Effect of Budgetary Control on Financial Performance:
IOSR Journal of Economics and Finance (IOSR-JEF)
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.
budgetary planning, budgetary implementation, budgetary variance analysis and budgetary evaluation, financial performance, Sugar manufacturing Companies