Effect of Budgetary Control on Financial Performance:
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Date
2021-10-30
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Publisher
IOSR Journal of Economics and Finance (IOSR-JEF)
Abstract
Manufacturing sector plays a vital role in providing livelihoods and national revenues, incomes, employment
and foreign exchange savings to Kenya. The core problem affecting Kenya sugar industry is the persistent
deterioration in profitability and liquidity. At the moment, five public-owned mills are indebted to the tune of
over One hundred billion shillings. Budgetary control is one of the major technic used in planning and control
function of any organization. Previous research has been done on the effect of budgetary control on financial
performance of other institutions. However, no research has been done on its effect on financial performance of
sugar manufacturing companies. The general objective was to investigate the effect of budgetary control on
financial performance through a comparative study of sugar manufacturing company in western Kenya. The
specific objectives were: to examine the effect of budgetary planning, budgetary implementation, budgetary
variance analysis and budgetary evaluation on financial performance of sugar manufacturing companies. A
descriptive survey research design was applied. Purposive sampling was used to select individual respondents
to participate in the study; respondent was staff dealing with finance and budgeting cost centers. A sample of
respondents was collected from Butali and Nzoia Sugar Company (this represents public and private sector in
western region). Primary data was used while the instrument of data collection was questionnaires. Descriptive
statistics and inferential statistics analyses were used. The survey under descriptive analysis revealed that,
budgetary planning had a direct positive impact on financial performance, budgetary implementation had a
direct positive impact on financial performance, budgetary variance analysis had a direct positive impact on
financial performance and budgetary evaluation had a direct positive impact on financial performance. In
conclusion, budgetary control is key to financial performance process of the firms analyzed in the survey and
therefore the survey recommends that all the budgetary control processes should apply as a tool for financial
control. The study recommends that there is a gap to focus on other factors that could influence financial
performance after having looked at budgetary control that is well functional but the industry is still persistent
deterioration in profitability and liquidity accompanied with a lot of debts.
Description
Keywords
budgetary planning, budgetary implementation, budgetary variance analysis and budgetary evaluation, financial performance, Sugar manufacturing Companies