors and facets of the organization.
- CO-ORDINATION – To bring together and reconcile into a common plan the actions of the different parts of the organization.
- COMMUNICATION – To provide a definite line of communication so that all the parts will be kept fully informed of the plans that the policies, constraints to which the organization is expected to confirm.
- MOTIVATION – To influence managerial behavior and motivate managers to perform in line with the organizational objectives.
- CONTROLLING – To assist manager in managing and controlling the activities for which they are responsible .
- PERFORMANCE EVALUATION – To evaluate performance by providing a useful means of informing managers of how well they are performing in meeting targets that they have previously helped to set out.
- CLARIFICATION OF AUTHORITY AND RESPONSIBILITY – To make it necessary to clarity the responsibilities of each manager who has a budget. Also to authorize the plans contained in the budget so that management by exception can be practiced (ability to give a sub ordinate a clearly defined role with authority to carry out the tasks assigned to him)
CHAPTER TWO
LITERATURE REVIEW
In the purchasing handbook by Georges Aljian, Aljian (2008) defined budgeting as formalized financial plan for balancing expenditures against incomes. Budgeting periods are very common but the most commonest period of time is usually one year within this year, there may be monthly or quarterly budget reviews made this term budget is popularly applied to that portion of money allocated for a specific purpose. ie the “manufacturing budget”, the labour budget” or the “procurement budget. There can be as many as those individual budgets as the complexity of the organization regures usually, these individual budgets are parts of an overall budget which is commonlyreferred to as the master budgets. The preparation of the master budget an the presentation of it to the officersof the company is usually the responsibility of the budget director who reports to the controller. In a small company, the budget director may be one of the officers of the company who acts only as a budget director in addition
to other managerial responsibility to co-ordinate the efforts of the individual 11 departments or management groups who will be asked to submit their cash requests in the form of a budget for their projected operations.
There are three main parts to the budgets:
The review of the previous year
The estimates of income and expenditure for the current year
The finance bill to make such alternatives in the taxation system as may be requested
A feature of the budget that is now sometimes criticized is that there is no continuity from one budget to another; each financial year is completely self-contained.
Budgeting is a familiar and very important type of short range plan, a plan that expresses in numerical terms (usually dollars) how the resources of a company can be distributed to attain a desired profit. since working out a budget force a company to determine how much money will be coming in what cost will be entailed, it simultaneously becomes a controlling as well as a planning operation.
Since the budget in a guideline to what will take place over a long thy period of time, a great deal of careful thought must go into its planning.
consequently, the master (or operating) budget, which is an overall estimate of revenue, cost and expenses, is based on severall sub-budgets, including the sales budget, the production budget and the cost of goods sold budget.
THE CONCEPT OF BUDGETING AND BUDGETARY CONTROL
12There is a consensus among authors that, in order to advert business failure, an enterprise must have a vision of where it wants to be in near future and accordingly draws up a strategic business plan.
These long term plan are further broken down into detailed step procedures by which to attain the business objectives. The end result of planning is profit maximization, which is also a yardstick for judging management performances. profit planning especially in the short term, it is generally agreed is carved out by the use of budget. A.W wills more is of the view that budgeting is a service functions and that budgets do not replace management. Wills also observes that planning goes from top down whereas budget formulation flows from bottom to up. Isaac reynolds agree with more but noted that “budget planning is the key to survival in today highly technical and competitive environment and that might have been avoided by profit planning.
CHAPTER THREE
RESEARCH DESIGN AND METHODOLOGY
RESEARCH DESIGN
In order to do justice in this research work, i employed three different methodsto elicit the required information they are;
- Survey method
- Oral interview
- By the use of textbook and magazine as my research instrument.
SURVEY METHOD: Since it is believed that observation will reveal some of the problems of budgeting and budgetary control. I observed the statement of accounts of most companies and it is brought to my notices that most of these companies a and business organization will failed in their business, if traced back to the find out that the remove cause of their failure is a result of not being able to budget their activities very well, and again, they failed because of inadequate management of their budgetary control department and their system of budgeting.
Through oral interview and some investigations, I made in the textbooks and newspapers, I understood that the body responsible for budget. Preparation/making in the business organization is the budgeting term, which is made up of some of the people working in the budgeting department. And also, the representatives from the areas of activity within the organization
CHAPTER FOUR
DATA PRESENTATION AND DATA ANALYSIS
Introduction
Data presentation and data analysis are of great importance to any meaningful research study since they both form the basis of conclusion and recommendation at the end of the research.
This chapter side interpretation of information gathered while in the study. The data used to process the information were well analyzed in this chapter using a simple percentage table. This is aimed at addressing the statement of problem raised at commencement of this study and testing the hypothesis for their validity or otherwise by using the information derived from the respondents.
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION
SUMMARY
Based on these facts given in this project work, we can see that budgetary control can be harmful as it is beneficial depending on how the system is administered. At least it helps management to decentralize responsibilities while it centralizes control. By means of efficient planning, effective communication, motivation and if human relations are strained and uncertainties which can result from the presence of variables in budget are not effectively provided for, budgetary control technique can constitute a grave deterrent to the achievement of management objective.
CONCLUSION
The most prominent goal of any reasonable firm is for a credible budget both in the production and exchange of goods and services.
To restore the integrity of the budgetary process, a manager must control deficit finance, streamline expenditure with realistic income profile and ensure that budget become an ultimate and effective instrument in controlling the financial system of their firm.
RECOMMENDATIONS
The findings strongly indicate that the company has good budgetary control system. However, the findings reveal some weakness, the ways these weaknesses may be overcome are outlined below:
Management appears to set standards for junior managers that are too difficult to attain. There is the danger of frustration, distrust and deliberate to take individual managers ability, education and aspirations into account in setting targets. When the ability attainable when the manager given his ability and education, is working under efficient conditions.
It is dangerous for managers in an organization to compete among themselves in a situation of inter-dependency. It means, for instance, that one manager can withhold vital information that another manager needs to make a good decision. This competition obviously is because reward is tied to goal attainment and no manager wants to assist the other to get ahead of him. All in one, corporate goals lose out to managers’ self interest, and the work environment is suffered with tension, management can encourage team work environment is suffered with tension, management can encourage team work among managers by stressing group reward above individual reward, for all manager at a level when each managers achieves the standards or is at reasonable range of its attainment.
Vague and conflicting instructions can impede effective action and answerability to more than one supervisor can introduce confusion and make control difficult. This can happen when certain functions are duplicated. The organizational structure of libraries should be overhauled. Jobs should be thoroughly scheduled and duties precisely
defined and described. The supervisor – subordinate relationship needs to be assessed so that a situation does not arise where a subordinate is answerable to two or more supervisors. A management consultant firm could be engaged to carry out the overhead.
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