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organizations in the past. Alternatively, planning and control may be pushed into
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the background and become almost invisible to line workers unless a major
problem or failure occurs. Even which the planning effectively perform the basi9c
functions of planning, organizing, and control management still must all three
functions require participation by all management levels.
Management set goals and objectives and formulate plans for achieving
them. The expected financial impacts of plans are develop and evaluated
through budgeting. Once plans are implemented, control depends heavily, or
cost accounting, which provides management with reports of actual production
cost, marketing expenses, and administrative expenses. Comparison of actual
cost with those budgeted for control. The reasons for significant deviations are
then determined a corrective actions are taken (Carter, 2007).
The capital budgeting process consists of five distinct but interrelated
steps: Proposal generation. Proposals for new investment projects are made at
all levels within a business organization and are viewed a business organization
and are reviewed by finance personnel. Proposals that are require large outlays
are more carefully scrutinized than less costly ones; Review and analysis.
Financial managers perform formal review and analysis to assess the merits of
investment proposals; Decision Making. Firms typically delegate capital
expenditures decision making on the basis of dollar limits. Generally, the board of
directors must authorize expenditures beyond a certain amount. Often plant
managers are given authority to make decisions necessary to keep the
production line moving; Implementation. Following approval, expenditures are
made and projects implemented. Expenditures for a large project often occur in
phase; Follow up. Results are monitored and actual costs and benefits are
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compared with those that were expected. Action may be required if actual
outcomes differ from project ones (Gitman & Zutter, 2012).
Budgetary Control is the process of establishment of budgets relating to
various activities and comparing the budgeted figures with the actual
performance for arriving at deviations, if any. Accordingly, there cannot be
budgetary control without budgets. Budgetary Control is a system which uses
budgets as a means of planning and controlling. According to I.C.M.A. England
Budgetary control is defined by Terminology as the establishment of budgets
relating to the responsibilities of executives to the requirements of a policy and
the continuous comparison of actual with the budgeted results, either to secure
by individual actions the objectives of that policy or to provide a basis for its
revision.
Budget Control is a system of controlling costs which includes the
preparation
of
budgets,
coordinating
the
department
and
establishing
reasonable yet profitable bid price. For that reason, project planning is difficult
challenge for managers. Project can be defined as a series of related tasks
directed toward a major output. For companies with multiple large projects,
such as construction firm, s project organization is an effective way o assigning
the people and physical resources needed. It is temporary organization structure
designed to achieve by using specialist from throughout the firm (Welsch, 2006).
Project scheduling involves sequencing and allotting to all project
activities. One popular project scheduling approach is the Gantt chart. Gantt
chart is used to schedule resources and allocate time. They permit managers to
observe the progress of cash activity and to spot and tackle problem areas.
Gantt charts, though, do not adequately illustrate the interrelationships, between
the activities and resources.
Throughput, an important concept in operations, is the number of units
processed through the facility sold. Throughput is a critical difference between
the successful and the unsuccessful enterprise.
constraints, which has been popularized by the book Goal: A process of ongoing
improvement by Elihayu Goldratt and Jeff Cox. The Theory of Constraints (TOC)
is a body of knowledge that deals with anything that limits and organizations
ability to achieve its goals. Constraints can be physical or nonphysical (Heizer &
Render, 2007).
Management control system (MCS) is a system which gathers and uses
information to evaluate the performance of different organizational resources like
human, physical, financial and also the organization as a whole considering the
organizational strategies Management control devices ensure that strategic
intentions are achieved. Management Control Systems (MCS) is a systemized
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controls
over
assets,
internal
auditing, and
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requirements
for
areas. This strategy also included targeting certain market segments where
competition was less.
Pursue one project, several respondents expressed that they preferred to
target one particular project to enter a new market. During the execution of that
project, the company understands the new market and the players in that
particular region and later decides whether to continue working in the market or
not. Some companies also follow their clients to new markets. Such entries are
less risky for the companies.
Join with local players, for some general contractors entering new
markets, the players; the legal, regulatory and economic forces were new to
them. To overcome these difficulties they teamed up with local players such as
subcontractors, suppliers, and laborers or even went in for joint ventures.
Establish good PR, many respondents expressed that good word of mouth
and networking was important to stay in business. Individuals working in the
marketing department did most of the service selling and were usually the first
people to go to the new market. Some companies also indicated that over 50 %
of the work was obtained through repeat clients thus highlighting the importance
of relationship selling (Nolan, 2005).
Local Literature
Budget is a detailed plan defining or outlining the sourcing and uses of
financial and other resources of the company in a given period of time. This is the
plan expressed in a quantitative terms. Every organization or individual has to
budget their scarce resources to make the best use of such resources (time,
money and energy). Owners of successful small companies who survived and
grew even in difficult economic times carefully planned or budget their inventory,
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agencies,
some
charitable
institutions
and
not-for-profit
organizations are required to prepared a budget and operate within such budget.
Budgeting directs the firms activities toward the achievement of
organizational goals. In the budgeting process, specific organizational goals for
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each segment, as well as the goals of the organization as well as a whole are
formally established and incorporated in the budgets (Roque, 2011).
Effective and efficient management of working capital improves returns
and minimizes the risk that the business enterprise will run short of cash. By
optimally managing cash, receivables, and inventory, a business enterprise can
maximize its rate of return and minimize its liquidity and business risk.
To improve cash inflow, you should evaluate the causes of and take
corrective actions for delays in having cash receipts deposited. Ascertain the
origin of cash receipts, how they are delivered, and how cash is transferred from
outlying accounts to the main corporate accounts. Also investigate banking policy
regarding availability of funds and the length of time lag between when a check is
received and when it is deposited.
The type of delays in processing checks are (1) mail float, the time
required for a check to move from debtor to creditor; (2) processing float the
time needed for the creditor to enter the payment; and (3) deposit collection
float, the time it takes for a check to clear.
There are many possible ways to accelerate cash receipts including the
use of lockboxes, return envelopes, pre-authorized debits (PADs), wire transfers
and depository transfer checks (Salvador, Baysa, Gamboa & Fua-Geronimo,
2012).
Effective cash management requires controls to protect cash from loss
through theft or fraud. The following are some characteristics of a system of cash
control: Segregation of duties for handling cash and recording cash transaction.
No one person should be in complete control of a transaction. The employee
handling cash receipts should not have access to the accounting records for
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and those transactions and other events that only can give rise to contingencies
and commitments; (4) the basis for the determination of impairment losses on
loans and advances and writing off uncollectible loans and advances; (5) the
basis for the determination of charges for general banking risks and the
accounting treatment of such charges (Liz, Ruado & Domingo, 2013).
Foreign Studies
Budget preparation was carried out in the branches of the bank and that
managers are the personnel responsible for the preparation and implementation
of budget. It also revealed that the bank has a budget committee and that on the
average budgets are actualized. Budget failure according to respondents was
caused by poor implementation and forecasting. There was a significant
relationship between budget and control mechanism in the banking industry and
there was also a significant relationship between budget preparation and budget
implementation in the banking industry (Abu-Saeed, 2008).
Using data from management controllers or CFO, this research empirically
investigates the reasons why companies implement budgetary control. Two
theoretical frameworks are mobilized: contingency and neo- institutional theories.
The contingency theory explains the implementation of the budgetary control by
the search for technical efficiency. Indeed, the budgetary control allows
decentralization with coordinated control, management by objectives and
management by exception. For these reasons, it constitutes a useful tool in some
technical environment. Five variables are used to operationalize the technical
environment of organizations: environment uncertainty, complexity of the
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costs, managers can create budgets with slack. It was generally assumed that
budgetary slack was detrimental to organizations, but it also had been beneficial
in certain instances. Schiff and Lewin discovered that management can and does
create slack to achieve attainable budgets and to secure resources for furthering
their personal goals and desires. They also stated that slack creation was
universal with managers in companies that were profitable or non-profitable,
stable or growing. They implied that it served managements self-interest to have
slack included in the budget (Ramdeen, Santos & Chatfield, 2007).
Local Studies
The concept of budgeting emphasizes the total system approach
integrating all the functional operational elements of the entity. Therefore, wide
level of participation at all management level should be attained. But, what is
really difficult in the budgeting process is how to coordinate and reconcile the
conflicting objectives of the different functional areas in the organization.
Attempts are made through budget meetings to reconcile the different objectives
and to coordinate them to maximize company operations towards the attainment
of a common purpose (Cunanan, 2004)
The perceived benefits of budgetary planning and controlling strategies
when the respondents are grouped according to the size of the projects handled
are very satisfactory. As the number of workers employed increases, the
application of budgetary procedures become more frequent because large
manpower resources needs more control as dealing with more manpower is
more difficult that with lesser number of workers.
The most important benefit brought by the budgetary planning and
controlling strategies according to the nature of projects handed is that: It
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compels the management to give serious and timely attention to planning and
instill in them the habit of careful study (Peralta 2005).
Budget process in the government which is similar to that in the private
industries, mentioned the relevance of education as a basis for empowerment
and that every person involved in the budget process and control procedures
should have enough training and experience to carry out his functions effectively.
The study also emphasized that decision making is one of the corner stones of
an organizations life and that without the required knowledge, experience, and
exposure in the assigned task, it cannot be carried out effectively (Abesamis,
2006).
In accordance with the study of Casamina and Plazo (2011), company
should make effort to make solutions and revisions when changes in budget
occur. Conduct a review of the limitations of maintaining the budget planning and
financial control against the benefits obtain. Moreover, continue innovating good
budget planning skills and improvement on delegation of every responsibility to
individuals. They should also continue to train and develop human resources.
The company should promote full commitment and involvement of the
employees as to budget planning and financial control and supporting and
motivating the employees as they move toward excellence and improvement in
their performance, and treat prior problems encountered in the budget planning
and financial control with an effective good manufacturing practice.
The researchers were able to relate studies made by Belleza, Bunyi,
Noveras, Ramos, Raypan (2009) in emphasizing that it is functional to encourage
the participation of members from each level of the organization. Furthermore, it
suggested that annual team building activities be conducted to help build
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that company should make effort to make solutions and revisions when changes
in budget occur. Conduct a review of the limitations of maintaining the budget
planning and financial control against the benefits obtain. Moreover, continue
innovating good budget planning skills and improvement on delegation of every
responsibility to individuals. Furthermore, both studies provide an understanding
of the financial budget planning and control employed, the problems encountered
and possible solutions to such, as well as the companies socio-economic and
environmental contributions as viewed by the representatives of the respondent
companies. The difference between the studies is the nature of business; the
present study used bank while the past study used Oil Company as their subject.
Another difference is that the present study focused on the financial budget
planning. On the other hand, the previous study focused on both the operating
and financial budget planning.
The present study helps to confirm the facts that were presented in the
literature and studies, both local and foreign, with regards to the financial budget
planning and control of ones business. The information given by the reference
assists the researchers in conducting a study that would contribute to the existing
body of knowledge about the topic.
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