The effect of budgeting on the financial performance of firms

Abstract

This research was work conducted with special reference to Budgeting and Financial Performance of BCU Ltd with the view to access the effect of budgeting that plays in the firm and how the key actors of budgeting engage its uses in their daily operational activities. Budget as a profit planning device sets standard of performance of managers, while budget control is a tool implored by management to keep track of actual performance to ensure budgeted standards are met. The study used cross-sectional research method targeting forty (40) respondents who areworkers at various managerial levels were taken as sample population within the firm. The researcher used both primary and secondary data. A well designed questionnaire was used to obtained data through administration of the questionnaires; quantitative methods were used in analyzing the data collected. A Pearson’s correlation model was adopted to determine the association between dependent and independent variables. The study findings revealed that there is a strong positive effect of budgeting on financial performance on firms. The study recommends that effective budget implementation should be facilitated through capacity building, robust systems and processes prioritization, and close monitoring for evaluation. Stakeholders should get involved in budget execution to enhancing the overall budget implementation. Further, financial management systems should be supported in order to ensure prudent management of funds and adequate sensitization of both the employees and the public on best financial management practices to enhance the oversight role. In addition, manufacturing companies need to establish a strong link between the planning process and the budget process.