Financial Planning And Control: A Key To Management Efficiency

This study was carried out to assess financial planning and control, a key to management efficiency using Nigerian breweries plc as a case study. The survey design was adopted and the simple random sampling techniques were employed in this study. The population size comprise of staff in managerial/financial department of Nigeria breweries. In determining the sample size, the researcher conveniently selected 57 respondents and 50 were validated. Self-constructed and validated questionnaire was used for data collection. The collected and validated questionnaires were analyzed using frequency tables. While the hypotheses were tested using chi-square statistical tool. The result of the findings reveals that there is effective financial planning and control practices in the organization. The study also revealed that financial planning and control facilitates effective utilization and allocation of financial resources of the organization, and it assist the management in the sustainability of the organization. Therefore, it is recommended that organization should ensure they standardize the practice of financial management through deploying relevant software services and training finance officers so as to support them to gain current financial management practice skills, as well as getting acquainted with the new software and systems used globally to enhance the practice of financial management. To mention but a few.

Introduction

1.1 Background to the Study

Financial planning involves analyzing financial flows of a firm as a whole, forecasting the consequences of various investments, financing and dividend decisions and weighting the effects of various alternatives. Financial planning is the core of financial management. The complex nature of business demands that management should place greater emphasis upon financial planning to secure and employ capital resources in the amount and proportion necessary to increase the efficiency of remaining factors of production. Financial planning is needed both in dynamic and perfect economic conditions. It helps management to avoid waste by furnishing policies and procedures which make possible a closer co-ordination between the various functions of business (Oye, 2006).

Financial planning must however be complemented by control in order to achieve the basic aim of planning. The actual results must be measured concurrently against projections. Control is the financial management function which must be exercised by executive personnel of the business enterprise to achieve the goals established by the planning function. It deals with testing the degree of management performance in the attainment of the set objectives. It is also a check to deviations from the planning function, and once the causes for the difference between the actual and expected performance have been identified, a corrective action should be initiated. However, Financial planning can be defined as the process which assures that financial resources are obtained economically and used efficiently and effectively in the accomplishment of desired goals. It covers the entire process of monitoring actions emanating from the decisions. Seen as an integral part of financial management, it also forms part of budgeting, accounting, reporting and review. The budget is then put in practice and results expected.

Budgetary control system forms a good basis of controlling plans. Definitely, actual activities are monitored and their results measured and then compared with plan. Then significant deviations from plan are identified and reported upon. The last step is to investigate the deviations accordingly and take corrective measures (Samuel, 1980).

The success of any business depends on the manner the production and distribution functions are coordinated. An important function of financial planning and control is the coordination of the various decisions taken within a company so that they are mutually consistent, having regard for financial aims and constraints. The exercise of this function is perhaps most clearly seen in formulating financial plans which involves merging of estimates of each department into a budget for the whole firm. In this process the financial manager holds a strategic position. Without coordination, individuals and departments would lose sight of their roles within the organization. They would begin to pursue their own specialized interests, often at the expense of the large organizational goals. Also, the point to be emphasized is that the activities of all departments must mesh. It is through budgeting that the activities of various departments are coordinated and unnecessary wastage of resources and efforts is stopped. Budgeting requires each manager to establish a proper rapport between the activities of his department and that of other departments. Any imbalance in the relationship between the departmental activities should be identified and corrective measure taken (Brockington, 1987).

It is obvious that we are living in an era of planning and control. Whether it be a student with his or her daily upkeep or the industrialist with his responsibilities to shareholders, planning and control are daily lives activities and it is an essential factor in national business and private life.

In a competitive world where the key factors are costs, price turnover and profit, planning and control enable every individual to have a sound appreciation of the financial implication of his plane and actions, and this financial plan and control can be used by any type and size of organization. As a tool of management, it can increase the efficiency of the organization as a whole since all the departments are involved. The efficiency and effectiveness of any organization depend on a number of factors which may be categorized as clarify of purpose, managements planning, control and communication. There is need to have a knowledge of the objectives of the organization otherwise it will not be possible to identify goals and set target for their achievement.

According to Orji J. "finance function deals with raising of fund and investing them in assets. He went further to say that financial management is the management activity that is concerned with the planning and controlling of the firms financial resource. The duty of the financial manager is to implement the acquisition, allocation and management of the resources. Finance therefore spreads into all segments of the firm"s activities thus its function must be understood by all segments of a firms activities and the function must be understood by all the managers in the firm.

Having known the future financial needs of a firm and its financial policies, the question then is how are these finance or fund raised? In taking this decision, it required the knowledge of the financial markets and how to make sound investment decision and to stimulate efficient operations in the organization.

This needed fund are sourced through internal and external source but before looking outside a firm for fund, the possibility of providing such funds internally should be examined. This source is mostly used for the firms expansion and should not be overlooked when planning finance. They are generated from the operations of the firm and is mostly made up of undistributed profits, depreciation provision tax provision and reduction in current assets.

The external sources on the other hand are made up of two main types namely short-term funds and long-term funds.

The short-term fund consist of trade credit, bank overdraft, bank loans, promissory notes etc. the long-term, refer to funds obtained either from loans with maturity dated several years in the future or from the owners of the business. This long-term fund is made up of equity fund and debt.

Equity fund represent the total interest of the owners of the business in the form of original share contribution plus subsequent addition either by way of additional investment or by ploughing back profit or reserves into the business. Debts are the long-term debt obligations of the business and it is usually made up of secured and unsecured debentures and bonds. The main sources of these long-term funds are the banks and the capital markets.

Financial planning and control therefore is said to be the name given to a system which is being used to increase overall management efficiency. It is concerned with planning for allocation of resources, monitoring the usage of these resources to assist in achieving the objectives of effectiveness and efficiency in both large and small scale organization.

The need for financial planning therefore arises because financial resources are limited and costly and even where the resources are available, the areas into which they could be applied profitable are diverse. Planning and control act as a device that enables management to anticipate change and adapt to it. No business exists without this two concept and success in business is proportionate to its planning and the skill with which it is controlled.

1.2 Statement of Problem

Financial planning and control is a guide to a particular set of financial goals or attainment and it is obvious that without a guide to a particular set of goals it will be very difficult to achieve that particular set of goals economically.

However, many organizations today do not make good financial plans about the operations of their organizations and where they do; they do not control their performances alongside their financial plan very well to control the controllable factors in their plans to enable them to achieve their financial goals.

Financial planning and control which is one of the tools that could be used by business organizations to achieve their profit plan, unfortunately is not being used properly by many business organizations. In essence, many business organizations have failed in their profit plan due to lack of financial planning and control in their organization.

In other words, if a study like this is not carried out or this study not taken seriously by organizations, then the inevitable problems that will occur is that organizations will not be able to minimize expenditure or cost and also will not be able to maximize productivity, in other words, not maximizing profitability.

In spite of all the write up concerning the raising of fund and their utilization, most organization however take the sledge hammer to crack nuts while trying to achieve their goals. This study will therefore try to answer such question like:

What problems affect the implementation of financial planning and control system in a company?

Do you think the fund manager of Nigeria Breweries exercise prudence in their work? If not does it affect planning and control in the company.

What kind of control should be applied and how effective is this control?

1.3 Objectives of the Study

The main objectives of this study is to find out financial planning and control, a key to management efficiency using Nigerian breweries plc as a case study, specifically the study intends to:

Find out if there is an effective financial planning and control practices in the organization.

Ascertain whether financial planning and control assist the management in making critical financial decisions.

Ascertain whether financial planning and control facilitates effective utilization and allocation of financial resources of the organization.

Ascertain whether financial planning and control assist the management in the sustainability of the organization.

1.4 Research Questions

The study will be guided by the following questions;

Is there effective financial planning and control practices in the organization?

Does financial planning and control assist the management in making critical financial decisions?

Does financial planning and control facilitates effective utilization and allocation of financial resources of the organization?

Does financial planning and control assist the management in the sustainability of the organization?

1.5 Research Hypothesis

H0: Financial planning and control have no significant effect on managerial efficiency in Nigeria breweries.

Ha: Financial planning and control have a significant effect on managerial efficiency in Nigeria breweries.

1.6 Significance of the Study

The study is very essential as well as beneficial to individuals and organizations. First and foremost, this study will serve as important financial objective reference to top executives of organizations who want to achieve efficiency and effectiveness in production, and as well maximize profit.

Secondly, it will also be significant to students who want to carry out further research on this area of study.

Finally, the findings of this study will be useful to the organization and other similar organizations, as well as the general public in this field as it depicts the nature of problem associated with financial planning in this part of the country.

1.7 Scope of the Study

The study focuses on the application of financial planning and control: a key to management efficiency a case study of Nigeria breweries. Therefore the respondent of the study will be obtained from the staffs in managerial/financial department of Nigeria breweries.

1.8 Limitations of the Study

Like any other research project, this study is not without limitations. Some of the difficulties encountered in carrying the study included:

Inability of the researcher to obtain adequate and relevant data from the organization, especially on sensitive economic issues that organizations are secretive about.

Financial constraint is another limitation. Inadequacy of finance helped to restrict the study to only Nigerian Breweries whereas the researcher would have loved to go beyond that.

The uncompromising nature of most respondents especially to questionnaires and verbal questions was another difficulty encountered by the researcher.

Lack of time to carryout out the personal observations of the enterprise operations properly, as well as attend to other academic activities was a major hindrance.

1.9 Definition of Terms

Financial Planning:

This means to prepare a financial plan. It is the mathematical sum of the following parameters (functions). Financial Resources (FR) + Financial Techniques (FT) = Financial Planning (FP).

Control:

Control is concern with the different use of resources to achieve a previously, determine objective or set of objective within a plan productivity (total factor basis).

Profitability:

Profitability is the ability of a business to earn a profit. A profit is what is left of the revenue a business generates after it pays all expenses directly related to the generation of the revenue such as producing a product, and other expenses related to the conduct of the business activities.

1.10 Organization of the Study

This research work is organized in five chapters, for easy understanding, as follows.

Chapter one is concern with the introduction, which consist of the (overview, of the study), historical background, statement of problem, objectives of the study, research hypotheses, significance of the study, scope and limitation of the study, definition of terms and historical background of the study.

Chapter two highlights the theoretical framework on which the study is based, thus the review of related literature.

Chapter three deals on the research design and methodology adopted in the study.

Chapter four concentrate on the data collection and analysis and presentation of finding.

Chapter five gives summary, conclusion, and recommendations made of the study.

Summary, Conclusions and Recommendations:

5.1 Introduction

This chapter summarizes the findings on financial planning and control, a key to management efficiency using Nigerian breweries plc as a case study. The chapter consists of summary of the study, conclusions, and recommendations.

5.2 Summary of the Study

In this study, our focus was on financial planning and control, a key to management efficiency using Nigerian breweries plc as a case study. The study is was specifically set to find out if there is effective financial planning and control practices in the organization, ascertain whether financial planning and control assist the management in making critical financial decisions, ascertain whether financial planning and control facilitates effective utilization and allocation of financial resources of the organization, and ascertain whether financial planning and control assist the management in the sustainability of the organization.

The study adopted the survey research design and randomly enrolled participants in the study. A total of 50 responses were validated from the enrolled participants where all respondent are staff in managerial/financial department of Nigeria breweries.

5.3 Conclusions

In the light of the analysis carried out, the following conclusions were drawn.

There is effective financial planning and control practices in the organization.

Financial planning and control assist the management in making critical financial decisions.

Financial planning and control facilitates effective utilization and allocation of financial resources of the organization.

Financial planning and control assist the management in the sustainability of the organization.

5.4 Recommendation

Based on the responses obtained, the researcher proffers the following;

Organizations should endeavour to improve on their financial management practices as the impact of their growth.

Organization should ensure they standardize the practice of financial management through deploying relevant software services and training finance officers so as to support them to gain current financial management practice skills, as well as getting acquainted with the new software and systems used globally to enhance the practice of financial management.

Chapter One:

Introduction

1.1 Background of the Study

1.2 Statement of the Problem

1.3 Objective of the Study

1.4 Research Questions

1.5 Research Hypothesis

1.6 Significance of the Study

1.7 Scope of the Study

1.8 Limitation of the Study

1.9 Definition of Terms

1.10 Organizations of the Study

Chapter Two:

Review of Literature

2.1 Conceptual Framework

2.2 Theoretical Framework

2.3 Empirical Review

Chapter Three:

Research Methodology

3.1 Research Design

3.2 Population of the Study

3.3 Sample Size Determination

3.4 Sample Size Selection Technique and Procedure

3.5 Research Instrument and Administration

3.6 Method of Data Collection

3.7 Method of Data Analysis

3.8 Validity of the Study

3.9 Reliability of the Study

3.10 Ethical Consideration

Chapter Four:

Data Presentation and Analysis

4.1 Data Presentation

4.2 Analysis of Data

4.3 Answering Research Questions

4.4 Test of Hypotheses

Chapter Five:

Summary, Conclusion and Recommendation

5.1 Summary

5.2 Conclusion

5.3 Recommendation

References

APPENDIX

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