BUDGETING AS A TOOL FOR PLANNING AND CONTROLLING IN MANUFACTURING COMPANIES IN NIGERIA: A STUDY OF DANGOTE CEMENT COMPANY GBOKO PLANT

BUDGETING AS A TOOL FOR PLANNING AND CONTROLLING IN MANUFACTURING COMPANIES IN NIGERIA: A STUDY OF DANGOTE CEMENT COMPANY GBOKO PLANT

CHAPTER ONE

INTRODUCTION

1.1       Background to the Study

The manufacturing sector in Nigeria faces many challenges caused by the environment in Nigeria such as poor infrastructure, poor standard of education, and high levels of corruption and a generally low level of disposable income of the population. In Nigeria today, there are few manufacturing companies, many manufacturing companies that are supposed to be in existences have collapsed due to such factors as poor management, unfriendly government policies and a total neglect by both the government and the private owners. The few manufacturing companies in existence import raw materials and component parts used in producing their final products (Equity Research Report on Nestle, 2009).

            Managers and stakeholders of manufacturing companies need modern skills like budgeting to forecast the major changes which are likely to affect the business while they plan future directions and dimension of resources needed to attain selected goals. Budget a short term finance planning tool of management is used to focus attention on company’s finance and overall operations of an organization. Budget highlights potential problems and advantages early, allowing management to take steps to avoid these problems or use the advantages wisely. A budget is a tool that helps managers in both their planning and control system that allows managers to compare actual performance with estimated or desired performance.

            A budget has been defined by Chartered Institute of Management Accountants (CIMA) 2006 as a financial or qualitative statement prepared and approved prior to a defined period of time for the purpose of attaining a given objective. It may include income, expenditure and the employment of capital. Lucey (2010), in support of the CIMAs definition defined budget to be a plan quantified in monetary terms, prepared and approved prior to a defined period of time, usually showing planned income to be generated or expenditure to be incurred during the period and the capital to be employed to maintain the given objective. Adams (2001), views budget as a future plan of action for the whole organization or a sector thereof. Budgets are plans that deal with future allocations and utilization of resources to different activities over a given period of time. For any organization to make progress or achieve its goals, it needs capital and to be able to make profit, it require 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 use budgets as a means of planning and controlling 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 divergences for which the management needs to watch to avoid embarrassment as any adverse variance will translate into inability to meet the corporate objective which will eventually lead to disagreement with stakeholders.

            Budget has become a tool of government with budgetary control becoming a tool of management. The daily increase in the number of industries both large and small as well as corporation is now applying this concept; it shows to a large extent that there are lots of advantages to be derived from applying the concept. In every country, the pattern and approach to control and regulation differs. It is therefore, worthy to note that anything that is uncontrolled is either wasted or mismanaged. Manufacturing companies need to develop and implement a well conceived strategic plan in order to be competitive in the business environment.

            Financial control is meant to assist management in planning, communicating, motivating, setting standard, coordinating, performance evaluation. Financial control is defined as the strings of coordinated actions that must be embarked upon to ensure that all expenditure that wholly, necessarily, reasonably and exclusively incurred for the purpose for which they were meant. Financial control is a process of comparing actual cost with budgeted cost on a regular basis, usually monthly.

It can therefore be said that budget is a parameter which measures the actual achievement of people, departments, ministries and firms, while budgetary control ensures that actual results are in accordance with the overall financial and policy objective of the establishment. The researcher intends to investigate Dangote Cement Company Gboko Plant a manufacturing company in Benue State, Nigeria.

1.2       Statement of the Problem   

            This research is primarily concerned with budget as a tool for planning and controlling in manufacturing companies which has been a major problem for most organizations in Nigeria.

            Financial services in both private and public sector is still being carried out on manual basis by poorly trained personnel where control measures have to be followed.

This posses a lot of difficulty in the management of such organizations leading to poor performance and in most cases result in closure of such organizations which would have contributed in the development of the economy.

            The main objective of setting profit making organizations is to maximize shareholders wealth. These objectives can only be realized if the organizations remain profitable. However, several cases abound where organizations which would have been profitable end up winding up as a result of financial crises. The question is; are the plans and financial control measures put in place in such organizations not been implemented? If they are, to what extent are they implementing these measures? Are the measures not capable of preventing waste and mismanagement? Or can organizations in Nigeria not overcome the problem of planning and financial control through proper use of available techniques? The fact that there are many tools/techniques of financial control available for organizations to use and many organizations still record high rate of financial mismanagement indicates that there exist a problem?

TOPIC: BUDGETING AS A TOOL FOR PLANNING AND CONTROLLING IN MANUFACTURING COMPANIES IN NIGERIA: A STUDY OF DANGOTE CEMENT COMPANY GBOKO PLANT

Chapters: 1 - 5
Delivery: Email

Number of Pages: 65

Price: 3000 NGN

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