The Impact of Budgetary Control on the Performance of Nigerian Manufacturing Companies

4466 Words 18 Pages
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Budgeting is a planning process which underlines predicting and quantifying the future in financial terms and predicting the future needs for finance. Aside from the planning role of budgeting, numerous articles on management accounting constantly stress the multi-purpose role of budgeting in business organization. Budgeting is used for forecasting, planning, coordination, communication, control and motivation. In the past few decades, considerable attention has been paid in particular to the role of management control of budgeting (Otley & Pollanen, 2000).
In order to reveal the nature of budgeting at business organizational level, it would be best to begin by comparing
…show more content…
This study will therefore attempt to analyze the process character of budgeting in the context of Nigerian manufacturing companies, and to investigate the influence of budgetary control process on organizational performance, taking Nigerian breweries and 7up bottling company as case study. 1.2 STATEMENT OF THE PROBLEM
Traditional budgeting has been criticized for a long time now for its inadequacy as a means of management control. Criticisms concerning its inadequate practices in a changing business environment emerged as early as the mid 1980’s with Johnson and Kaplan (1987) seminal book Relevance Lost. We could also note from the work of Allen (1998) who stated that the rapid changes in today’s business environment renders a rigid approach to budgetary control obsolete. It is no longer helpful, in his opinion, to compare actual results to that forecasted anything up to 15 months previously. He argues that amongst the requirements of a more appropriate system, would be the building in of accountability to explain the differences between actual and planned performance. This demands a more immediate time frame of information reporting.
Thus, there is a need to integrate strategic management and budgeting. We could point out the works of Adams et al (2003) to this regard. These authors conceptualized that to be effective, budgets must be aligned with the organization’s strategies, appropriate strategic planning, and performance management processes

Related Documents