RELATIONSHIP BETWEEN BUDGETARY CONTROL AND MANAGEMENT PERFORMANCE

1.1 Introduction

Budgetary control is control technique which when the compares of the planned state of affairs with actually state of affairs and the continuous devising of means of correcting the deviation. It involves the use of available technique such as operational research, computer science and so on, to ensure that the budget is realistic as possible. The budget is without doubt, the most widely used control device in both business and government circle. The budget is drawn up for control purpose, that is an attempt to control the direction that the firm taking.

As a prelude to other parts of this study, this chapter will discuss the background upon which this study was initiated, the statement of problems that led to this study, the Aim and Objectives of the study. Others are Significance of the study, Scope of work, Research hypothesis and questions, Limitations of the Study and Definition of technical terms.

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1.2 Background of Study

Planning and control are major activities of management in all organizations. Budgets are central to the process of planning and control. The involvement with budget places the management accountant as a key player in the provision of management information. A budget is one of useful tools for monitoring the implementation of a correctly cost operational plan of entity. Historically, budget emerged out of a need to control and monitor the project income and the utilization of funds by entities.

Performance measurement and management control are critical component of impairing organization performance. In this study, budget is set within an overall organization planning and control framework. A common sub Division of the wider planning and control framework in organization is strategic planning, management control and operational or task control.

Strategic planning is the process of deciding on the goals of the organization and the formulation of the broad strategies to be use in attaining these goals. It is creative and involves identifying a company’s strengths and opportunities to grow while minimizing weakness and threats. It has a long-term orientation and looks outside the organization at customers and competitors.

Management control is the process by which management assures that the organization carries out its strategies. It is more short-time is focused on middle management and is more rhythmic and routine.

Operational or task control is the process of assuming that specific tasks are carried out effectively and efficiently. The time scale may be very short-term and addresses targets of junior management most often is based on the use of non-financial measures and may be based on clearly defined input/output relationships.

Generally, an organization’s objectives are expressed in on and three to five year time frames and are informed by its mission and vision. Traditionally, objectives are based on financial measures but increasingly are inclusive of non-financial measures. Strategies are the ways in which the organization expect to achieve success. Depending on the uncertainty of the environment strategies can be developed as a “plan’ or a series of decisions made in a period of time but either way, for a stipulated time period their outcomes are consistent with the organizations objectives in that they are expressed in financial and increasingly, non-financial terms broadly management control system serve as the foundation for decision-making in all organization differ, management control systems provide the same structural support for the activities and goals of the organization ultimately, organizations adopt management control system with the expectation that they will facilitate better with the making and leads to improve organizational performance. Over time, the one would expect firms to adopt their management control system in an effect to maximum firm’s performance. To Dates, Empirical Research has not fully examined the effects of management control systems and planning on performance.

Previous studies suggest budgets are very unpopular with managers. There is scant evidence linking budgetary control and planning directly to organizational performance, the focus of this study. The study thus provide an analysis of budgeting process, control and planning among organization in Nigeria and a particular reference to industrial sector with the ultimate aim of demonstrating the role of management accountant in the process.

Therefore, in Access Bank of Nigeria Plc where the research was carried out, the activities that was conducted is to examine the Relationship between Budgetary Control and Management Performance.

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1.3 Statement of Problems

The budget is perhaps the most important instrument of government. But the concept, the policy and legal framework, the process and how it can be analyzed and evaluated is not understood by majority of managers.

Budgeting on the budget refers to the procedures and mechanisms by which the budget is prepared, Implemented and monitored. Budgeting is very crucial for the growth of the organizations. Good budgeting can lead to productivity growth and profitability. But to prepare a good budget requires a responsible leadership, special staff assistance, broad accurate and reliable information, completion plan, a financial calendar and effective monitoring and control over the execution of the budget plan. Research have however shown that 80% of the companies in Nigeria are dissatisfied with their planning and budgeting with their planning and budgeting processes and it has been estimated that these processes use up to 20% of all management time (Salihu, 2005).

The study thus provides an analysis of the budgeting control process and planning in financial institution in Nigeria. It will discuss budgets in a wider planning and control context and discuss a number of issues surrounding the generation and use of the budgets.

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1.4 Aim and Objectives of Study

The aim of the study is to examine the Relationship between Budgetary Control and Management Performance using Access Bank of Nigeria Plc as a case study. In achieving this aim, the following specific objectives were laid out as follows:

1. To evaluate the impact of budgeting and budgetary control on the support of top management staff,
2. To identify the role of budgeting and budgetary control on accountability, and
3. To examine the effect of Budgeting and budgetary control on the performance of an organization.

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1.5 Research Questions

The study came up with research questions so as to be able to ascertain the above stated objectives. The specific research questions for the study are stated below as follows:

• How was the budget developed?
• To what extent the Access Bank of Nigeria Plc finance sources of revenue attained?
• To what extent the budget problem named the performance of budget in financial institution in Nigeria?
• What are the roles of account department in Access Bank of Nigeria Plc?
• To what extent the budget can influence the design of the budget objectives in the budget planning phase?

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1.6 Research Hypothesis

In order to pursue the objective of this study, the following generalized statements have been designed to guide and aids in obtaining the result for the experiment to be conducted. For this work, the null hypothesis will be represented with H0 while the alternative hypothesis will be represented with hypothesis H1.

Hypothesis One

• H0: There is no significant relationship between Budgeting and budgetary control on the support of Top management staff.
• H1: There is a significant relationship between Budgeting and budgetary control on the support of Top management staff.

Hypothesis Two

• H0: There is no significant relationship between budgeting and budgetary control on Accountability.
• H1: There is a significant relationship between budgeting and budgetary control on Accountability.

Hypothesis Three

• H0: There is no significant relationship between budgeting and budgetary control on the performance of an organization
• H1: There is a significant relationship between budgeting and budgetary control on the performance of an organization

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1.7 Significance of Study

Budget is a reflection of the operational plans of an entity. A budget is an action plan for a specific period of time covering all departments/function/facets of an organization and containing targets to be achieved both in physical and financial terms, which serve as important criteria of performance.

Previous research has tended to focus on the antecedents of budgetary control, rather the effects of budgetary control. For example Simons (1987) found that a firm’s strategy was related to its choice of control systems. More recently, Widener (2007) finds that in certain strategic conditions, information processing needs are such performance measure both interactively and diagnostically suggesting multiple interdependent and complementary relations among the control system.

This study will be of immense benefit to other researchers who intend to know more on this study and can also be used by non-researchers to build more on their research work. This study contributes to knowledge and could serve as a guide for other study.

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1.8 Scope of Study

The study focuses on the Relationship between Budgetary Control and Management Performance using Access Bank of Nigeria Plc as a case study.

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1.9 Limitations of the Study

During the course of this study, many things militated against its completion, some of which are:

1. Time Constraint: The time frame given to accomplish this project was very short due to school academic calendar and it was carried out under pressure which made the researcher not to implement some necessary features.
2. Establishment Policies: Establishment policies posed a serious limitation as most staffs are not ready to release information needed for this project work. There were lots of information needed from the staffs of this establishment to enhance the study which took them time to release or they did not release at all for security purposes, hence the scope was reduced.
3. Research material: availability of research material is a major setback to the scope of the study.
4. Frequent power failure: This made the researcher append more money on fuel to ensure sustainable power.
5. Financial Constraint: Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).

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1.10 Definition of Terms

Budget: Is a plan quantified in monetary terms prepared and approved prior to a defined time usually showing planning income to be generated and/or expenditure to be incurred during that period and the given objective employed of attain a given objective.

Budgeting: This is the process of preparing a summary statement of plans expressed in monetary quantitative terms.

Decision Making: Involve selection from among alternative course of action or most preferred choice out of many alternative

Budgetary Control: This IS the control technique of planning In advance of the various functions of a business so that the business as a whole can be controlled.

Control: The process of setting goal and objectives In advance and determining ways to achieving it.

Plans: A set of things to do in order to achieve something usually done in advance.

Planning: This is the process of setting goals and objectives in advance and determines way of achieving it.

Responsibility Accounting: This is the term used to describe a system of decentralization of authority with performance of the decentralized units measured in term of accounting results.

Operational plan: Is derived from a broad strategies plan of an entity.

Budgetee: Is a subordinate manger that arranges a budget proposal according to the requirement of the requirement of the superior manager.

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1.11 Organization of the Study

The research work is planned to be divided into five chapters.

Chapter one covers the introduction, statement of problem, objectives of study, significance of the study research methodology, scope and limitation of study, research question and research hypothesis.

Chapter two covers the literature review and theoretical frame work of budgeting. It also includes overview of Access Bank Nigeria Plc.

Chapter three explains research methodology.

Chapter four covers data analysis and interpretation of results.

Chapter five contains summary, findings, recommendation and conclusion of the study.