NEED FOR EFFICIENCY IN PURCHASING BUDGET IN A MANUFACTURING COMPANY

1.0 Introduction

This chapter states the significance and objective of the study. It also states some of the problems which the researcher seek to find solutions.

1.1 Background of the Study

Budgeting the development and execution of fiscal Acton is a major public and private resources allocation processes both (government and private). It is the process of allocating resources to meet demands, as well as converting rhetoric, to reality a process of introducing change. That process should link the past, present and future in orderly and ordered way.

However, the importance of budgeting cannot be over emphasised. It is a device, intended to provide greater effectiveness in achieving organisational efficiency. To be effective however, the functional aspect must out weigh the dysfunctional aspect. In organizations, the problem of not accurately according for the expenditure of funds, leads to another important aspect or side of the con are known as “Budgetary control”.

Emphatically, the survival of an organizational (both public and private, profit or non-profit) relies heavily on effective budgetary control. Various control techniques and tools have proffered by authorised in the fields they are viz:

1. Budget implementation and monitoring committee
2. Supplementary estimates
3. Auditing of accounts

More so, it is a known fact that budgeting is a plan

Budgeting is about planning or more accurately a planning process. It is a process in which the objectives policies and policy measures. Finding requirement and sources and allocation of funds stated in the budget and determined. It can be attributed as livelihood of an organization. The problem of budgeting doe not lie in its formation but it lies in its effective implementation, this aspect has accounted for the liquidation of most organization.

Sincerely speaking, reflecting the importance of effective budgetary control system is likened to a landlord building a house without going it, its requisite foundation. A practical example notable is the report made on the cable news network (CNN) kin the year 2002 to be precise. The programme was based on entrepreneurs education. The entrepreneur that accounted for the highest amount of profit that year in the United states of America (USA) was called upon to make speech as regard to his success (the entrepreneur halls faces to the precise).

The major content he enumerated are as follows:

1. Planning
2. Projecting of what the next year revenue and expenditure will look like (budgeting).
3. Periodic review of what was projected
4. Workers welfare adequately protected.

The first three, planning, projecting what the next years revenue and expenditure would look like and periodic revenues of what projected for (Budgetary controlling purchase) are what are important for the topic under review.

In summary, budgetary control is a potent look in winning he ever increasing business corporate warfare and also a prior in which the success of an organization revolves. This study will therefore focus on how far budgeting control has impacted on the profit projections of the Rokanna industries Plc.

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1.2 Statement of the Problems

Problems are meritable in achieving an organizational ends. The following are some of the problems that have threatened on the organization.

1. Improper planning is one of the problems that have distributed the firm.
2. Inappropriate utilization of the firm's resources due to purchasing department and other department in the organisation.
3. The managers in the organization does not always monitor and evaluate the budgets to ensure that the project are on track.
4. There is no much written reports made on the budgets, which serves as the basis for identification implementation problems and discrepancy between planned output and actual output.

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1.3 Objective of the Study

The objectives of the study are as follows:

1. To ascertain the importance of budgetary purchase to organizational effectiveness or efficiency.
2. To investigate the reason why some firms do not adopt the principle of budgetary purchase.
3. To examine the likely problems of poor budgetary purchase.
4. To measure that extent to which budgetary control is applied in Rokana industries Plc.
5. To educate its impact on the organization at large.
6. To identify the necessary budgetary controls that must be maintained in an organization.

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1.4 Research Questions

To achieve the objective listed above, answers are hopefully going to the following questions:

• Does budget serve as a standard to performance and responsibility centre established?
• How do they identify responsibilities for the achievement of plans?
• How do they allocate their resources within the limitation imposed by the scarcity of funds to meet their plans?
• What are the problems associated with budgetary control implementations in purchase?
• What measures can be adopted to reduce the impact of the problem?
• Is budgetary control used in profit planning?

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1.5 Research Hypothesis

in the light of the above research questions, the following hypothesis have been formulated:

• Ho: Budgetary control does not have a significant impact kin the achievement of organizational objective.
• Hi: Budgetary has a significant impact in the achievement of organizational objective.
• Ho: Budgetary control purchase does not measure deviation from set goals.
• Hi: Budgetary control measures deviation form set goals.

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1.6 Significance of the Study

The study will be beneficial to the firm understanding and the researcher himself.

• This research work have made the researcher to read wide range of books and journals.
• Managers will be able to know which employee is effective and which is not, as deviations from plan will have to be aimed.
• This study would immensely serve as a pathfinder to other researchers who might be interested in further research on this or other related topics.
• It is hoped that this research would help practicing managers and others in the public who are interested in the effective management of human and material corporate objective through purchasing budget planning and control.

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1.7 Scope of the Study

This work will be limited to Rokana Industries Plc, in other to enhance the process of allocating resources to met demands as well as converting rhetoric to reality.

It is also a device, intended to provide greater effectiveness in achieving organization efficiency.

1. Also to improve logistics between the manufacturer and its suppliers.
2. The study stress the importance of effective budget performance monitoring and control procedures.
3. For purpose of accuracy in data collection and analysis as well as cost reduction and time saving, we have decided to use Rokana Industries Plc Owerri, as a case study and relate our finding to other manufacturing industries by extrapolation process.

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1.8 Limitation of the Study

Although the study was a successful one, some problem were encountered. These include:

1. Lack of information: The difficulties in reaching the officer who should supply the needed information was not easy.
2. Cost of time factor: The cost and time wasted were also factors that could have frustrated the study but for the fact that the research work assiduously to overcome the problems.
3. The inability of the researcher together or collect all the questionnaire distributed to shortage of time was another militigating factor.
4. Also this research study was not adequately funded due to financial constraints.
5. While carrying out this research study, the researcher encountered some problems owing to limited time.

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1.9 Definition of Terms

The definition of terms helped the reader of this research work to understand some of the terms that would be used in the course of writing this research work.

The terms are:

i. Budget:

This is a set target with which to measure the actual achievements of people, department or the firm itself.

ii. Budgetary Control Purchase:

This is the whole of monitoring actual performance and comparing same with the budget to ensure the attainment of the overall budget and purchasing objective in general.

iii. Verification:

This refers to the physical check of qualities items available.

iv Profitability;

This is the net result of a large number of policies and decision. It could be inform of:

• Profits in relation to sales
• Profits in relation to assets. It is a plan or an acting of a firm geared toward making profit.

v. Budget Centre:

It is a responsibility centre where the manager is responsible only for costs (expenses) incurred in the sub-unit.

Vi An Organization:

An organization consists of group of individual in combination of tangible and intangible assets arranged to achieve organizational goals.

Vi Purchasing;

It is a managerial process that goes for beyond simply buying materials. It is also a process by which organization define the needs for good and services and for the optional use of available resources to achieve a pre-determined objectives.

Viii Budget Committee:

Person responsible to preparation and administration of the n=budget often headed by the MD and co-ordinated by the management accountant generally referred to use budget officer.

If such as system is in existence, hence cost could be reduced and quick action initiated to correct adverse variance where possible.

ix Increases Selling Prices:

Research could be undertaken into possible market reaction to high prices.

X Reduced Selling Prices:

The [possibility of greater sales to a lower selling price should be investigated greater sales means greater production which may lead to reduced cost.

Xi Reduced Investigation

Are as follows:

• Reduced stock; Capital is often looked up unnecessarily in stocks.
• Reduced amount owing by debtors: Better utilization of plant and equipment capacities could be investigated over and under loading could be corrected idle plant disposed off.

Xii Control:

This is defined as a systematic effort to compare performance with predetermined standard or plans in order to see whether performance or result is in line with the standard or plan and perhaps in order to take remedial action required to see that human and other resource and being use in the most efficient and effective manner in achieving an organizational objectives.

Xii Income:

This is amount expected to receive when products are sold.

Xiv Manager:

A person who undertake the task and function of managing of nay level and kind of enterprise. He is also referred to as one who achieves economic results by organization.

Xv Master Budget:

This us a summary of all phases of company's plan and goals for future.

Xvi Expenditure:

This is the gross outflows of financial resources in payment for ad vantage derived by the organization.

Xvii Management:

Management is a process of planning organizing, leading, controlling, motivating, coordinating and executing the efforts or organizational resources to achieve stated organizational goals.

xviii Resources:

This is an inclusive form often applied for the assets of an organization on unrecorded sources of an organizational strength such as, management, customers etc.

ixx Revenue:

This refers as the gross inflow of money or finance or financial resources into an organization capable of reducing the liability.

xx Planning:

Planning is the selecting of reasonable course of action that would direct an organization human resources for further time sperm. Also a process of forecasting, formulating policies, objectives, programming, scheduling, procedural and budget of activities.

xxi Research:

Research questions are questions to be investigated raised in the research to give it bearing and help the researcher to focus on the research as directed and defined him on what data to look for.

xxii Implementations:

This is the process od making sure that something has been officially decided, start to happen or be used or carried out.

Xxii Efficiency:

This can be explained, as to fail to take care of something or denies of an important thing or case.

xxv Programme:

This can be defined as a plan of things that will be done or included in the development of something to lunch a research programme a training programme for new staff.