Journal of Educational Research in Natural and Social Sciences (JERNASS)
Vol 1, No.1, 2015
BUDGETARY CONTROL AND ORGANIZATIONAL
PERFORMANCE
1
Balogun, A. Ph.D, 2Mamidu, A.I. & 3Dr. Owuze, C.A.
1
Department Banking and Finance, Achievers University, Owo, Nigeria
2
Department of Accounting, Achievers University, Owo, Nigeria
3
Department of Business Administration, Ambrose Alli University, Ekpoma, Nigeria
Abstract
The purpose of the study was to carry out a preliminary investigation on budgetary control and
organizational performance. It also set out the measure of performance on the organizational and
determined the inhibiting factors that affect the use of budgetary controls. In this project,
International Breweries was chosen as a case study. The objective was to evaluate the impact of
budgeting control in organizations performance, evaluate factors inhibiting effective budgetary
control in an organization among others. Data used for the research was collected through well-
structured questionnaire using simple random sampling for selecting respondents. Analysis of data
was done using frequency percentage and chi-square. Findings from this study revealed that
budgets and budgetary controls are factors that can influence the performance of an organization,
as they have a very mutual relationship. Concerning how budgets are linked to performance,
budgets and budgetary controls mainly form and give every organization the structural support to
achieve its goals and objectives, and maximizing performance, through resource allocation and
control. Recommendations were then made that all organization must prepare budget and put in
place budget control since it has a great impact on organization performance. Also budget control
should be made mechanism for resource and control and it should be linked at all times to overall
corporate strategies and goals.
Key Words: Budgetary control, Inhibiting factors, Simple random sampling, International
breweries.
Introduction
Following the uncertainties prevailing in the Nigerian business environment toady, managers and
stakeholders must be poised and prepared to compete favourably under these rapidly shifting
conditions. In order to survive under these environmental complexities and vagueness managers
and stakeholders of both private and public sectors need sharp tools, proven management techniques
to forecast the major changes which are likely to affect the business while they choose future
direction and dimension of resources needed to attain selected goals.
Budgetary control as a proven management tool helps organization management, and enhances
improved performance of any economy in different ways. Its primary function is to serve as a guide
in financial planning operators; it also establishes limits for departmental excesses. It helps
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administrative officials to make careful analysis of all existing operations, thereby justifying
expanding, eliminating or restricting present practice. Budgeting and control entails a distinct
pattern of decisions in an organization which is capable of determining its objectives, purposes or
goals, and how these goals are achieved by establishing principal policies and plans. However, the
inability to recognize the problem concerned and fixing a boundary off investigation creates an
obstacle for the successful implementation of budgeting and control. Some organization creates an
obstacle for the successful implementation of budgeting and control. Some organizations only look
for narrow ranges of alternatives which they arrive at from their past expenses and present situation,
other management levels even avoid long-term planning and budgeting in favour of today's problems
thereby making the problems of tomorrow more severe. The foregoing reflects on the need for
organizations to set up a formal mechanism for scanning its environment for opportunities and give
early signs of future problems, this course of action will improve the system of budgeting and
control, resulting in an appropriate expectation of improved performance, in the manufacturing
sector as seen in this study.
Research Objectives
The objectives for this study are:
To identify the relationship between budgetary control and organizational performance.
To identify the problems associated with budgets and budgetary control in an organization.
To identify ways to improve organizational performance through budgetary control
measures.
Research Questions
In order to achieve the above objectives the following research questions will be used:
1. What relationship exists between budgetary control and organizational performance?
2. What are the problems associated with budgets and budgetary controls in your organization?
3. How can organizational performance be improved through the use of budgetary control
measures?
Research Hypotheses
In order to elicit more information on preliminary investigation on budgetary control and
organizational performance, three hypothesis stated in their null form will be tested.
H1: There is no relationship between budgetary control and organizational performance
H2: There are no problems associated with budget and budgetary control in the organization.
H3: Budget and budgetary control can no way improve organization performance.
DATA ANALYSIS
This chapter covers data analysis, interpretation and the mode of presentation to support the
relationship that exists between budgetary control and organizational performance. The various
sections below therefore show the analysis and discussion of data collected from respondents
through questionnaires. The twenty five (25) questionnaires distributed to the various respondents
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Vol 1, No.1, 2015
were all filled, as the researcher used the census sampling techniques.
PRESENTATION AND ANALYSIS OF DATA
Section A
Table 4.1 Sex Frequency
Sex No of Response % of Response
Male 15 60
Female 10 40
Total 25 100
Source: Field survey, 2013
From table 4.1, 60% of the respondents are males while the order 40% are females the table reveals
that majority of the respondent are male, thus indicate that their more male among the management
staff than female.
Table 4.2 Age Distribution
Age No of Response % of Response
26-30 2 8
31-35 8 32
36-40 10 40
41-above 5 20
Total 25 100
Source: Field survey, 2013
From table 4.2, 8% of the respondents fall between 26 years 30 years of age, 32% fall between 31-
35years, 40% of the respondent fall between 36-40 while 20% fall between 41years and above. This
implies that all the respondents are adults and their responses can be relied on.
Table 4.3 Marital Status Frequency
Marital Status No of Response % of Response
Single 5 20
Married 20 80
Total 25 100
Source: Field survey, 2012
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From table 4.3 while 20% are single men and ladies while 80% of the respondents are married men
and women. This implies that the respondents are responsible experienced adult.
Table 4.4 Educational Frequency
Educational No of Response % of Response
HND, BSC, BA, LLB 12 48
MBA, MSC, PHD 8 32
ACIB, ACA, ACII, ACIS 5 20
Total 25 100
Source: Field survey, 2013
From table 4.4, 48% of the respondents have HND, BSC, BA and LLB, 32% have MBA, MSC and
PHD, while 20% have professional qualification; ACIB, ACA, ACII, ACIS, FCA and FCIS. This
implies that respondents are educated enough to give experienced responses.
Table 4.5 Years of Experience
Years No of Response % of Response
1-5 4 16
5-10 10 40
11-15 5 20
15- above 6 24
Total 25 100
Source: Field survey, 2013
Table 4.5, 16% of the respondents have 1-5years of working experience, 40% have 5-10years of
experience, 20% have 10-15years experience, 24% have 15 and above years experience. With 40%
have 5-10years experience implies that respondents will give tested answer.
Section B
Table 4.6 Does your organization prepare budgets?
Responses No of Response % of Response
Strongly Agree 23 92
Agree 2 8
Strongly Disagree - -
Disagree - -
Total 25 100
Source: Field survey, 2013
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Table 4.6, shows the responses gotten from the respondents concerning whether their organization
prepare budget, 23 respondents representing 92% of the total respondents indicated that their
organization to prepare budgets. This clearly shows that budget preparation is very necessary in
every organization.
Table 4.7, Do you have budgetary control systems in your organization?
Responses No of Response % of Response
Strongly Agree 21 84
Agree 3 12
Strongly Disagree - -
Disagree 1 4
Total 25 100
Source: Field survey, 2013
Table 4.7, shows the respondent's responses on whether they have a budgetary control system in
their organization or not, 21 respondents representing 84% clearly indicated that there is an
existence of a budgetary control system in their organization.
This clearly shows that there is a budgetary control system in place in International Breweries Plc,
Ilesha.
Table 4.8 There is relationship between budgetary control and performance?
Responses No of Response % of Response
Strongly Agree 20 80
Agree 3 12
Strongly Disagree 1 4
Disagree 1 4
Total 25 100
Source: Field survey, 2013
Table 4.8, shows the response gotten from the respondents on whether there is a relationship between
budgetary control and organizational performance. 80% of the respondents strongly agree that there
is a relationship between budgetary control and organizational performance, while 4% respondents
each strongly disagree and disagree that there is no relationship. However, since majority of the
respondents indicated that there is a relationship between budgetary control and organizational
performance, then in actual fact, there is a relationship between budgetary control and organizational
performance.
A similar research conducted by Davilla (2006), also found out that there is a clear relationship
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between budgets, budgetary controls, and the performance of an organization, as indicated in table
4.8.
Table 4.9 What Relationship exist between Budgetary control and performance?
Responses No of Response % of Response
Basic for decision making 2 8
Foundation for sound planning 2 8
Measurement for performance 5 20
Provide structural support for performance 10 40
Resource allocation control 6 24
Total 25 100
Source: Field survey, 2013
Table 4.9, highlights the various responses gotten from the respondents who indicated that there is a
link between budgets, budgetary controls and performance, 2 respondents representing 8% indicated
that budgetary control serves as a basis for decision making for improved performance, 2 respondent
representing 8% of the respondents indicated that budgetary controls is the foundation for sound
planning, 5 respondents representing 20% indicated that budgetary control is a measure for
performance, 10 respondents representing 40% indicated that budgetary control provides structural
support for performance, while the remaining 6 respondents representing 24% indicated that
budgetary control is a tool for proper resource allocation and control.
This clearly shows that budgetary control is linked to performance in numerous ways, and the biggest
link between budgetary control and performance is that it provides structural support for
performance through the achievement of goals/objectives.
Table 4.10 Are there challenges facing your budgetary controls?
Responses No of Response % of Response
Strongly Agree 24 96
Agree 1 4
Strongly Disagree - -
Disagree - -
Total 25 100
Source: Field survey, 2013
Table 4.10 shows responses on whether there are challenges faced by the respondents in their
organization with respect to their budgetary controls, 24 respondents representing 94% of the total
population strongly agree and 1 respondent representing 4% agree that their budgetary control
systems are faced with challenges. This also shows that the budgetary control of International
Breweries Plc is faced with challenges and needs to be addressed.
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Table 4.11 What are the problems facing your budgetary control system?
Problems No of Response % of Response
Inaccurate records 6 24
Negligence of the importance of budget 12 48
Lack of integration with overall 3 12
strategy
Lack of financial expert 1 4
Overestimation of cost 3 12
Total 25 100
Source: Field survey, 2013
Table 4.11,clearly highlights the various challenges facing the budgetary control system of the
respondents, 6 respondents representing 24% indicated 'in-accurate record's as a challenge, 12
respondents representing 48% indicated that negligence of the importance of budgets and budgetary
control was a challenge in the organization, 3 respondents representing 12% indicated lack of
integration with overall organization's strategies as a challenge, 2 respondents representing 8%
indicated lack of financial experts, another 3 respondents representing 12% indicated
overestimation of cost by managers so that they will not be blame in the future for overspending. This
suggest that there are numerous and serious problem facing budgetary controls of organizations.
This finding also corresponds to a similar research conducted by Boquist (2001). He found out that
lack of integration and financial experts were the major problems facing budgetary control system of
most organization.
Table 4.2.7 Can these problems identified above be addressed?
Responses No of Response % of Response
Strongly Agree 25 100
Agree - -
Strongly Disagree - -
Disagree - -
Total 25 100
Source: Field survey, 2013
Table 4.2.7 shows responses on whether the problems can be properly addressed, 25 respondents
representing 100% indicated that the challenges faced by budgetary control can be properly
addressed.
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Table 4.2.8 Can budgetary control improves performance?
Responses No of Response % of Response
Strongly Agree 25 100
Agree - -
Strongly Disagree - -
Disagree - -
Total 25 100
Table 4.2.8 shows responses on whether budgetary control can improve performance. All 25
respondents repr3esenting 100% indicated that budgetary control can improve the performance of an
organization.
In a similar research conducted by Bouillon (2007) on budgets and budgetary controls, he linked
good and flexible budgets to improve organizational performance. In your opinion, what various do
you think the performance of an organization can be improved through budgets and budgetary
controls?
Table 4.2.9 How performance can be improved through budgets and budgetary controls?
Solutions No of Response % of Response
Linking budget with overall strategy 10 40
Keeping proper record 5 20
More skill financial analyst 4 16
Budget review 2 8
Creating of enabling environment 1 4
Using budget as a benchmark 3 12
Total 25 100
Field Survey, 2013
Table 4.2.9 highlights on the various ways organizational performance can be improved through
budgets, 10 respondents representing 40% indicated that budgets should be linked with the overall
strategies of the organization, 5 respondents representing 20% indicated that proper records should
be kept, 4 respondents representing 16% said more skilled financial analyst should be hired to
prepare budgets, 2 respondents indicated 'review of budgets' 1 respondent representing 4%
indicated 'creation of enabling environment' while 3 respondents representing12% indicated that
budgets should be used as bench mark for improved performance.
TESTING OF HYPOTHESES
HYPOTHESIS 1
Ho: there is no relationship between budgetary control and organizational performance
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X2 = ∑ (Fo-Fe)2
Fe
Level of significant = 0.05
Degree of freedom = (m-1) x (n-1)
Where M = number of rows
N = Number of column
Degree of freedom = 3
Level of confidence = 70%
Fo Fe Fo - Fe (Fo-Fe)2 (Fo-Fe)2/Fe
20 6.25 13.75 189.06 30.25
3 6.25 -3.25 10.56 1.69
1 6.25 -5.25 27.56 4.41
1 6.25 -5.25 27.56 4.41
25 25 40.76
Since calculated value of 40.76 is greater than table value of 7.815, we can reject the null
hypothesis that there is no relationship between budgetary control and organizational performance
and accept the alternative hypothesis. Therefore, there exist a strong relationship between
budgetary control and organizational performance.
HYPOTHESIS II
Hi: there are no problems associated with budget and budgetary control in the organization
Fo Fe Fo - Fe (Fo-Fe)2 (Fo-Fe)2/Fe
24 6.25 17.75 315.06 50.41
1 6.25 5.25 27.56 4.41
0 6.25 6.25 39.06 6.25
10 6.25 3.75 14.06 2.25
25 25 63.32
Since calculated value of 63.32 is greater than table value of 7.815, we can reject the null hypothesis
that there are no problems associated with budget and budgetary control in the organization and
accept the alternative hypothesis. Therefore, there are problems associated with budget and
budgetary control in International Breweries Plc.
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HYPOTHESIS III
H2: Budget and budgetary control can in no way improve organizational performance
Fo Fe Fo - Fe (Fo-Fe)2 (Fo-Fe)2/Fe
25 6.25 18.25 333.06 53.29
0 6.25 6.25 39.06 6.25
0 6.25 6.25 39.06 6.25
0 6.25 6.25 39.06 6.25
25 25 72.04
Since calculated value of 72.04 is greater than table value of 7.815, we can reject the null hypothesis
that budget and budgetary control can no way improve organization performance and accept the
alternative hypothesis. Therefore, budget and budgetary control improve organizational
performance.
CONCLUSION, RECOMMENDATIONS AND POLICY ISSUES
This chapter considers the summary of findings, conclusion and policy issues of the study. The
findings are what the researcher found out during the study based on the responses given and
interviews conducted. This also includes the conclusion of the whole work and finally, what the
researcher thinks can be done to enhance the performance and development of the Brewery industry.
SUMMARY
The first objective of this study was to identify relationship between budgetary controls and the
performance of an organization. Findings from the study show that budgetary control has a strong
relationship with organizational performance, because, budget itself forms the basis for decision
making, foundation for sound planning, measure for performance of an organization, budgetary
controls provide structural support for performance and it also acts as a tool for resource allocation
and control (see table 4.2.4).
The above findings strongly suggest that budgets are greatly linked to performance of an
organization, hence, it should not be neglected. The study also revealed that budgets and budgetary
controls have a greater link to the performance of an organization because, it provide structural
support for performance. If the power of budgetary controls are not fully utilized or recognized by an
organization, performance may not be fully maximized, as resources may be allocated and
channelled to un-profitable projects/ventures.
The second objective of this study was to identify the problems associated with budgetary controls in
an organization. The study revealed that the biggest challenge facing budgetary control is that the
organization's managers do not fully understand or appreciate the importance of budgets/budgetary
controls in the organization (see table 4.6). other problems identified are: inadequate/in-complete
financial records, lack of integration with overall organization's strategy, kacj of financial experts,
and overestimation of cost (see table 4.2.6). If these problems persist for long, it could lead to the
organization performing below expectation. Losses may realised in the long run if organization do
not address budgetary control problems effectively. The third objective of the study was to identify
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ways of improving the performance of an organization.
Findings revealed that in actual fact, the performance of an organization can be improved (see table
4.2.9). The study also revealed that the performance of an organization can be improved if budgets
are linked with the overall organizational strategies. Keeping proper and complete financial records
will also improve performance. Others are: using budgets as bench marks, getting more experienced
and skilled financial analyst, revising and debating on past, current and future budgets, and creating
an enabling environment for effective and efficient budgetary control. All of these solutions will go a
long way in improving the performance of an organization if adopted.
CONCLUSION
This study conducted a preliminary investigation of budgetary control and performance of an
organization, using International Breweries Plc as a case study. The researcher reviewed previous
literature and contributions to this study, the problems associated with budgetary control, various
ways to improve performance through budgetary controls, various ways to improve performance
through budgetary controls in previous and recent times, among other salient issues relevant to the
subject of study. The researcher found out that the performance of some organization in Nigeria
leaves much to be desired, as a result of the various problems associated with budgets and budgetary
control systems in some organization. However, an empirical investigation was undertaken, using
the descriptive research design, to aid easy understanding of the layman who is also expected to
maximize the advantage of the result-oriented budgetary control system. Following our findings, the
researchers hereby advise mangers and business operators (not only in the Breweries industry) to pay
more attention to their budgetary control systems, while those without any should endeavour to
ensure the set-up of a result-oriented system as it goes a long way in repositioning businesses and
organizations from their creeping performance level to an improved and high capacity utilization
point.
POLICY ISSUES
After a preliminary investigation of how budgetary control are linked to the performance of an
organization, the researcher through her findings and analysis, came up with the following
recommendations to help organizations maximise performance:
First, organizations must recognize that budgets and budgetary controls are heavily
linked to organizational performance. Managers should endeavour to fully utilize the
budget resource, since it has the power to completely transform the organization.
Organizations without budgetary control systems should endeavour to put it in place
in their organization.
Second, organizations must at all times link their budgets to their overall corporate
strategies and goals. Budgets/budgetary controls must always be prepared in a
strategically manner to fit into the organization's goals and aims. Budgets should not
be prepared as a mere formality or function.
Third, accurate and complete financial records must be always kept by the
organization. Without proper financial records, organizations may not be able to
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achieve maximum performance. Budgets will never be a useful tool for improved
performance if financial estimates and records are in-complete or in-accurate.
Fourth, budgets/budgetary controls should be used as an internal control measure to
check and measure performance in an organisation. As observed by the study,
budgets/budgetary controls form an integral part of an organization's internal control,
hence, it should always be used to control most of the organization's financial
operations and activities.
Finally, budgets/budgetary control should be made the sole tool and mechanism for
resource allocation and control. All resources needed for a project should be
authorized by the budget of the organization, as this will enhance greater
accountability and transparency in the organization.
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study. Accounting, Organizations and Society (Ottawa: DC Canada Educational
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Bouillong, M.L. (2007): The economic benefit of goal congruence and implications for
management control systems. Journal of Accounting and Public Policy. P.7-8.
Cavalluzzo, S.A. (2000): The role of accounting data in performance evaluations, budgetary
participation and organizational effectiveness. Journal of Accounting Research p 99.
Chenhall W.A. (2002): The budgetary and performance influences of product standardization and
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