The Impact Of Budgeting And Budgetary Control On The Performance Of Manufacturing Company In Nigeria

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The Impact Of Budgeting And Budgetary Control On The Performance Of Manufacturing Company In Nigeria

Budgetary Control


This study, the impact of budgeting and budgetary control on the performance of manufacturing company in Nigeria, was conducted using Cadbury Nigeria Plc, as case study. Since wants are plenty while resources are limited, every organisa-tion tends to find means by which it can get what it wants with the limited resources at its disposal. Therefore, firms seek to adopt the concept of budgeting and budgetary control to satisfy their needs at the least possible cost and at the same time fulfill their stewardship obligations to the numerous stakeholders. We adopted a descriptive research design with data gathered through questionnaire administered to respondents. Non-parametric tool of chi square was employed to analyse the data. Hypotheses were tested and analysed on a 5% level of significance and it was revealed that budgeting is a useful tool that guides firms to evaluate whether their goals and objectives are actualised. Considering the changing environ-ment in which firms now operate, it can be concluded that budget, which is a continous management activity, should adapt to changes in the dynamic business environment


Wants are numerous while resources are limited but there is every tendency to waste or under-utilise the li-mited resources by the human factor involved in the pro-duction 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 produe at that poss-ible minimum cost so as to remain in business and also achieve the corporate objectives of profitability and sta- bility. In view of this, there is every need to do a realis-tic planning of the activities of the firm taking into con-sideration the limiting factors and the long term objec-tives 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. A budget has been defined by Chartered Institute of
Management Accountants (CIMA), as “a financial or
qualitative statement prepared and approved prior to a defined period of time for the purpose of attaining a giv-en objective. It may include income, expenditure and
the employment of capital”. CIMA also defined budget
ry control as “the establishment of budgets relating the
responsibilities of executives to the requirements of a policy and the continous comparisons of actual with budgeted results, either to secure by individual action the objectives of that policy or to provide a basis for its revi-sion.
Horngreen (1982) defined a budget as “a quantit
ative expression of a plan of action and an aid to coordination
and implementation”. The Oxford Advanced Learners‟
dictionary defined budget as an estimate or plan of the money available to somebody and how it will be spent over a period of time. Both Horngreen and the dictio-nary emphasised the word plan, but planning itself is found in all aspect of human endeavour, hence planning is a blue print of business growth and a road map for development that helps in deciding objectives, qantita-tively and qualitatively. It involves setting a goal on the premise of the objectives and keeping of the resources. The process of planning requires that managers of busi-ness to act as if they are fortune tellers and attempt to predict the future course of action to be adopted. Such prediction of the so-called fortune tellers will determine whether or not the objectives of the firm will be met. Adams (2001), views budget as a future plan of action for the whole organisation or a sector thereof. Budgets are plans that deal with future allocations and utilisation of resources to different activities over a given period of time.

For any organisation to make progress or achieve its goals, it needs capital and to be able to make profit, it requires planning of its resources, which can only be achieved through budgeting, hence budgeting serves as a tool for financial planning. Batty (1982), defined budgetary control as a system which uses budgets as a means of planning and control-ling all aspects of producing and or selling commodities or services. This is true as we tend to prepare revenue and expenditure variance analysis to be able to deduce areas of divergencies for which the management needs to watch to avoid embarassment as any adverse variance will translate into inability to meet the corporate objec-tive which will eventually lead to disagreement with stakeholders.

Journal of Business Management & Social Sciences Research (JBM&SSR) ISSN No: 2319-5614 Volume 2, No.12, December 2013 Blue Ocean Research Journals 9
Pandy (1985) has observed that although many people will complain about budget and its process, budgets are indispensable in a large modern organisation as the ben-efit that occurs from budgets and its control is much greater than the cost involved. In view of this, the fact that resources are scarce, coupled with high competition that permeate most businesses, budgets when rightly applied, would be an effective tool for planning and con-trol, especially in large corporation as Cadbury Nigeria Plc

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