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Product Code: 00005638

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Budgets are management tools universally recognized for their ability to support planning and efficient management of resources and activities in manufacturing organization. The main objective of this write up is to throw more light on the review of budget and budgetary control on organization performance using the Nestle Nigeria plc.as a case study. This research work purely based on budget and budgetary control as an instrument of planning and control in the company. This research work was conducted with special reference to the budgetary control system of the Nestle Nigeria Plc. with the view of ascertaining the major role of budgets in the achievement of profit and assessing management performance in the organization. Budget as a profit planning device sets standards for performance of the management while budgetary control is a tool implored by management to keep track of actual performance to ensure that budgeted standards are achieved and completed. In the course of this research work two thousand two hundred and one (2201) employees were taken as the population. Data was obtained through both primary (i.e the administration of questionnaires) and secondary data (i.e. journal, text books, web search, etc.). Data collected is analyzed by using descriptive statistic of frequency so as to prove or disprove the hypothesis therein. The analysis of the finding reveals that there is significant relationship between budgetary control and the financial performance of business organization and also that there is a significant relationship between budgetary control and performance of management in business organization and lastly that there is significant relationship between budgetary control and quality control in business. Nestle Nigeria Plc. has a formal system of budgeting and does attach incentives for the attainment of budgetary control goals and objectives in the company.

Keywords; Budget, Budgetary control, Organization performance, Manufacturing company, planning, controlling.







TITLE                                                                                              PAGES

Title Page                                                                                                    i

Integrity Attestation                                                                                   ii

Certification                                                                                                         iii

Dedication                                                                                                  iv

Acknowledgements                                                                                     v

Abstract                                                                                                      vi

Table of content                                                                                          vii


CHAPTER ONE                                                                                       1

Introduction                                                                                              1

1.1   Background of the Study                                                                      1       

1.2   Statement of the Problem                                                                     3

1.3   Research Objectives                                                                              4

1.4   Research Questions                                                                              5

1.5   Research Hypothesis                                                                                     5

1.6   Significance of the Study                                                                      6

1.7   Scope of the Study                                                                               6

1.8   Limitations of the Study                                                                       7

1.9   Definition of Terms                                                                              7


CHAPTER TWO                                                                                                9

Literature Review                                                                                      9

2.0 Introduction                                                                                          9

2.1 Conceptual Review                                                                               9

2.1.1 Concept of Budget                                                                                      9

2.1.2 Features of Budget                                                                                      11

2.1.3 Objectives of Budget                                                                         11

2.1.4 Types of Budget                                                                                12­­­­­­­­

2.1.5 Advantages of Budget                                                                       13

2.1.6 Disadvantages of Budget                                                                            14

2.1.7 Limitations of Budget                                                                        15

2.1.8 Problems associated with budget and their implementation                        15

2.1.9 Principles of Budgeting                                                                     16

2.1.10 Concept of Budgetary Control                                                                  17

2.1.11 Purposes of Budgetary Control                                                                18

2.1.12 Objectives of budgetary Control                                                      19

2.1.13 Types of Budgetary Control                                                            19

2.1.14 Advantages of Budgetary Control                                                   21

2.1.15 Disadvantages of Budgetary Control                                                        22

2.1.16 Budgetary Control Procedure                                                                   22

2.1.17 Overview of Performance Evaluation                                                       22

2.2 Theoretical Framework                                                                        23

2.2.1 The theory of Budgeting                                                                    23

2.2.2 Budgetary Control Model                                                                           25

2.3 Empirical Review                                                                                 26

2.4 Study gap and summary of the chapter                                                         27


CHAPTER THREE                                                                                  28

Research Methodology                                                                              28

3.0 Introduction                                                                                          28

3.1 Research Design                                                                                   28

3.2 Population of the study                                                                        28

3.3 Sample and sampling technique                                                           29

3.4 Data collection                                                                                               30

3.5 Validity of research instrument                                                            30

3.6 Reliability of research instrument                                                                  30

3.7 Method of data analysis                                                                       31


CHAPTER FOUR                                                                                     32

Data Analysis and Presentation                                                                32

4.0 Introduction                                                                                          32

4.1 Presentation and analysis of the data                                                   32

4.2 Test of hypothesis                                                                                47


CHAPTER FIVE                                                                                                53

Summary, Conclusions and Recommendations                                                53

5.0 Introduction                                                                                          53

5.1 Summary of findings                                                                                      53

5.2 Conclusion                                                                                           54

5.3 Recommendation                                                                                  55

REFERENCES                                                                                         57

APPENDICES                                                                                           60











Various researches on budget and budgetary control have clearly shown that organizations need to pay serious attention to budgetary process, budget and budgetary control. In light of these various issues facing organizations as a result of poor/mismanaged budgetary control systems, the researcher went ahead to research more on the topic and came out with various recommendations and findings to help curb the problems organizations have with their various budgetary control systems.

In the business world today, organizations developed a variety of processes and techniques designed to contribute to the planning and control functions. One of the most important processes is budgeting.Budgeting involves the establishment of predetermined goals, the reporting of actual performance results and evaluation of performance in terms of the predetermined goals. Budget and budgetary control however are used interchangeably, these two arediffer in theory and practice.

The term 'Budget' appears to have been derived from the French word Baguette, which means 'Little bag' or a container of documents and accounts. Budget is a financial tools for predicting future operations and control of those operations. It is a planning tools written play for the future that forces management to evaluate the assumptions and objectives identified in the budgeting process.  It is control tool that reveals the efficient or inefficient use of company resources. It serves as a motivational tool and also a means of communication.

Budgets are monetized expressions of target to be accomplished in a given year by an individual, organization or nation. It is a deliberate attempt to achieve superior targets over time with available and expected resources. Such targets are influenced by the experiences of the past and expectation of the future. Basically, a budget system enables management more effectively to plan, coordinate, control and evaluate its activities.  It is a device intended to provide greater effectiveness in achieving organizational efficiency.In any organization where budget is used as a means of profit planning, many alternative plans have to be considered and the most profitable one will be adopted. To be effective, however, the functional aspects must outweigh the dysfunctional aspects. Because where a budget plan exists, decisions are not merely spontaneous reactions to stimuli in an environment of unclassified goals. It is relevant to note that management activities are the driving force behind every organization and of course necessarily unavoidable. Developing a budget is a critical step in planning any economic activity. This includes business, governmental agencies and individuals.

Furthermore a budget is an attempt made at the beginning of each financial year to plan the profit and loss account for the year and to aim for a definite statement of financial position. This profit planning must be a well thought-out operational plan with its financial implication expressed as both long and short range profit plans.

Therefore, budgetary control is the establishment of policies and the periodic review or comparison of the actual result with the budgeted performances either to secure approval for individual action or to serve as a remedial course of action. It is also the process of developing a spending plan and periodically comparing actual expenditures against that plan to determine if the spending patterns need adjustment to stay on track. Budgetary control systems are universal and have been considered as an essential tool for financial planning. The purpose of budgetingis to providea forecast of revenues and expenditures which is achieved through constructing a model of how businesses might perform financiallyif certain strategies, events and plans are carried out (Churchill, 2001).

A budgetary control is described by Lucey (2002) as a quantitative expression of a plan of action prepared in advance of the period to which it relates. Organizations can use budgetary control in forecasting techniques in order to make plan and budget for the future (Epstein and McFarlan, 2011). It refers to the actual comparison of obtained results with the figures and data relating to budget in order to take necessary actions for solving or preventing the recurrence of deviations. Budgetary control predict the waste of resources that occurs in operations. Organizations rely heavily on budgetary control to manage the spending activities and this technique is also used by the public and private sector as well as private individuals.

These activities – Planning, organizing, directing and controlling of economic resources, are schematized to reflect the nature and objectives of the organization and must be tailored towards the attainment of the overall organization’s predetermined objectives.

On this background, every organization no matter the nature has a few plan for the future, simply because the success of any organization depends on the level of plan and control that is put into   the organization. Consequently, it is important to systematically or objectively assess the relevant efficiency, effectiveness, impact and sustainability of the activities in the light of the budget. Hence, the intention of the study is to research the budgetary procedures in a business organizations.



 In the 21st century, organizations worldwide both private and public have realized the need to restructure and revise their activities for a better quality control pattern. One of the most radically affected aspects of these organizations is the budget and budgetary control. Companies have performed poorly due to the fact that they lack effective and efficient budget and budgetary control system to adequately allocate resources to meet organizational goals and maximize performance. A research conducted by Boquist (2001) observed that companies continue to fail because they have flawed budgetary planning and control systems which they apparently fail to recognize. Some business organizations do not even know the link between budgetary control and performance and this affects their performance negatively. Various organizations ranging from small scale businesses to large scale businesses fail to recognize the power of budget and budgetary control over performance outcomes.

Budgetary control causes some dysfunctional effects in organizations which might cause much more problems than it suggests to solve, very few organizations strive to change their system. Since the pioneering work of Argyris in the early 1950's scientist know about those dysfunctional effects caused by budgetary control. One of the main problems Argyris found was that the hierarchical system of top-down budgeting, caused serious problems in human relations at work, especially when budgets were used as top-down externally controlled pressure device. This pressure caused alot of problems like budgetary slack, data manipulation or the refuse of cooperation between departments which compete against each other for rare resources (Argyris, 1953). So it is not surprising that scientist like McGregor called for a new way of controlling and evaluating employees and managers (McGregor, 1960). Even though alot of scientist called for the usefulness of giving employees a voice in the process of budgeting i.e, budgetary participation they did not seem to be much progress during the last 40 years (Libby and Lindsay, 2010; Umapathy,1987).

The main criticism towards budgets mentioned by (Libby and Lindsay, 2010) refers to the fact that they consume time, they do not allow the entity to seize opportunities, prevent flexibility and adaptability to the environment. Critics argue that budgets do not reflect the entity's strategy are focused on costs rather than adding value, reduce flexibility and the entity's ability to adapt to change, are bureaucratic and limit creativity. Budgets consume time and resources, are rarely updated, are based on assumptions and facilitate budgetary games. Other criticism of budgets are the fact that they support a vertical control, limit communication between departments, do not take into account the structure of the entity and make employees feel unappreciated. Ahmed et al., 2003 also analyze budgets criticism. They mention the fact that budgets do not take into account customers and quality are not effective in a changing environment, are inadequate for products with a reduced life cycle, create opportunities for manipulation, can lead to conflict, they focus on achieving short-term result. The refuse of changing the management control system for achieving a smarter and more efficient kind of control might cause much more problems in today's knowledge economy as hierarchical control seems to stiffel innovation which is the most important resource of knowledge economy (Marginson and Ogden 2005a, 2005b;Otley, 2004).

From the review of past research, most studies have concentrated on budgetary control and how it affects organization performance. This study is determined to fill the gap by trying to establish whether there is any relationship between budgetary control and performance of management in business organization.



This research focuses on budget and budgetary control on organization performance by taking a look at the aims, objectives or roles budget perform in a business organization.

1.      To establish the relationship between budgetary control and the financial performance of business organization.

2.      To ascertain the impact of budgetary control and the performance of management in business organization.

3.      To determine the effect of budgetary control and quality control in business organization.



In order to achieve the above objectives the following research questions will be used to provide answers to research problems.

1.      How does budgetary control influence the financial performance of a business organization?

2.      Does budgetary control have impact on the performance of management in business organization?

3.      To what extend does budgetary control have affect on the quality control of a business organization?



Hypothesis of the research are as follows;

Hypothesis One:

H0: There is no significant relationship between budgetary control and the financial performance of business organization.

H1: There is significant relationship between budgetary control and the financial performance of business organization.

Hypothesis Two:

HO: There is no significant relationship between budgetary control and performance of management in business organization.

H1: There is significant relationship between budgetary control and performance of management in business organization.

Hypothesis Three:

H0: There is no significant relationship between budgetary control and quality control in business organization.

H1: There is significant relationship between budgetary control and quality control in business organization.



The significance of the study is to highlight the use of budget and budgetary control as one of the tools for strategic planning to be adopted by the management of organizations to perform effectively and efficiently. Therefore, this research study shall be of benefit to organizations in a business sector as well as further studies.

 Furthermore, the study is important to the researcher in the sense that it will add more knowledge and furnish the researcher’s personal skills. This research would also help the stakeholder and employees of the organization to know how they can adopt effective strategic budget planning in the light of the succeeding economic situation in order to remain viable in their different competitive environments.



This research seeks to examine the effect of budget and budgetary control on organization performance in Nigeria. The research shall be limited to mainly budget and budgetary control as a planning, controlling and performance evaluation tool in the organization.


In embarking on this research, the researcher encountered the following problems;

1.      The time used to undertake the study was limited. The time was loaded with other academic activities.

2.      Response from the management and employees of the company through the questionnaire provided by the researcher was a bit slow because of the work load on the part of the management and employees of the organization.

3.      Also the issue of dearth of study materials relating to budget and budgetary control on organization performance was a little bit difficult to ascertain.



Budget: is a plan that is usually expressed in monetary terms approved before the period of use and it usually covers one year.

Budgetary control: According to the Chartered Institute of Management of Accountant (CIMA), Budgetary control is the establishment of budget relating to the responsibilities of executives to the requirements of a policy and the continuous comparism of actual budgeted results either to be secure by individual action of the objectives of that policy or provided a basis for its revision.

Planning: is the process of thinking about an organizing activities required to achieve an objectives. A process of making arrangements for in advance.

Organization: is an organized group of people with a particular purpose such as business or government department. The action of organizing something.

Performance: is the achievement of the organization in relation with its set goals. It is the outcomes achieved or accomplished through the contribution of individuals or teams to the organization`s strategic goals or the process of performing a task or function.

Management: is a process of planning, decision making, organizing, leading, motivating and controlling the human resources, financial, physical and information resources of an organization to reach its goals in an efficient and effective manner.

Employee: is a person employed for wages and salaries especially at non- executives level. It is an individual who was hired by an employer to do a specific job.

Controlling: is the process of comparing the actual performance with the set standards of the company to ensure that activities are performed according to the plans.

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