ABSTRACT
The usefulness of budgeting, as a management tool cannot be over emphasized. A
good budgeting system could aid management in decision-making, performing the
controlling and planning functions. It does seem that this very important
implement of work is not efficiently used by many mangers, especially those in
the private sector of our economy. The effect is that corporate efficiency has
declined, profit maximization opportunity thrown over board, while planning and
managerial inefficiency are installed.
Because of the above reasons, this research work was effect looked into
budgeting as managerial tool for panning, controlling and decision making with
particular reference to Emenite Limited approved budgetary system, in the
panning, controlling and decision-making in the company. To carry out this
investigation, the researcher carried out a survey through interviews and
responses of the fifteen key officials responsible for planning and
implementing the budgeting steps.
Based on the investigation carried out, it was noted that Emenite, Ltd, and
most companies operate in partnership.
TABLE OF CONTENTS
CHAPTER ONE
1.0 Introduction
1.1 General Background to the
subject-matter-
1.2 Problems Associated with the subject Matter
1.3 Importance/Significance of study
1.4 Scope and Limitation of the study
1.5 Definition of important terms
References
CHAPTER TWO
2.0 Literature Review
2.1 Historical Background
2.2 Budget and Budgeting
2.3 Budgetary Decision Making
References
CHAPTER THREE
3.0 Data presentation and
Analysis
3.1 Recommendation
3.2 Conclusion
3.3 Summary of Findings
References
CHAPTER ONE
1.0 INTRODUCTION
THE GENERAL BACKGROUND TO THE SUBJECT MATTER:
The economic concept of resource being scarce
relative to demand for them required that every individual prepare a scale of
preference, arranging in a certain order how resources are going to be used or
apportioned.
This involves to a very large extends some budgeting.
Hand, L. F. (1985) stated that budgeting entails the setting of targets. It is
a technique which is widely used in business and which affects all levels of
management.
However, in Nigeria the mention of the word budget usually connotes a link with
the public sector of the economy.
The government annual budget statement both at the Federal and the State level
details the various sources of government revenue and expenditure and this
usually affects the economic life of every individual in the country.
This situation has therefore influenced the private sector of the Nigerian
economy and most managers have come to view budget as tools reserved for public
sectors, which they are supposed to use.
Looking at hand view on budgeting. It is very unfortunate for Nigeria business
to hold such negative views of the concept. A budget is simply a financial
plan. A household budget itemizes the family source of income and describes how
this income will be spent, so much for food, housing, transportation,
entertainment, education and so on.
Similarly the Federal budget indicates income sources and allocates funds to
defense, transport, agriculture education and the like. By the same taken a
company budget is a plan detailing how funds will be spent on labour, capital
goods raw-materials, personnel and so on, how funds will be generated for their
expenditure.
A budget is therefore an indispensable tool for an individual, household,
company and government or its departments that want to spend its resources in
the most economic way. However, most private sector businessmen in Nigeria are
unaware of the importance of budgets.
This ignorance cuts across all classes of our business community especially
within the classes of those without appreciable business education or
sufficient knowledge of the rudiments of modern business management.
The resulting effects are that more firms do not prepare good budgets, that is
where a budget is prepared at all.
Consequently, the degree of budget utilization and adherence is very low. It is
said that if you do not know where you are going, no road would take you there.
Budgets are crucial tools in starting a course of operation for a business, and
also important in management planning and controlling.
Budgets are essential for controlling in that they enable a firm to check on
variations between planned and actual performance achieved. When these
variations are systematically analyzed, management gains insight into the cause
of the variations and can take positive corrective action.
In Nigeria, most private enterprises can at best be described as medium
or small-scale. The importance of budgeting as a planning and effective
controlling measure needs to be appreciated by the management of those
enterprises.
1.2 PROBLEMS ASSOCIATED WITH THE SUBJECT-MATTER:
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.
(a). 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.
(b). 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
(c) 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.
(d). 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 principles described in budgetary control are also applied to keep down the
costs of operating a system of budgeting controls.
1.3 IMPORTANT/SIGNIFICANCE OF
STUDY:
It is an acceptable fact that a well-articulated and implemented budgetary
system is an effective managerial tool for planning, controlling and
decision-making.
A good budget will enhance accountability, productivity, profitability and
eventually wealth maximization on the long run. In this vein, it is hoped that
Emenite limited will benefit from well-conducted study of this nature.
Hopefully, the exercise will help the management to realize the performance
with regards to its periodic planning, forecasting and the corresponding
financial results.
This work may be useful to the members of the academic community such as
students and future researchers on this subject. They may find something of
interest in the whole study. Also the reading public may find the work
informative and educative.
However, it is obvious that good budgeting system provides a good framework for
evaluation and control.
In any organized company lazy and inefficient managers and officers look at
budgeting targets with great suspicion.
Consequently, energy and time is usually wasted to work against budget
proposals instead of striving to achieve the set objectives.
Precisely, the officers concerned already have developed a negative bias even
before the budget is drawn and approved. Often sources for setting budgeting
targets are secondary. This happens where budgets are drawn by top-level
managers and a few accounting staff. The result is that the budget is defective
and not much can be done to salvage it, unless it is withdrawn and re-written.
In circumstances like these, the officers who are to implement the budgetary
control system lack sufficient commitment, which is necessary towards achieving
set objective.
1.5 DEFINITION OF
IMPORTANT TERMS
BUDGET: a formal statement of forecast usually expressed
in financial and quantitative terms which aids in achieving set objectives with
available resources.
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 itself 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.
It is management who must decide to add or drop a product or service.
Department | Business Administration and Management |
Project ID Code | BAM0054 |
Chapters | 3 Chapters |
No of Pages | 47 pages |
Methodology | Null |
Reference | YES |
Format | Microsoft Word |
Price | ₦4000, $15 |
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