Budgeting as a Tool for Enhancing Efficiency of Corporations: (a Study of Seven-up Bottling Company Plc, Aba, Abia State)
ABSTRACT
This study is to assess the role of budget in enhancing the efficiency of corporations. This study centered on types of budgets operates in the company. However, the followings are some of the problems addressed in the study, why most business organization fail to meet their requirement as a result of their inability to formulate good budget and inventory control; problems of inventory, raw materials, idle labour, particular utilization of machine and inflation exchange rate. All this occurs as a result of lack of adequate budget formulation and control. Data was collected through questionnaire and interviews methods and research methodology sample size. Analysis was mainly through simple percentage average and with the sample size calculated using Taro Yamene formular, among the finding made are the budgeting and budgetary system are used to judge the performance of the workers. That budgeting and budgetary control process are effective tools for assessing and improving, the performance of the subordinate based on the analysis, the researcher concluded that appraisal of the impact of budgeting is an important budgetary control in an organization and it is relevant to the success of any business organization. This led to the recommendation that with proper budgetary and control in an organization, they will be able to co-ordinate the various department and channel then toward the achievements of the organization objectives.
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
An organisation have its broad objectives set by the board of directors who also set up the broad direction of the business which are load down in an over all policy document known as the corporate plan. The executive then translate these objectives and policies into action, specific aims in view and take into action to attain these aims. Its development and growth will be haphazard and fragmentary. Management generally uses budgetary control tool to achieve its objectives.
The importance of budget control cannot be over emphasized as the competitive business environment is seized by complex and uncertain economic factors. Although budget has been looked at form different perspective by different organisation yet the underlying philosophy and concept remains as the same, the budget as looked upon from a legal point of view as a plan of operation embodying on estimates of proposed means of financing them; while in the business sectors it is looked at as a qualitative of action and policies usually monetary prepared and appropriate to the time which it relates.
In essence a budget give expression to the objectives of achieving those objectives. It will be appreciated that in addition of being a major control device the basic management function of planning co-ordination and control are facilitated by the budget system.
Budgeting is a significant part of both planning and the controlling processes and is widely used by managers to plan, monitor and control various activities at every level of the organization. Thus budgets can be highly useful and functional. Some of the functional benefits or merits of preparing and using budges as control techniques are given by D.T. Otley. These are as follows:
- Budgets helps managers in integrating personnel efforts within the organisation towards a common goal.
- Budgeting process induces the management to shift attention to the failure operations. Since budgets are apart of the planning process, they force managers to anticipate and forecast the trends and changes in the external environment.
- The budgeting process helps management learn from past experience. The management can critically look at the success or failure of the past budgets and isolate errors and analyse their causes and establish steps to be taken to avoid repetition of such errors.
- Budgets acts as controlling devices to correct any deviations. If the expenditures for a given activity exceed the allotted budget at any point in time, this will signal a deviation from the proscribed course, requiring attention and action by the management.
- Budget helps new people and lower-level managers see where the organization is going and where they fit in the organization
- Budgets facilitate communication throughout the organization.
It is in the light of the above research work that I thought it’s wise to study the impact of budget as a tool for enhancing efficiency of corporations in the segment of Abia stat, rising seven-up Bottling Company Plc, (SBC) Aba as a study.
Budgeting control is one of the important tools that have gained a lot of popularity in recent time, perhaps because of increase in competition in a depressed economy where disposable income kept on decreasing over a period of time.
It can be seen from the above that budgeting is a significant part of both planning and the controlling processes and is widely used by mangers to plan, monitor and control various activities at every level of the organization while budgets acts as controlling devices to correct any deviations.
1.11 HISTORY AND PROFILE OF COMPANY OF STUDY
Seven-Up Bottling Company, Plc, (SBC) was founded by a Lebanese in 1959 and on October 1st 1960, production of carbonated soft drinks began at the first plant, then located at Ijora Lagos. The Seven-Up Bottling Company, Plc is one of the largest independent manufacturer and distributor of well-known and widely consumed brands of soft drinks in Nigeria.
According to History, a Lebanese, Mohammed El-khali who came to Nigeria in 1920 founded the company. Mohammed is the father of the company’s current chairman Fayscal El-Khalil. The company metamorphosed from a very successful transport business (El-khlil Transport) in a bid to diversify the then largest transport company in West Africa.
With this success, Seven-up a plant at Aba in 1983, they bought over Pepsi cola international and re-launched Pepsi in Nigeria in 1988 by so doing, Seven-up became the number one brand in the southern part of Nigeria and it won the international Bottler of soft drinks award for the year 1986.
However, the Aba plant of Seven-Up Nigeria Plc was established in 1989 and has a very massive structure, landscape and production lines.
The company was quoted in the Nigerian stock exchange (NSE) and went public in 1984. the greatest period of growth for Seven-up Bottling company, Plc began in the early 80’s with the Ibadan plant 1980, the Ikeja plant in 1981, the Kano plant in 1985, the Aba plant in 1989 with the acquisition of John Holt soft drinks, the Kanuna plant 1989, Benin plant in 1992. Ilorin plant and Enugu plant in 2002, making the total number of depots now to be 37 several depots and dealers in all parts of the country.
Company’s Information: Nationally.
Full Name: 7up Bottling Company
Headquarters: No 247, Moshood Abiola Way Ijora Apapa, Lagos.
P.O. Box: 134 Apapa, Lagos
Status Listed:
Legal form: Public Limited Company
Operational Status: Operational
IBIN code: NG 7up0000004
Incorporation Date: 1959
Fayscal El-Khali – Chairman
Company’s Information: With the Branch of study.
Full name: 7up Bottling Company Plc, Aba Abia State
Branch Address: Glass Industry Road
Ogbor Hill, Aba North,
Aba, Abia State, Nigeria.
Email Address: [email protected]
Website: www.sevenup.org.
Hours of work:
Mondays – Fridays: 8.00am – 5.00pm
Saturdays – Sundays: Closed.
Source: Personnel and Administrative Department of Seven-up Bottling company Plc. Aba plant.
Keys:
N.M.M National Manufacturing Manager
F.C Financial Controller
E.S.M Engineering Service Manager
C.O.O Chief Operating Officer
N.F.M.M National fleet Maintenance Manager
H.H.R.M Head Human Resource Management
N.M.N National Marketing Manager
F.M – Factory Manager
A.M – Accounts Manager
M.M – Marketing Manager
P.M – Personnel Manager
I.M – Inventory Manager
T.E. – Transport Engineer
Taken from personnel and administrative Departments of Seven-up Bottling company Plc, Aba plant.
Company’s description:
As earlier stated, the seven-up Bottling company is one of the largest independent manufacturing and distribution of the well known and widely consumed brands of soft drinks in Nigeria. the company brands are pepsi, 7up, teem, Mountain Dew, and Mirinda which includes mirinda soda, Mirinda tonic, Mriinda Ginger and Teem Lemonda, which are produce and marketed in a present (9) manufacturing plants. The company also market their product through their over 200 distribution centers called deports spread over the nooks and crane of Nigeria during the fiscal year.
1.2 STATEMENT OF PROBLEM
Budget is one of the controlling instrument use by the management. It is a plan or estimate to be attained by a corporations. The major problem addressed was the low estimation of money to be invested by the company as it result to low production turnover. Production turnover was addressed due to the fact huge amount of money was invested and their production rate becomes high which gave them the edge to become leader in the soft drinks industry in Nigeria.
Budgetary control is essential in every company organisation that want to achieve it stated or set objectives. This research work therefore, aim at addressing the problem of budget as a tool for enhancing efficiency of corporation.
- In all, the problem addressed in this study directs to problems of inventory, raw materials, idle labour and particular utilization of machine. All these occur as a result of lack of adequate budget formulation and control which is why most corporations or business organisation fails to meet their requirement as a result of their requirement as a result of their inability to formulate good budget and inventory control.
- Lack of budgetary system training and development in the industry.
- Lack of budgetary system facilities in the industry that will help the company in its budgets.
- Low skills qualifications and poor experience personnel employed in post as the sensitive handler of budget in the organisation.
- OBJECTIVES OF THE STUDY
The objectives of the study is to access the role of budget in enhancing the efficiency of corporation. However the following specific objectives would be achieved;
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- This study as earlier stated have it objective as how work efficiency can be improved in the organization through the evaluation of management performance in the use of scarce resources to achieve their goal.
- To know whether the use of budgeting and budgetary control is being fully utilized in the company.
- To access how the budget of the company under study is being prepared.
- To evaluate the impact of budgetary control on the life of the organisation.
- To know the sources though which the management gather information for the budget.
- To know whether organization control management performance through budgeting and budgetary.
1.4 RESEARCH QUESTIONS
Research questions refers to the base general questions which the researcher develops though which series of other minor questions are later on developed for the purpose to collecting data or pieces of information from respondents on the topic of the study for analysis. or to say it is the key analytical question which have been carfully and uniquely formulated to aid in the achievement of this study. These includes:
- Do your organisation control management performance through budgeting and budgetary?
- Do budgeting and budgetary control plans vital impact in the life of the organisation?
- How does the budget of this company being prepared?
- In what ways do the management gather information for the budget?
- Has the use of budgeting and budgetary control been fully utilized in your company?
1.5 SCOPE OF THE STUDY
The research would be concentrated in the seven-up Bottling company, Plc Aba, Abia state. The research cover the budgeting control of Seven-up Bottling Company Plc., Aba, Abia State and how it works as a tool for enhancing efficiency in this corporation. To cover the master budget which embraces the impact of operating decision those concerning the acquisition and utilization of financial decision, cash and capital budget. Sub-sequent the research is going to analyse the budget of various functional units and see how control is used to follow up budget in an organization.
LIMITATION OF THE STUDY
In carving out this work I the researcher encountered a lot of problems, which is as follows:
- Lack of money, a huge amount of money was needed in shuttling the questionnaire and in collecting them back.
- The time used to undertake this study was not enough as to enable the researcher to give an indepth treatment to it.
- Also, response from the employees of the company which is also refer as the respondent, through the questionnaire provided was also a bit slow. This is because of the reason such as much work load on them which made them to tell me to come to day come tomorrow to collect the questionnaire which I served them.
1.6 ASSUMPTION
The assumption made in this research work was that the ocmpany opt to corporate with me, the researcher by completing the questionnaire and granting me audience for interview correctly and truthfully. As it will make the information relating to this study correct, and as well having arrived a the result or findings can help in controlling the budget of the corporation and also help in controlling the budget of the corporation and also help in enhancing the efficiency of the corporation.
1.7 SIGNIFICANCE OF THE STUDY
The addition of knowledge is basically the aim of every research and this research work seeks to achieve just that.
More importantly, this research is necessary in understanding how budgetary control is established and also how it affects organizational performance of an organization. it enables the organization verify whether or not the plans of the organisation are understand by all members and put into effect corrective measures where deviation or under deviation is occurring. It also promotes good morale and harmony in the organization.
Since budget is a tool for planning and financial planning is the almost significance to a business organisation as it enables the organisation project the future consequences of present decisions in order to avoid surprise and understand the link between present and future decision.
1.7 DEFINITION OF TERMS
In the course of conducting this research work the research made use of some technical term for easy understanding they are defined as used in this study.
- BUDGET: According to ICMA (2004) institution of cost and Management Accountants. “Budget is a plan quantified in monetary terms prepared and approved prior to a defined period of time, usually during that period and the capital to be employed to attain a given objectives “or “Budget is a financial and/or quantitative statement prepared prior to a defined period of time, of the policy to be pursued during that period for the purpose of attaining a given objective”.
- BUDGE PERIODS: According to ICMA (2004) Institute of cost and management accountants. “It is the period to which a budget is prepared and used which may be subdivided into control periods, except for capital expenditure budgets, the budget period is commonly the accounting year of the firm.
- BUDGET CENTRES: According to the institute of cost and management. Accountant. (ICMA) 2004. “is a section of an organization for which separate budget can be prepared and control exercised.
- BUDGET COMMITTEE: According to Abohi (2001:37) “It is usually set up be management of co-ordinate and administer the budgets. The budget committee is usually headed by the managing director of Chief Executive. Usually every part of the organization is represented in the committee.
- BUDGET MANUAL: according to ICMA (2004). It is a document which setout, inter alias, the responsibilities of the persons engaged in the routine of, and the forms and records required for budgetary control”. It is a collection of instruction, governing the responsibilities of persons and the procedures, forms and records relating to the preparation and use of budgeting data.
- Budget control: The definition according to ICMA (1989) “It’s the establishment of budgets relating of a policy, and the continuous comparison of actual with budgeted results, either to secure by individual action the objective of that policy or to provide a basis for its revision”.
- BUDGETARY CONTROL: “Is a system of controlling costs which includes preparation of budgets, co-ordinating and department and establishing responsibilities, comparing actual performance with the budgeted and acting upon results to achieve maximum profit.
- FUNCTIONAL BUDGET: According to Lucey (2008) “It’s a budget of Income or expenditure appropriate to the responsibility of a particular function”.
