The effect of Budgetary Control Process on Firm Financial Performance: A Case study of Nzoia Sugar Company, Kenya

Abstract

This study sought to identify the link between budgetary control and the performance of the public enterprises in Kenya focusing on Nzoia Sugar Company (NSC) as a case study. The objectives of the study include; to determine the effect of budgetary planning on organizational performance; to examine the effect of budget monitoring on organizational performance and to establish the effect of budgetary feedback on performance targets at NSC. The variables which are also internal are planning, monitoring and feedback and there is need to analyze them to establish how they affect organizational performance.The target population of the study was 132 employees of the organization, the research adopted a census approach by interviewing all Heads of departments, heads of sections and supervisors. The sources of data for the research were primary while questionnaires and interviews were used as the data collection methods. Moreover, in computing and presentation of the data from the findings the computer program Statistical Package for Social Sciences (SPSS) was used. Findings from the study sought to reveal whether budgetary control can influence performance and more so if there exists any relationship between the two. Budgets and budgetary control mainly form and give every organization the structural support to be able to achieve their goals and objectives through proper allocation of resources therefore it forms a crucial base under which an organization can be able to improve on their performances thus the need to conduct a study on how budgetary control can influence performances.The results indicated that there was no significant relationship between the budget monitoring (p = 0.807) and the financial performance. The findings also indicated no significant relationship (p = 0.448) between the budget feedback and the financial performance. The results however indicated that there was significant relationship (0.006) between the budget planning and financial performance. The study concludes that budgetary planning is key to budgetary control process of any given firm. Firms are expected to embrace budgetary planning in the budgetary control process. The study recommends that firms should aim at identifying high priority programs to include in the budget in order to have a competitive advantage over others, firms‟ management should take corrective actions where variances are reported since they are quickly becoming a rather effective and efficient way in budget feedback process, top management should hold budget conferences to review performance since it has the potential to affect performance of the firm. Holding budget conferences with the employees should thus be a core objective in budgetary control process. The study suggest that further studies to analyze the direct and interaction relationship of budgetary control process on financial performance of firms should be carried out.