A Perspective View of Budget Control As A Tool For Management Decisions Making

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Published on International Journal of Economics & Business
Publication Date: April, 2020

Anthony Nkemakolam
Department of Banking, Madonna University Okija
Nigeria

Journal Full Text PDF: A Perspective View of Budget Control As A Tool For Management Decisions Making.

Abstract
The need for management to make good decision and be able to arrive at a targeted end, counts as a plus on the part of such management. However, since organization fails to plan and as a result, fail to succeed. The primary objective of this study is to critically examine the extent to which budgetary control serves as a means of management decision making. The methodology used to gather information therefore includes the sources of data collection which involves the use of primary and secondary source. The use of interview and personal observation was employed, the categories of people interviewed out across from top to low level officers and the findings were noted. The method of data analysis used is chi-square (x2) method. Which influenced the paper conclusion from the findings which reveal that, Budgetary control serves as a tool for management decision making.

Keywords: Management, Decision, Budget Control, and Management Techniques.

1. Introduction
Budgetary control has been widely accepted as a management technique. It is aimed at controlling the operations of an enterprise or organization in order to achieve meaningful and maximum input. Budgetary control helps management to co-ordinate and control the various activities at divisional level so that the overall co-operations goal or target can be achieved. It is the light of this, that all management attaches significant importance to the budgets. It has often been said that the who fails to plan is planning to fail. Bearing this in mind, budgetary control could be said to have no replacement in an organization because it helps to combat crisis and to help avoid “fire brigades” approach which some organization engage in. a formalized budgeting system in very important in every organization.
Since budgetary control is a means to an end, a management tool and not an end it itself, it is then advisable for business structures to be assessed against rigidity, which can inhibit purposeful classification of objectives. There should be adequate organizational structure to form a foundation for a budgetary system, lines of authority and responsibility, proper departmentalization, good communication network and good human relations should be maintained by management. It is hoped that the work will throw more light on budgetary control and how it will better serve as a means or tool for management decision making and also help or assist management in performance evaluation, co-coordination interrelated activities, setting standards, motivating, communicating and planning. It is also hoped that this work at a glance will help one to see the usefulness of budgetary control and how it could serve as a yardstick or reference point for all set target in an organization.

Paper Problem
Like in most life endeavors, planning is one thing and implementation is another, one of this most militating factor against budgetary control is, adequate implementation. In most organizations, the implementation allows it to suffer set-back thereby making the good work useless. Another seemingly serious points is lack of motivation, most companies today have made the use of cheap labour their watchword. Little do they know that it does not yield adequate and maximum result. When most of thee workers are not motivate, there is no way they can put in their best towards the benefits that budgetary control can bring. This is not because it is not desirable but because most of them are lazy and inefficient. Most consider the process of budgetary control as time consuming and as such do not give it any change of paying off or giving maximum result. This lack of sense of motivation and co-operation at other levels of management.
Another pressing factor that militates against efficient and effective budgetary control is inexperience. Up to this present time, it will not come to appreciate and recognize budgets once set, could be allowed to appear inflexible and act as a constraint on management initiative.

Research Hypothesis
a. Ho: NBC Plc. Budgetary control does not serve as a control device aimed at reducing management’s predetermined target.
Hi: NBC Plc. Budgetary control serves a control device aimed at reducing management’s predetermined target.
b. Ho: NBC Plc. Budgetary control does not help management to measure or compare between input and output of all decision reached.
Hi: NBC Plc. Budgetary control helps management to measure or compare between input and output of all decision reached.
c. Ho: NBC Plc. Budgetary control does not help to evaluate actual performance or deviation from management set target.
Hi: NBC Plc. Budgetary control helps to evaluate actual performance or deviation from management set target.
Note: Ho: = Null Hypothesis
Hi: = Alternative hypothesis
Basically, talking about budgeting is drawing ones mind to the main subject which s planning and planning on the other hand, involves determination of targets, goals and objectives. Budget is therefore those quantities plans aimed at achieving the said targets, goals and objectives as formulated by management. Budget goes further to express management’s philosophies and ideas of future activities of the firm based on past experience such as social, political, economic and technological innovations. Although those experiences may be historical, but in most case serve as stepping stone and on a basis for forging ahead in order not to make repeated mistakes.

2. Literature Review
Types of Budget, Fixed Budget & Flexible Budget
There are basically two types of budgets from which other forms of budgets emanate and these two are fixed and flexible budgets. According to Horngren, a fixed budget is defined as “a single planned volume level, and is not altered or adjusted, regardless of changes in volume or other conditions during the budget period” (1988, p.18). it can also be seen as, a budget which his designed to remain unchanged irrespective of the volume of output or turnover attached that is, it is single budget with no analysis of cost. T. Lucky (1993:334). A flexible budget is defined as “a budget which by recognizing the difference in behavior between fixed and variable costs in relation to fluctuation to output or turnover, is designed to change appropriately with such fluctuation “Owler and Brown (1978:538). Flexible budget enables control of operation to be carried out during the budget period”. Fixed type of budget cannot be used to control the operation effectively. A fixed budget provides a satisfactory basis of control purpose where each product department operates at exactly the rate of activity planned. However, experience has shown that planned activities do not happen automatically, it is meaningless to compare actual costs of one rate of activity with budget cost or figure or another rate.

Flexibility and Rigidity
The degree of rigidity and flexibility that an organization allows in order to help them achieve a planned activity is a matter of managerial judgement. In most cases rigidity is recommended to check excess and wasteful application of limited resources, but this should be related when it is crystal clear that major changes that necessitates flexibility have happened or occurred. Since we have stated that a budget is not an end in itself, but a means to an end, it is therefore a management tool and should be applied to maintain some already set targets or to reach the height the management had in mind.
Budget Committee; A meaningful and real participation of all managers are called to prepare the budgets. The membership of the budget committee consist of executives form various departments. Frequently, members form production, sales, finance and then maintenance are usually included in the committee. The chief Executive normally serves as the chairman. In the cash of NBC PLC, the chairman of the committee is usually the Accountant if the planning manager ten own as other names such as budget co-ordinator an at times, the budget directors. The major function of the budget committee are as follows
a. To suggest a change of the budget if needed.
b. The provision of general guideline for preparing budget
c. To offer technical advice
d. To receive and review individual budget form other departments to co-ordinate budgetary activities
e. To co-ordinate budgetary activities.
f. To reconcile individual or divergent view.

3. Research Result
Questionnaire Distribution
Of the fifty (50) questionnaire administered to the employees of Nigeria Bottling Company Plc. Ninth Mile Corner, only forty-four (44) were returned.
Yaro Yemeni (1964) formular

For the above table showing the various responses gotten form some selected but relevant questions. It would be imperative to show how the above percentages were gotten from question 3, the question read thus: Do you in your won option agree that the budgetary control measures embarked upon by NBC in this land helps to reach a predetermined target? To this, 25 people ticked strongly agree, 10 ticked agree, 5 ticked strongly disagree while 6 people ticked disagree respectively. The worked out percentage are as follows:

Question 4: All goods and set objectives of the management may not be achievable without a good budgetary control system. To this, the total of 25, 10, 4 and 5 were gotten following the order as stated in the tabulated illustration above. The percentages as follows:

Testing of Hypothesis
Decision Rule:
In order to test the hypothesis, responses to certain selected but relevant question would be analyzed and also tested using chi-square (x2) distribution which is the statistical tool selected for use in chapter three.
The decision rule shall be:
• Accept the null hypothesis: (Ho) if the calculated X2 is less than the critical
X2 and thus reject the alternative hypothesis (Hi)
• Reject the null hypothesis: (Ho) if the calculated X2 is more than the critical
X2 and thus accept the alternative hypothesis (Hi)

Hypothesis One
Ho: Budgetary control serves as a control device aimed at reading management’s predetermined target.
Hi: Budgetary control does not serve as a control device aimed at reading management’s predetermined target.
In order to test the above hypothesis, questions 3 which relates to it would be analyzed and tested.
Question 3: Do you in your own opinion agree that budgetary control measures embarked upon by NBC plc. In this plant helps to reach a predetermined target?

Therefore calculated X2 = 2.59041
At the 0.05 level of signifinance, the critical X2 at the (4-1) (4-1)
= 9. Degree of freedom is 16.92
Decision: Since the calculated X2 = 2.59041 is less than the critical X2 = 16.92. we accept the null hypothesis (Ho) which states that budgetary control serves as a control device aimed at reaching managements predetermined target. Thus we reject the alternative hypothesis (Hi).
Hypothesis 2
Ho: NBC’s budgetary control helps to evaluate actual performance or deviation from management set target.
Hi: NBC’s budgetary control does not help to evaluate actual performance or deviation from management set target. In order to test the above hypothesis, the responses to question 4 would be analyzed.
Question 4: All goals and set objectives of the management may not be achievable without a good budgetary control system.

Therefore calculated X2 = 6.8559
At the 0.05 level of significance, the critical X2 at the (4-1) (4-1) = 9
= Degree of freedom is 16.92
Decision: Since the calculated X2 is less than the critical X2 = 16.92. We therefore accept the null hypothesis (Ho) which states that NBC budgetary control helps to evaluate actual performance or deviation from management. Thus we reject the alternative hypothesis (Hi).
Hypothesis Three
Ho: NBS’s budgetary control serves as a yardstick or reference point for all set targets
Hi: NBS’s budgetary control does not serve as a yardstick or reference point for all set targets. In order to test the above hypothesis. Question 5 which relates other staff to focus their minds on where and how to achieve resulted.

Therefore calculated X2 = 6.9992
At the 0.05 level of significance, the critical X2 at the (4-1) (4-1)
= 9. Degree of freedom is 16.92
Decision: Since the calculated X2 is 6.8559 less than the critical X2 = 16.92. We therefore accept the null hypothesis (Ho) which states that NBC budgetary control serves as a yardstick or reference point for all set target. Thus the alternative hypothesis (Hi) is rejected.
Hypothesis 4
Ho: NBS’s Budgetary control help management to measure or compare between input and output of all decision reached.
In order to test the above hypothesis, question 10 would be analyzed and tested
Question 10: The output always surpasses to input whether or not there is good budgetary control system.

Therefore calculated X2 = 6.03175
At the 0.05 level of significance, the critical X2 at the (4-1)(4-1) = 9
Degree of Freedom is 16.92
Decision: Since the calculated X2 is 6.03175 is less than the critical X2 = 16.92. We therefore accept the null hypothesis (Ho) which states that NBC budgetary control helps management to measure or compare between input and output of all decisions reached. Thus the alternative hypothesis (Hi) is rejected.

4. Conclusion
This paper work has gone a long way to enhance our knowledge and to prove that company’s success to a great extend depends on the effectiveness of the budgetary control system adopted by that organization. Owing to this fact, it will be wise to point out that companies should avoid haphazard and inconsistent budgetary control system over time. When a regular and consistent system could not be established, it becomes difficult to be used as a reference point for future planning and a failure in the budgetary and planning stage will lead to a total failure of the entire organization.
The budgetary procedure adopted by the plant is quite encouraging and needs commendation. However, such acceptance of the operating budget is still subject to beliefs, attitude, and degree of understanding of the various important fiscal policies adopted by the organization. In this regard, we mentioned earlier, it should be used continuously to motivate and encourage behavour toward degree objectively. Therefore significant changes that occur between budgets should emanated from. On a general role however, we as individuals can also learn from this work at least drawing inference and seeing how budgetary control enhances all sectors. Even the country plans each year through the yearly budget. It is my opinion therefore that budgetary control measure be given great and adequate attention. It should be review, evaluated and changed when necessary in order to be consistent and to meet up with the trend of time.

5. Recommendations
In this aspect of determining the plant’s budgetary system, modern scientific system should be adopted instead of using human djudgement. This will go a long way in minimizing the rought and excessive fund and inadequacies by man. The wastage of time will be greatly reduced and quick results achieve. A good budgetary control is also as a result of good internal control system. It is advised that the internal control system should be done, in a way that it matches customer/company relationship if not checked, dismemberment of customer will affect company’s sales which will inturn affect the production thereby bringing about a lot of variances in the budget.
Staff should be well renovated to allow them put in their best job satisfaction no doubt leads to great efficiency by the worker which will be the over-all interest of the company when staffs which are described as the greatest asset of the firm are not comfortable the company is bound to have some share of it no matter how small their discomfort Well –trained budget officers should be employed to carryout budgeting and budgetary control function to improve the ones already on ground. Finally, investment sections should be separated from the traditional budget division.

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