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Globally, a lot of business organizations have fold-up due to lack of liquidity. One of the major means of ensuring liquidity in an organization is to ensure that organizations carry out its activity to ensure that it will achieve a level of profitability that will guarantee the continuity of the organization. Hence the topic, the impact of budgetary control on the profitability of business organization. With the topic “The Impact of Budgetary Control on the Profitability of Business organization”. This study is to be carried out to show the impact of budgetary control on the profitability of business organization. The aim of the study is to show why some business organization fail in their profit objective and to explain how as effective budgetary control could be used to enhance the profitability of business organization. Data used for this study were gathered through the review of related literature. Survey was also carried out and opinions were sampled about the topic through the use of questionnaires. The data obtained from the questionnaires were statistically analyzed with tables. The data in the tables were further analyzed with the help of chi-square for informed decision. The result obtained from this study shows that effective budgetary control have a strong and positive impact on the profitability of any business organization. Without ensuring that actions are carried out as budgeted to ensure that the budget goals are achieved, organizations will hardly meet their profit plan. In chapter five of this study, the study made some recommendation on how budgetary control as a tool could be used to control actions to ensure that profitability of business organizations is achieved
1.1 BACKGROUND OF THE STUDY
The word “budget” was derived from the French word “bougette” which means a small bag. It connotes a small bag which embodies the financial proposals of an organization for a given period of time usually one year. The organization could be government, business enterprises or family.
Initially, business firms used the appropriation type of budget adopted from the government. The purpose was to limit the expenditure on some items such as advertising and research and development, which were considered as luxury item. But this is in contrast with what is obtainable in the present day economics. Going by the volume IV of International Edition of the Encyclopedia Americana , “a business unit employs a budget to carry out its financial planning or forecasting. A business budget is a formalized quantitative presentation – a set of figures of a firm’s coordinated plans”.
Budgeting is essentially, a process of planning and control. A well-prepared budget provides management with a planned program based upon investigation, study, and research on the part of the entire organization. In addition, a well-prepared budget provides complete co-ordination of the marketing, production and financial activities of a business. Budgeting alone, however, does not bring realization of the plans. Control over operations is necessary in order that deviations from the plans may be noted and corrected so that the business may be kept on the planned course.
Budgetary Control originated in the 1920’s as a means of planning and control. Businessman wanted to see the possible outcome of their plans and forecasts, and budgets were prepared for this purpose. Hamilton  rightly indicated that, “modern budgetary control comprises both a plan of operations and the means of controlling operations within the scope of the “plan”. He further pointed out that:
“Budgetary Control by itself is not a wonder-working device; neither should it be regarded as a mere accounting
procedure. It is a powerful tool of good business management. Effective use of this tool requires sound organization, proper accounting classification and records,
adequate research, and the enthusiastic support of all employees from top down”.
Budgetary Control is very useful in the making of business plans. Every organizational activity can be expressed in terms of budgets. With the operation of a budgetary control system, business expenditure can be made to match with the economic realities of the organization.
In recent years, budgetary Control has been frequently examined to find its relationship with profitability of Industries. The existence of many industries as at present can only be justified in terms of their profitability. Therefore, to such industries, anything, which improves their profitability, is worthwhile.
Profitability may mean different things to different organization under different conditions. Most organization takes it to mean ability to realize a return over and above the cost of resources put into the organization’s activity. However, to some other organizations, anything, which reduces the cost of operation, is profitable.
The use of budgetary control in profit planning is tremendous. It can be used in matching expenditure and income in order to make some profits. And to the extent that budgetary control is frequently applied in profit planning, its contribution to the realization of profits cannot be doubted.
1.2 STATEMENT OF PROBLEM
Budget is a guide to a particular objectives and it is obvious that without a guide to a particular objective it will be very difficult to achieve that objective economically.
However, many organization today do not make good budget about their organization and where they do, they do not control their performance vis-a-avis their budget very well to control the controllerable factors in their budget to enable them to achieve their plan.
Budget, which is one of the tools that could be used by business organization to achieve their profit plan unfortunately, is not being used properly by many business organizations. In essence, many business organizations have failed in their profit plan due to lack of budgetary control in their organization.
1.3 OBJECTIVES OF STUDY
The aim of this study is to find out the impact of Budgetary Control on the profitability of business organization. This study has been designed:
1. To determine the impact of budgetary control on the profitability of business organization.
2. To carryout a comparative analysis to show how budgetary control could be used to achieve profit plans.
3. To determine how budgetary control could be used to improve business performance.
1.4 RESEARCH HYPOTHESIS
In this work, the following hypotheses are formulated:
1. Budgetary control increases the profitability of business organization.
2. Budgetary control helps to achieve a profit plan.
3. Budgetary control impacts business performance positively.
1.5 SCOPE AND LIMITATIONS OF THE STUDY
The research covers the three related Business organization that deals on oil, viz, Envoy Oil Industries ltd., Golden Oil
Industries ltd., and ALMB Milling Oil ltd. The period, 2004 – 2008, covers the aspect dealing with our data for statistical analysis.
Some difficulties were encountered in the course of obtaining the necessary information. For instance, the problem of picking the three Business organizations for case study in this project work was not a small one. Also, on numerous occasions, it was impossible to get in touch with the officers who should supply the needed information.
Moreover, when these officers were reached, it was sometimes impossible to obtain the needed data which most of the officers in these Business organization considered as being very confidential. The huge financial implication as regards my case – studying three related business organizations was also a constraint.
Obviously, all these problems had some effect on the information collected and probably, the conclusions reached.
1.6 SIGNIFICANCE OF THE STUDY
There is presently a high incidence of Industrial failure due to world-wide economic recession. For a country like Nigeria, the problem has become a daunting one. The pegging of exchange and interest rates are invariably increasing the cost of operation of
these three related Business organizations, hence decreasing their profit.
Therefore, it is very necessary for every organization to plan its expenditure and ensure costs and still operate profitably in terms of having a return over and above cost of operation. It is the determination of the contribution of budgetary control in this regard that comprises the significance of this study.
1.7 ASSUMPTIONS OF THE STUDY
Although this research work is mainly concerned with budgetary control, it is assumed that budgetary control should be studied together with budgeting. This is simply because budgetary control cannot be in existence without budget. Therefore, in this research work, attention will be devoted to budgets and budgetary control in Business organization. It is also assumed that of all organizations, Industries best clarifies the relationship between budgetary control and profitability.
1.8 OPERATIONAL DEFINITION OF TERMS
The following operational variables are defined in the context of this research study:
It is an economic plan, quantified in respect of a period of time, which related an organization’s operating ability and objectives with its financial resources;
This is the process of controlling performance and costs by
setting target, measuring performance, apportioning responsibilities for costs as shown in budget statement and reports and acting upon deviations from plan.
This is the state of minimization of costs or the realization of some returns over and above costs in relation to a company.
Is a group of individuals working together to achieve some specified goals.
Is a firm that concentrated in the manufacturing of different items or it is a branch of trade contrasted with distribution and commerce.
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