BUDGETING AS AN INSTRUMENT OF INTERNAL CONTROL IN A MANUFACTURING ORGANIZATION (A CASE STUDY OF AMA BREWERIES ENUGU)

ABSTRACT

An efficient budgeting control system is one that produces the desired result. A balanced budget is the one that produces no variances but to achieve this, we are left to contemplation rather than a reality. This has become the problem of most of our manufacturing concerns in Nigeria. This study investigated the budget control and execution in manufacturing concerns in Nigeria with a view of appraising their efficiency. Out of a population of one hundred and fifty six drawn from the manufacturing concern, seventy eight were selected as the sample size using statistical sample tools Taro Yamani. A questionnaire was designed and distributed to elicit information from the sample population; also data was sourced through primary and secondary sources. These data collected were presented and analyzed by means of tables and percentages. The hypotheses adduced were tested using such tools as chisquare. It was observed that manufacturing concerns do plan their profit so as to minimize losses though the procedure is not religiously carried out. However, it was discovered that the procedure is inadequate and inefficient. An inadequate budget procedure and execution causes a high accumulation of inventory thereby tying down the capital which could have yielded greater profit to the organization. Therefore there is need for the proper control of budgets in manufacturing concerns as to minimize losses and maximize profits.

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

According to Enudu 1999, the business environment is characterized by a lot of uncertainties ranging from such factors as: Economic environment, political and legal factors, social environment, supply and demand forces, competition, consumers attitude and technological changes.

A critical look at the performances of some of these manufacturing business organizations will reveal a lot of business failures as a result of lack of proper planning against these uncertainties.

According to Drury 2000, proper planning of business helps in reducing uncertainties thereby providing the management of these enterprises with a clear direction by determining their courses of actions in advance.

According to Pandey 2010, for any enterprise to achieve these goals and objectives, they must be managed effectively and efficiently. Management is efficient if it is able to accomplish the objectives of the enterprise and becomes effective when it accomplishes the objectives with minimum efforts and costs. One of the ways in which the management can achieve these objectives is though profit planning and control or budgeting.

According to Lucey 2002, the main purpose of budget planning is to provide the necessary guidelines for making decisions. With the proper budget planning, the enterprise can no longer be under the mercy of whims of Fickle economic and social forces thereby relying on the ability to sense what is required. Nweze 2011.

The value of budgeting control of any organization can never be overemphasized as these organizations and companies have limited resources and these scarce resources impose limits on the number of extent and range of end result the organization was set out to achieve.

The proper coordination of the various activities of these organization especially manufacturing concerns by their management is the main concern of this study.

1.2 STATEMENT OF THE PROBLEM

Having stated earlier according to Enudu 1999 that the business environment is full of uncertainties as a result of such factors; socioeconomic issues, political unrest, demand and supply forces, legal issues and technological changes all these affect the management of any organization in one way or the other thus needed attention for proper management.

You would equally recalled that organizational goals and objectives are numerous but the means or resources for satisfying these needs are limited, at times not available hence needed control to satisfy the high priority areas.

These problems enunciated above have led the researcher to find answers to such questions as follows:

Do manufacturing companies in Nigeria do Budgeting

If they do, what are the types of budgeting usually employed by them

The type used or applied does it enhances their profit planning strategies