BUDGETING: A SYSTEMATIC APPROACH TO PROFIT PLANNING AND CONTROL

(A CASE STUDY OF MOBILE TELECOMMUNICATION NETWORK LIMITED, MTN ZIKS AVENUE ENUGU STATE)

ABSTRACT

 

Budgeting – A systematic approach to profit planning and control is a work centered on the use of budgeting as a tool for planning and control for profit maximization in a mobile telecommunication network Nigeria limited Enugu as a case study. The objective of this study is to show the importance of budgeting as a tool for systematic profit planning and control in the mobile telecommunication network Nigeria limited which has profit maximization as its objective. The research work is also aimed at identifying the steps adopted in the formation of annual budget of MTN Nigeria.

CHAPTER ONE

1.0  INTRODUCTION                                               1

• Historical Development of the Firm 4
• Statement of the Problem 5
• Objective of the Study 9
• Research Questions 10
• Scope of the Study 11
• Limitation of the Study 11
• Significance of the Study 13
• Definition of Terms 14

CHAPTER TWO

2.0  LITERATURE REVIEW                                       16

• Introduction 16
• Definition of Budgeting 17
• Types of Budgeting 20
• Sources of Data 22
• Stages of Budgeting Process 22
• Budget Review 27
• Appraisal of Fixed, Flexible and Other Budget 28
• Planning Function 29
• Controlling Function 30
• Budgeting Control 31

 

CHAPTER THREE

3.0  RESEARCH DESIGN AND METHODOLOGY            33

• Research Design 33
• Sampling Techniques 33
• Sampling Design and Population Size 34
• Sources of Secondary Data 34
• Interview Questions 35
• Method of Data Analysis 35
• Distribution of Chi-square Statistics 36

 

CHAPTER FOUR

4.0  DATA PRESENTATION, ANALYSIS

AND INTERPRETATION                                     39

4.1  Analysis of Questionnaire Returned                           39

 

CHAPTER FIVE

5.0  SUMMARY OF FINDINGS, CONCLUSION

AND RECOMMENDATIONS                                 54

• Summary of Findings 54
• Conclusion 56
• Recommendations 57

 

Bibliography                                                    60

Appendix                                                        63

CHAPTER ONE

 

1.0  INTRODUCTION

The growing complexity of the business environment and the ever increasing competition among firms in the modern time, make planning and inavailable tool for business success.

Budgeting is one of the tools adopted by management for effective cost planning and control.

A budgeting commonly understood as the forecast of government, organization or society, of its expenditures and ventures for a specific period of time. The period covered by a budget is usually known as a financial year. Budgeting is concerned with the utilization of financial resources to serve human needs. Budgeting is mainly a mechanisms for making choices among alternative expenditure.

An enterprise which is effectively and efficiently managed produces good and rewarding results. Management is efficient if it is able to accomplish the objectives with minimum efforts and costs.

Profit planning and control or budgeting is an integral part of management. The decision making process of management sesits with planning. Planning is the design of a desired future and of effective ways of bringing it out. Planning involves the determination of the future course of action for accomplishing the objectives of the enterprise. The basic purpose of planning is the provide guidelines for making decisions. It is a forward process to reducing uncertainty about the future.

Planning is a continuous process which would generally involves four fundamentals steps:

1. Establishing the objectives
2. Determining the goals
3. Development strategies
4. Formulating profit plans/budgets

Objectives are the statement of boar and longterm desired state of position of the enterprise in the future. They are directional and motivational in nature. They are generally the qualitative expressions of the desired future state.

Goals represent the operational specifications of the broad objective with time and quantity dimensions. Goals are the quantified targets to for attained within a specific period.

Strategies specify the ways of achieving the goals operationally. For instance, use of retained earnings for expansion, keeping dept at a reasonable level, expending sales through price reduction and aggressive advertisement.

Finally, the formalization of objectives, goals and strategies for operational purpose is called the profit planning or budgeting. It is called the profit plan or budget because it explicitly states the goals in terms of time expectations and expected financial results for each major segment of the entity.

 

1.1  HISTORICAL DEVELOPMENT OF THE FIRM

It is important at this point to review briefly the history of the company Mobile Telecommunication Network Nigeria Limited (MTN). it was incorporated in Nigeria communications commission. On May, 2001 MTN emerged as the first to make calls on its GSM Network in the new dispensation. Thereafter, the company launched full commercial operations beginning with Lagos, Abuja and Port-Harcourt in the company new provides coverage to 85 cities and well over 5,000 communities and villages, spanning every geo-political zone and 31 of Nigeria’s 36 states.

It is the first to erect a country wide micro-wave radio transmission backbone, offering unnvalled value for money evidenced by a loyal customers base attracted by MTN’s convenience, mobility, roaming on 30 international networks and economic tariff.

MTN’s product and services are available at its friend scrip centres and a nationwide network of dealership, banks and convenience channels including entries, petron stations and neighbourhood stores.

 

1.2  STATEMENT OF THE PROBLEM

It is the primary duty of management of the organization to ensure the achievement of the company. The company was faced with high operational cost due to inadequate infrastructure, security of lives and property, low disposal income, high import tariffs. This research work is therefore intended to help in determining and highlight the problems that militate against the application of utilization of budgeting as a tool for profit planning and control. The research work will help in providing solutions to the following problems;

1. Inability of the company’s objective
2. Insufficient appraisal of the company’s performance based on budget
3. Inability of functional officer in the cost centers to standard pre-planned by the company.
4. Insufficient mortuary of compliance as well as derivations from the departmental and overall budget.

 

TECHNICAL ASSISTANCE/COMMERCIAL SERVICE AGREEMENT

The company is technically supported by Nami Tech in South Africa who does the prepaid voucher and supplies to MTN.

COMPANY’S CONTRIBUTION TO NIGERIAN ECONOMY

MTN currently employs more than 1,200 Nigerians – more than 160 Nigerian companies are currently MTN distribution partners. Yet a great many other Nigerians earns a living as self-employ proprietors, many others operate the hundred of business centres scattered all over the city/cities.

 

VISION

• To improve telecommunications, infrastructures and access throughout the countries where operate
• Quality services
• High profile distribution and accessibility of their services and products
• Setting up a good base for future expansion
• Training and transforming skills to local staff
• Becoming a good corporate citizen and becoming a major player in the Nigerian economy.

MISSION

• To be a catalyst for Nigeria’s economic growth and development helping to unleash Nigeria’s strong development potential not only through the provision of world class communications but also through innovative and impactful corporate social responsibility initiatives.
• We want the calls made on our network to be the best quality in Nigeria
• We want our network to cover the broadcast areas of Nigeria and other continues to enhancing of convenience and value desired from using our network.
• Every call made should enforce your convinction that MTN is needed.

 

 

 

 

1.3  OBJECTIVES OF THE STUDY

Budgeting, planning and control are the major components for a successful management in the Mobile Telecommunication Network Nigeria Limited. These are the areas of responsibility of management, and to an extent, present a yardstick for performance evaluation of management function. Hence this study includes in its purpose the following.

1. To highlight the importance of budgeting as a tool for planning and control in the operations of a telecommunication company with profits maximization as its main objective.
2. To identify the procedures adopted in the reformation and implementation of annual budgets in Mobile Telecommunication Network Nigeria Limited Enugu.
3. To determine whether or not budgeting control as a management tool contributes to the improvement of managerial efficiency and highlight productivity.
4. To determine whether there is a correlation between the types of budget implemented and their performance.

 

1.4  RESEARCH QUESTIONS

1. Are workers communicated of the company’s objective(s) when preparing the budget?
2. Is there division of the actual from the standard set?
3. Does the budget imposes a threat to the managers rather than a challenge?
4. Does management ensure adherence to the budget?

 

 

 

1.5  SCOPE OF THE STUDY

Budgeting – a systematic approach to profit planning and control can be limited to Mobile Telecommunication Network Nigeria Limited Enugu both in accessibility to ascertain information and distribution and collection of questionnaires.

The major problem faced were insufficient fund to cove the cost of printing questionnaires, distribution and collection of same to and from the respondents.

 

1.6  LIMITATION OF THE STUDY

However, there are some factors that affected the smooth running and operations and conduct of the research works. These factors are:

1. Financial Constraints: Finances was one of the major factor that limited this study. This is because the researcher did not have enough money to carry out the research.
2. Unavailability of Materials: This factor was the major factor that limited this research work, the researcher found it difficult to acquire most of the materials needed for the research work.
3. Time Constraint: Another factor that affected this research work was time, due to the fact that where the researcher started the project has at the middle of normal academic session, so there was no time to cover up and meet up with some things and other school activities.
4. Management Constraints: This was another factor that affected this research work. The management of the mobile telecommunication Network (MTN) did not co-operate with the researcher while the research was going on.

1.7  SIGNIFICANCE OF THE STUDY

The significance of this study is to determine whether budgeting is an approach to profit. This study will be of great importance to determine the following:-

1. The study will determine whether budgeting as a tool for planning and control plays any significant role towards ensuring profitability and efficiency of goods and services.
2. To ascertain the role played by the management in the budgeting and whether they ensure adherence to the budget.
3. The study will also help future researcher on budgeting and budgetary control with emphasis on mobile telecommunication Network Nigeria limited.
4. Ascertain the roles of budget as a tool for effective and efficient utilization of resources.

 

1.8  DEFINITION OF TERMS

Budget: The Chartered Institute of Management Accountants (CIMA) defines budget as “a plan quantified in monetary terms, prepared and approved prior to a defined period usually one year, showing planned into income to be generated and expenditure to be incurred during the period and the capital to be employed to attain that objective.

Budgetary Control: This is the establishment of a budget relating the responsibility of executives to the requirements of a policy and the continuous comparison of actual with budgeting results either to secure the individual action with the objective of that policy or to provide a basis for its revision.

Planning: This is the establishment of objectives, and the formulation, evaluation and selection of the policies strategies, tactics, and nation required to achieve these objectives.

Control: This is the process of ensuring that a firms activities conform to its plans and that its objective are achieved.

Variance: This is the difference between planned (budget and actual results).

Favourable Variance: This is excess of the budget result over the actual result, in the case of cost but in the case of revenue it is the excess of that result over the budgeted.

Unfavourable Variance: This is the excess of actual result are the budgeted in terms of cost and vice-versa in terms of revenue.

Business: Any establishment which has profit motive or maximization as its major objectives.

Organization: All establishment whether government or privately owned.

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