Budgetary Planning and Control Practices

CHAPTER ONE
1.0 INTRODUCTION
In accordance with the New Educational Reforms, every final year student is required to undertake a research work relevant to his/her field of study and make recommendations for possible solution in partial fulfilment for the award of Higher National Diploma.
It is in accordance with this that the researcher has chosen to conduct a research on the topic: Budgeting in processing industries with West African Mills Company as a case study.
1.1 BACKGROUND OF THE STUDY
A frequent asked question in formulating the corporate plan is “where do we see ourselves in ten years time”? To answer this successfully the firm must consider * What it wants to achieve (objectives) * How it intends to get there (its strategies) * What resources will be required (its operating plans) * How well it is doing in comparisons to the plan (control).
(Source: ACCA Study Text-Performance Management)\
The budget is a short-term operating plan, linked to the corporate plan that is used for detailed control.
A budgeting process forces business to look to the future. If a business does not look to the future it will fail in the short, medium or long term. It will fail because the organization will be out of tune with its environment. Strategic plans will have to be translated into medium term tactical plans, which in turn need to be converted into detailed budgets.
(Source: ACCA Study Text-Performance Management)
Similarly, a firm’s mission will be translated into strategic goals, which are then expressed as tactical targets, which again end up as short term operational targets.
According to ACCA Study Text, budgeting is a plan expressed in monetary terms. It is prepared and approved prior to the budget period and may show expenditure and the capital to be employed. It is therefore in line with this that companies want to ensure that all activities are planned ahead of time to enable them determine income they will be achieving as well as the expected expenditure that will be incurred in the future.

1.2 STATEMENT OF THE PROBLEMS
Budgeting is a benchmark of every business entity, in that it identifies, examines, evaluates and reports the management transactions to provide accurate, timely and reliable budgeting information. This is not withstanding, Western Region as one of the developing regions in Ghana has a lot of industries of which many operate with little reference to budgets and this has resulted in many problems.
Not having clearly defined policies of the organization as a whole and not having some central control measures where activities can be directed are some of the problems.
It is in view of this that the research is very necessary in order to access the possibility of reducing the problems faced by these organizations as far as budgeting is concerned.
1.3 PURPOSE AND OBJECTIVES OF THE STUDY
The objectives of the research are to: * Explain why organizations use budgeting. * Evaluate how the budgetary system fit into the performance hierarchy in the organization. * Access the benefits and difficulties of the participation of employees in the negotiation of targets. * Evaluate the information used in various budgetary systems and the source of information needed. * Discover the difficulties associated with budget preparation.

1.4 RESEARCH QUESTIONS
The following research questions were formulated to guide the study. a) What are the objectives of budgeting and budgetary control at West African Mills Company? b) Who are involved in the preparation of budget at West African Mills Company? c) How does the budget measure the performance of management at West African Mills Company? d) How the budget does facilitates the process of planning and control at West African Mills Company? e) What are the challenges posed in implementing budgetary control procedures at West African Mills Company?
1.5 SIGNIFICANCE OF THE STUDY
The study when completed will serve as a source for future research work. It will help the researcher to know about budgeting and activities of West African Mills Company Limited.
The researcher will also serve the school library with a copy of the research work for student’s reference.
It will provide West African Mills Company with solutions for some of the problems associated with budgeting operations.
Finally, to other organizations, it will assist them in solving problems associated with budget preparation.

1.6 LIMITATION OF THE STUDY
The time to conduct the research was very short since the study had to be conducted alongside academic work.
In undertaking this project work, the researcher was faced with financial constraints. Costs such as printing of questionnaires and travelling to gather information for this project had to be borne solely by the researcher out of his meagre resources.
With respect to the information gathering, the necessary books and other information to support the researcher were not readily available. Apart from this, the respondents were reluctant to give out information there by making the conduct of the study difficult.

1.7 DELIMITATION
The research could have covered more processing industries in the country but due to the limitation above, the researcher limited the study to only West African Mills Company Limited.
1.8 ORGANISATION OF THE STUDY
This project is divided into five (5) main chapters as follows;
Chapter one contains the introduction, which includes background of the study, statement of the problem, objectives, research question, significance and scope of the study as wells as limitations, delimitations and organization of the study.
Chapter two reviews the literature on the topic, such reviews include the following; what is Budgeting, it objectives, uses of budgeting, steps in preparation of a budget, types of budgeting. What is Budgetary control system, it objectives, advantages and disadvantages of budgetary control, steps in implementing budgetary control systems
Chapter three deals with the methodology adopted which includes introduction, population and sample of the study, sample techniques, data collection instruments and data collection methods.
Chapter four considers the presentation and analysis of data, under this chapter the following will be considered; the introduction, questionnaire administered, industrial data, sex distribution, Budget preparation, Budget period, Budget unit and committee.
Chapter five which is the final chapter consists of summary of the whole research work findings from the questionnaires administered, conclusion and recommendations based on the findings from questionnaires and other related books and articles.
CHAPTER TWO
LITERATURE REVIEW

2.0 INTRODUCTION
This chapter on related literature looks at what other people have said about the topic under study. The review covers the definitions of budgeting, objectives of budgeting, problems involved, budgetary planning and control systems and participation in the budget setting process.

2.1 WHAT IS A BUDGET
Once business is operational, it is essential to plan and tightly manage its financial performance. Creating a budgeting process is the most effective way to keep the business and its finances on track. Business organizations must be made to understand the importance of budgeting. Budgeting ensures that all activities are planned ahead of time to help in knowing the income to be earned and expenditure to be incurred before business start operations.
A budget is a quantitative expression of planned actions prepared in advance in the period in which it relates. Lucey (2003). The quantitative statements include planned revenues, expenses, assets, liabilities and cash flows.
According to Lucey (2003), a budget provides a means of coordinating the various activities within the organization and also facilitates control.
“Budget is a financial plan and a list of all planned expenses and revenue. It is a plan for saving, borrowing and spending”. Sheffrin (2003)
According to Sheffrin a budget is an important concept in microeconomics, which uses a budget line to illustrate the trade-offs between two or more goods. In other terms, a budget is an organisational plan stated in monetary terms.
A budget is a written record of income and expenses during a specific time frame, typically a year”. Light bulb Press Inc (2008)
According to Light bulb Press Inc, you can use a budget as a spending plan to allocate your income to cover your expenses and to track how closely your actual expenditures line up with what you had planned to spend.

2.2 AIMS OF BUDGETING
Planning: A budgeting process forces a business to look to the future. If a business does not look to the future it will fail in the short, medium or long term. It will fail because the organization will be out of tune with its environment.
Control: Actual results are compared against the budget and action taken as appropriate. In many respects this is the most important aspect of budgeting.
Communication: The budget may form the basis of the reporting hierarchy. It is a formal communication channel that allows junior and senior managers to converse.
Co-ordination: The budget allows the business to co-ordinate all diverse actions towards a common corporate goal.
Evaluation: The budget may be used to evaluate the financial result as part of the business such as a cost centre. It may further be used to evaluate the actions of a manager within the business.
Motivation: The budget may be used as a target for managers to aim at. Reward should be given to manager for operating within the levels of expenditure budgeted by the management.
(Source: ACCA Study Text-Performance Management)

2.3 USES OF BUDGETS
A well structured budget helps to bring together goals, plans, decision making and employee evaluation within an organization. According to Izhar (2000), a budget performs the following functions;
Firstly, a budget ensures an effective planning within the organization. Planning is a way of drawing plans towards the future and making the necessary arrangements to ensure that the plans are achieved. Planning therefore forces managers to formally consider alternative future causes of action evaluate them and decide on the best alternative. Planning also helps to anticipate problems before they occur and therefore giving management time to consider possible ways of solving them when they occur.
Secondly, budgeting ensures coordination among the various departments within the organization. Normally, decisions taken by various departmental heads may contradict with each other’s point of view. A well structured budget therefore helps to avoid conflict which may arise from such decisions but rather encourage managers to consider how their decisions and plans affect other departments and how the plans of other departments affect them.
Budget ensures controlling and evaluations of activities. According to Izhar a budget helps to control activities of both employees and management to ensure that their activities conform to plans and also determine whether the planned objectives are met by comparing the actual results with the budget.
Further, a budget promotes individual and departmental participation. Budgeting brings together the different functions of the organization by actively involving managers at the various departments in the budget preparation.
Besides, junior members feel they have a say in the running of the organization and therefore put in their maximum effort to ensure that productivity is increased to meet planned objectives if involved in its preparation.

2.4 TYPE OF BUDGETS
Budgeting is crucial to business control. Managerial accounting approaches a company’s financial situation in an operational way, giving information in a manner that supports managers in planning and control procedures. Various budget formats in managerial accounting influence how a manager forecast department activity and how he addresses progress or short fall to meet goals. Companies may use several types of managerial budgets concurrently. This are the following types of budget according to Scott Shpak In 2000:
2.4.1 Master Budget: Master budget is a comprehensive projection of how management expects to conduct all aspect of business over the budget period, usually fiscal year. It summarizes projected activity by way of a cash budget, budgeted income statement and budgeted balance sheet. Most master budget include interrelated budget from the various department. Managers typically use these subset budgets to plan and set performance objectives. Master budget are generally use in larger businesses to keep many managers on the same page.

2.4.2 Operational Budget: The operational budget covers revenues and expenses surrounding the day to day core business of a company. Revenues represent sales of product and services; expenses define the cost of goods sold as well as overhead and administrative costs directly related to producing goods and services. While budgeted annually operating budget are usually broken down into smaller reporting periods such as, weekly or monthly. Managers compare ongoing results to budget throughout the year, planning and adjusting for variations in revenue.

2.4.3 Cash flow Budget: A cash flow budget examines the inflows and outflows of cash in the business on a day to day basis. It predicts a company’s ability to take in more money than it pays out. Managers monitor cash flow budget to pinpoint shortfalls between expenses and sales—times when financing may be needed to cover overheads. Cash flow budget also suggest production cycles and inventory levels so that a company’s resources are available for activity, not sitting idle on warehouse shelves.

2.4.4 Financial Budget: A financial budget outlines how a business receives and spends money on a corporate scale, including revenues from core business plus income and costs from capital expenditure. Managing assets such as property, buildings, investments and major equipment may have significant effect on the financial health of a company, particularly through the peaks and troughs of daily business. Executive managers use financial budget to leverage financing and value the company for mergers and public offerings of stock.

2.4.5 Static Budget: A static budget contains element where expenditure remain unchanged with variations to sale levels. Overhead cost represents one type of static budget, but these budgets aren’t confined to traditional overhead expenses. Some department may have a fixed amount of money set in budget to spend, and it is up to managers to make sure such amount are spent without going over budget. This condition occurs routinely in public and nonprofit sectors, where organizations or department are funded largely by grant.
Sheffrin (2003) also explain the following types of budget
2.4.6 Production Budget: An estimate of the number of units that must be manufactured to meet the sales goals. The production budget also estimates the various costs involved with manufacturing those units, including labor and material. Created by product oriented companies.
2.4.7 Capital Budget: A prediction of future cash receipts and expenditures for a particular time period. It usually covers a period in the short term future. The cash flow budget helps the business determine when income will be sufficient to cover expenses and when the company will need to seek outside financing.
2.5 ROLE OF BUDEGTING AND BUDGETARY CONTROL IN BUSINESS
The Institute of Cost and Management (2011) explains the following as advantages and characteristics of budgeting and budgetary control; * Compels management to think about the future which is probably the most important feature of a budgetary planning and control system, forces management to look ahead to set out detailed plans for achieving the targets for each department operation and each manager to anticipate and give the organization purpose and direction. * Promotes coordination and communication. * Cleary defines areas of responsibility by requiring managers of budget centers to be made responsible for the operations under their control. * Provides a basis for performance appraisal (variance analysis). A budget is basically a yardstick against which actual performance is measured and assessed. * Enables remedial action to be taken as variances emerge. * Motivates e employees by participating in the setting of budget. * Improves the allocation of scarce resources 2.6 PROBLEMS OF BUDGETING * Budgets are time consuming.
Despite the advent of powerful computer networks with multi-layered models, budgeting remains protracted and expensive. The average time consumed is about five to six months. It also involves many people and absorbs up to 20% to 30% of senior executives and financial managers time. Some organizations have attempted to place a cost on the whole budgeting process. * Budgets provide poor value to users.
The perception of the value provided by the budgeting process varies widely. In some firms, it was apparent, the group board thought the budget gave them control; where as operating managers thought it was completely irrelevant to their needs. * Budgets fail to focus on shareholders’ value.
A budget focuses on internally negotiated targets which tend to be implemental changes from previous periods’ outcome. The result of this is a target that inwardly looks comfortable to management, yet it appears outwardly difficult to superiors. There is no focus on the maximization of shareholders values. * Budgets protect cost rather than reduce cost.
Use it or lose it is the managers’ mantra. Not spending the budget is a cardinal sin in most organizations. The result is that superiors invariably question why the resource is needed and are understandably reluctant to allow it to pass into the budget for next period. * Budget stifles product and strategic innovation.
“Never take risk. It is just not worth it if it is not in the budget, you might be exposed”; is what some managers say. Anyhow, if the risk is taken and it worked out well, superiors may probably think of it first. If it didn’t work out, their job might be on the line.
Source: (ACCOUNTINGWEB MAY 7, 2007) 2.7 BEHAVIOURAL ASPECTS OF BUDGETING Individuals react to the demands of budgeting and budgetary control in different ways and their behaviour can damage the budgeting process. Behavioural problems include disfunctional behaviour and budget slack.
Disfunctional behaviour: This is when individual managers seek to achieve their own objectives at the expense of the objectives of the organization. A key performance management issue is to ensure that the system of targets and measures used does not encourage such behaviour but rather encourages goal congruence.
Budget slack: This is a deliberate over estimation of expenditure and/or under estimation of revenues in the budgeting process. This can happen because managers want easy targets or simply “play the system”. This may result in a budget that is poor for control purpose and meaningless variances
2.8 APPROACHES TO BUDGETING
Top down and bottom up budgeting
Top down: A budget that is set without allowing the ultimate budget holder to have the opportunity to participate in the budgeting process. A top-down approach to budgeting leads to budgets that are imposed on managers. Where managers within an organization are believed to want to avoid responsibility and work, then imposed budgets may improve performance. It is also possible that acceptance of imposed budgets by managers who are responsible for their implementation and achievement is diminished because they feel they have not been able to influence budget targets.
Bottom up: A system of budgeting in which budget holders have the opportunity to participate in setting their own budgets is called bottom up budgeting. This is also called participative budgeting. Even here budgets prepared by junior managers would be reviewed and challenged by senior management.
Advantages of participative budgets: * Increased motivation. * Should contain better information, especially in fast-moving or diverse business. * Increases managers’ understanding and commitment. * Better communication. * Senior managers can concentrate on strategic issues.
Disadvantage of participative budgets * Senior managers may resent loss of control. * Bad decisions from inexperienced managers. * Budgets may not be in line with corporate objectives as managers lack a strategic perspective and will focus just on divisional concern. * Budget preparation is slower and disputes can arise.

Incremental Budgeting
This approach uses a budget prepared using a previous period’s budget or actual performance as a base, with incremental amounts added for the new budget period. The advantage of this approach is that it is simple and creates a more stable and consistent environment for managers. However, this approach encourages spending up to the budget so that the budget is maintained for the subsequent year, doesn’t respond to changing circumstances and perpetuates misallocations of resources.
Incremental budgeting may, therefore, be argued to have weakness in that: * The resource allocation is not clearly linked to strategic plans and the consideration of alternative strategies. * There is the tendency to new high priority activities. * There is insufficient focus on efficiency, effectiveness and the alternative methods by which activities would be achieved. * It often leads to arbitrary cuts being made in order to meet overall financial targets. * It tends not to lead to management commitment to the budgeting process.
Traditional budgeting, sometimes called incremental budgeting, takes a current level of spending, almost without examination, and discussion takes place about any extra expenditure.
Advantages:
* Quickest and easiest method of budgeting. * Assuming that the historic figures are acceptable, only the increment needs to be justified. * Avoids “reinventing the wheel”.
Disadvantages:
* Builds in previous problems and inefficiencies. * Uneconomic activities may be continued, e.g. the firm may continue to make a component in-house when it might be cheaper to outsource. * Managers may spend unnecessarily to use up their budgeted expenditure allowance this year, thus ensuring they get the same (or larger) budget next year.

Zero-based budgeting (ZBB)
By contrast, in zero-based budgeting, each item in the budget must be justified starting from the zero-base. The zero based approach is indifferent to whether the total budget is increasing or decreasing. The advantage of this approach is that it promotes a more efficient allocation of resources, requires manager to find more cost effective ways to improve operations and helps detect inflated budgets. Since everything has to be justified this approach will obviously be more time consuming. Questions they should ask themselves include; * Is the activity essential? What would happen if it ceased? * Is the provision of the activity at the correct level? * Are there other alternatives for achieving the same effect? There are four stages in the implementation of ZBB: * Managers should specify for their responsibility centres, those activities that can be individually evaluated. * Each of the individual activities is then described in a decision package. The decision package should state the costs and revenues expected from the given activity. It should be drawn up in such a way that the package can be evaluated and ranked against other packages. * Each decision package is evaluated and ranked usually using cost/benefit analysis. * The resources are then allocated to the various packages.

Advantages * Inefficient or obsolete operations can be identified and discontinued. * Wasteful expenditure is avoided. * Resources should be allocated efficiently and economically. * Managers are forced to consider alternatives methods of achieving their objectives

Disadvantages * The time involved and the cost of preparing the budget is much greater than for less elaborate budgeting methods. * Managers, staff and unions may feel threatened. * It is difficult to compare and rank completely different types of activities.
Activity-based budgeting (ABB)
Traditionally, there has been a tendency to an incremental approach to budgeting for overhead costs, and prepare next year’s budget by simply adding a percentage to the current year’s budget, to allow for inflation. ABB is an alternative method which may produce more accurate budgets and enable greater control of overhead expenditure.
ABB is defined as ‘a method of budgeting based on an activity framework and utilizing cost driver data in the budget-setting and variance feedback processes’.
The main features and potential advantages of activity-based budgeting are: * Activities are seen as the key to effective planning and control. * Costs are traced to activities with the creation of ‘cost pools’ which relate to an activity. * Positive efforts are made to eliminate non-value added activities. * It is argued that activities consume resources and that efforts should be focused on the control of the cause of costs not the point of incidence.
(Source: http//www.plangurucommunity.com)
2.9 BUDGETARY PLANNING
2.9.1 PLANNING:
Planning as part of the Budgeting system involves a long range planning, strategic planning and short term planning (Sizer ). Further, emphasizes that short term budgeting must accept the environment of today, and the physical human and financial resources at present available to the organization.
Planning involves selecting objectives and action to achieve them. It is looking ahead and preparing for it, which links it to budgeting. Through planning the organization is able to assess where it is supposed to be in terms of objectives and goals. This comes from the information system (Mocker, Lewis; Stoner, 2000)
Budgets are put in place in advance of the budget periods based on anticipated set of circumstances or environment. The major decisions are made as part of the long term planning process (Selznick,). Benefits of budgeting accrue to the whole organization if both the short and long term consequences of the budgets are considered. However, the annual budgeting process leads to the refinement of those plans, since managers must produce detailed plans for the implementation of the long range plans. Without the annual budgeting process, the pressures of day-to-day operating problems may tempt managers not to plan for future operations (Scott).
2.9.2 PLANNING PROCESS:
The planning process ensures that managers do plan for future operations, and consider how conditions in the next year might change and what steps they should take to respond to these conditions. Kimbrough and Nunnery, (2000) describing the procedures for school budget preparation points out the following; that teachers should be asked to submit items to included in the estimates, that the lists of estimates by the different teachers and heads of departments be assembled, reviewed during a special meeting consisting of the school heads and the bursar. According to them, plans and estimates must reflect serious considerations when budgeting. This process sets out the various requirements of the agreed priority to ensure its feasibility. In particular, the plans should include considerations of cash resources available, and the cash needs and further ensure that any differences are covered by the available resources. This calls for a coherent plan including all parts and individuals of the organization.
Budgetary planning is therefore the key to success in business and budgeting forces planning to take place. Once not done properly the organization will not operate properly. An organizations plan and priorities should therefore be important drivers to the budgeting process. The previous studies reviewed above, therefore lead to the conclusion that there is an increasing perception that budgets are less useful in today highly challenging business environment. Consequently knowledge about budgeting practices is useful to provide insights into whether budgets are still appropriate planning and control tools. It’s the researcher’s intention to explore whether such a budgeting process and planning processes exist at West African Mills Company.

2.10 BUDGETARY CONTROL
Budgetary control normally involves the use of budget as control documents. This means that budgetary control deals with “action” that are taken to ensure that actual performance of budgetary activity conforms to pre-determined plans. In order words, budgetary control deals with regulating the activity of the business to follow the pattern that had previously been planned in the budget.
According to Riley 2012, budgetary control is the process by which financial control is exercised within an organization. Budgets for income/revenue and expenditure are prepared in advance and then compared with actual performance to establish any variances.
Managers are responsible for controllable costs within their budgets and are required to take remedial action if the adverse variances arise and they are considered excessive
2.11 CONCEPTS AND COMPONENTS OF BUDGETARY CONTROLS
Budgetary Control is the process of comparing actual results with planned results and reporting on the variations. Control compares actual performance and budgeted and helps expenditure to be kept within agreed limits. The most important managerial problem in Budgetary Control is the interpretation of budget variance. Deviations should be noted and corrective action taken. Budgetary Control is constituted of Budgeting, monitoring and control, analyzing and feedback.
2.11.1 Monitoring:
Budgetary Monitoring and Control is a deterrent process against misappropriation of funds in terms of procedures and rules that establish the boundaries of financial behaviour. According to Drury (2000), budgetary monitoring and control process is a systematic and continuous one which, is characterized by the following stages: * Establishing targeted performance or level of activity for each department of the organization by way of setting targets to be achieved enhances the monitoring of the organizations performance. * Communicating details of the budgetary policy to all the stakeholders for easy appreciation of the set targets and objectives enhances ownership of the results achieved at end of the day. * Monitoring actual revenue or cost data this is done by way of continuous comparison of actual performance with the budgeted performance and regular reporting of variances to the responsible officers.
This helps in asserting the reasons for the differences between actual and budgeted performance and taking the suitable corrective action. The “bottom-top” approach of budgeting allows participation of all levels of management in the decision-making process. Negotiations then begin between the corporate office and department heads to finalize budgetary figures. The budgetary process then shifts to a "tops-down" approach, where the corporate office has ultimate control to set the final budget. Through this process of monitoring, analysis and control, the problem of "ratcheting" is generally avoided (Kelly, 2003).
A budgetary monitoring and control process assumes that expenditure must agree with the budgeted plans and maintains information about expenditure. Financial control is also one of the most important aspects of budgeting. By means of budgetary control, which means comparing actual results with planned results and reporting on the variations, a control frame is set for management.

2.11.2 Control:
Control basically provides the ex-ante motivation to achieving the budget and the ex-post reinforcements necessary to ensure future motivation. Hence the perception of variances as extremely important and valid measures of performance is upheld. The evaluation of budget performance should be based on a comparison of actual performance with an adjusted budget to reflect the current circumstances of the environment under which managers are actually operating in. a budget therefore, assists mangers in monitoring and controlling the activities for which they are responsible. By comparing the actual results against the budgeted amounts for different categories of expenses, managers can ascertain which costs don’t conform to the original plan requires their attention. This process enables management to operate a system of management by exception, which means that a manager’s attention and effort can be concentrated on significant deviations from the expected results. Thus enabling managers to identify inefficiencies and appreciate control action thought to remedy the situation.
Carr, (2000), argues that in order to achieve the expected output results, monitoring and evaluation is necessary.

2.12 EFFECTIVE BUDGETARY CONTROL REPORT
The budgetary control report is a major vehicle in the feedback process and to ensure maximum effectiveness, it is important that, its design, timing and general impact is ignored or misunderstood will not lead to effective actions and so will be useless.
The key items which should be shown are the budgeted level of costs and revenue for the period and year to date, the actual level of cost and revenue for the period and year to date, the actual level of cost and revenue for the period and year to date, the variance between the above two points stated together with the trends in variances, and indication of what variances are significant together, with, where possible, analysis and comments which can be used to bring the variances under control.

2.13 BUDGETARY CONTROL AT WEST AFRICAN MILLS COMPANY
According to Lucy T (2003) he stated that, budgetary control is an example of management by exception where attention is directed to the few items which are not proceeding according to plan. The aim of budgetary control is to provide a formal basis for monitory the progress of the organization as a whole and of its component parts, towards the achievement of the objectives specified in the planning budgets.
It is a well-known fact that, staff shortages are already occurring in the company and a significant increase on budgeted sales could have serious implications if skilled staff cannot be recruited to service this increase.

2.14 WHY VARIANCES OCCUR AT WEST AFRICAN MILLS COMPANY
Gyasi K (2005) explains variance in terms of budgetary control as the difference between planned, budgeted or standard result and actual result. Gyasi K. explains further that in processing companies variances are course by sales and cost. The sales variances are the difference between amounts of money a business expects to sell it products or services. It means that a business will be more or less profitable than it anticipate over a given time period, they can be either favorable or non favorable. Cost variance is the amount of money that is actually spent on a project or part of a project compare to the amount of work that was actually accomplished. Cost variance is the budgeted cost of work performed minus the actual cost of work performed. According to O.Stratton (2005) without flexible budget organizations cannot separate the effects of differences in cost behavior from the effects of changes in sales activity. The flexible budget indicate whether operations were efficient or not and may form the basis periodic performance evaluation.

CHAPTER THREE
METHODOLOGY
3.0 INTRODUCTION
In order to have reliable information for this study, effective and efficient techniques were used. This chapter discusses the various research methodology employed in obtaining the necessary information for the study. It also deals with the various data collection techniques used. The use of primary and secondary sources of data, sample determination and the target population among others were all considered in this chapter.

3.1 RESEARCH DESIGN
The research gives an opportunity for the problems to be studied in some depth within the limited time scope. Under this framework, the researcher concentrated on a specific situation and identified the various interactive processes at work after which it could be generalised for other areas. The researcher identified a problem with budgetary planning and control practices at West African Mills Company, collection of data from West African Mills Company by the use of questionnaire, analyzed the data and made recommendation.

3.2 POPULATION AND SAMPLE OF THE STUDY
The population of the study constitutes the accounting department in West African Mills Company. The target population for the study is ten (10). It comprises three (3) managers and seven (7) employees from the department. The researcher considered the ten sample size because of the population, limited time and cost which made it impossible for the researcher to cover the total population.

3.3 SAMPLE TECHNIQUES
The researcher used simple random sampling technique and cluster sampling technique.
Simple random sampling is the basic sampling technique where we select a group of subjects (a sample) for study from a larger group (a population). Each individual is chosen entirely by chance and each member of the population has an equal chance of being included in the sample. Every possible sample of a given size has the same chance of selection; i.e. each member of the population is equally likely to be chosen at any stage in the sampling process.
Cluster sampling is a sampling technique where the entire population is divided into groups, or clusters and a random sample of these clusters are selected. All observations in the selected clusters are included in the sample.

3.4.0 DATA COLLECTION INSTRUMENT
For a successful research to be carried out there is the need to collect adequate and reliable data. The main types of data gathered were primary and secondary data.

3.4.1 PRIMARY DATA
The researcher relied on a self structured questionnaire as the main data collection instrument to elicit the desired information. The questionnaire was self-structured. The questions cover the objectives for the study. This was done to achieve the aim of conducting the research. The questionnaire would be used because almost all the people in the defined population can read and write.
3.4.2 SECONDARY DATA
The researcher tried to use data from the organization’s financial statement and vital information on the subject matter ascertained from textbooks, articles, journals on Budgetary planning and control practices which will be through the assistance search engine such as ELIN@marladalen and Google. These materials aided us in getting most of the information for the research.

3.5 DATA COLLECTION METHOD
The nature of the topic under consideration is such that it would require reliable and current responses in order to enable the researcher come out with accurate results that reflects the reality on the ground. In pursuance of this, questionnaire was sent out to the department. This questionnaire was personally delivered and collected from the targeted population. All ten (10) questionnaires were sent out and all the ten (10) were collected.

3.6 METHOD OF DATA ANALYSIS
In order to have a true analysis of the information or data collected, descriptive and tabular form was used to arrive at the various percentages corresponding to the absolute figure. Details of the analysis of data were dealt within the next chapter of this research work.

3.7 RIGOUR
There was the need to ensure trustworthiness in the data collection, and the criteria for ensuring that will include credibility, reliability, transferability, dependability, and conformability. Credibility is comparable with internal validity; it has to do with ensuring a fit between the views of the researcher and those of the participants. The authors suggest a presentation of the final transcriptions to participants for them to determine what has been captured is consistent to their (participants) views.
The findings from the questionnaires survey will be used to establish the extent to which the findings are reproducible under similar rules, principles and conditions.

.CHAPTER FOUR
ANALYSIS OF DATA
4.0 INTRODUCTION
This chapter dealt with the analysis of data collected from the administered questionnaires at West African Mills Company. Some of the responses given to the questionnaires have been converted into tables with absolute figures and corresponding percentages.
QUESTIONNAIRES ADMINISTERED Department | Questionnaire distributed | Questionnaire completed | Percentage (%) | Accounts | 10 | 10 | 100 | Totals | 10 | 10 | 100 |
Table 1. Source: field data. May 2013
Table 1 above shows that, ten (10) questionnaires representing 100% were given out and all the ten (10) representing 100% were completed. The response rate therefore was 100%.
4.1 AGE DISTRIBUTION
Question one: What is your age in the distribution below? Age | Responses | Percentages (%) | 20 and below | - | 0 | 26-30 | 2 | 20 | 31-35 | 2 | 20 | 36-40 | 4 | 40 | 41 and above | 2 | 20 | Total | 10 | 100 |
Table 2. Source: Field Data, May 2013
Table 2 asked for the age distribution of the respondents. To this question, none of the respondents fell within the ages of 20 and below whilst the age group of 26-30 had two representing 20%. Then the ages of 31-35 and 36-40 had two and four respectively representing 20% and 30%. Two of the respondents fell within the ages 41 and above representing 20%. It can therefore be concluded that, most of the respondents were within the ages 36-40 years.

4.2 SEX DISTRIBUTION
Question two: What is your sex? Answers | Responses | Percentages (%) | Male | 8 | 80 | Female | 2 | 20 | Total | 10 | 100 |
Table 3. Source: Field Data, May 2013
From table 3 above, eight of the respondents representing 80% were males and two of the respondents representing 20% were females. It can therefore be concluded that, majority of the staff were males.

4.3 MARITAL STATUS
Question three: What is your marital status? Answers | Responses | Percentages (%) | Married | 7 | 70 | Single | 3 | 30 | Total | 10 | 100 |
Table 4. Source: Field Data, May 2013 From the above table 4, seven of the respondents representing 70% were married and three of the respondents representing 30% were single. It can be held that, most of the respondents were married.

4.4 EDUCATIONAL STATUS
Question four: What is your educational background? Answers | Responses | Percentages(%) | Professional | 2 | 20 | Tertiary | 8 | 80 | Secondary | - | 0 | Basic | - | 0 | Total | 10 | 100 |
Table 5. Source: Field Data, May 2013
Table 5 shows that, out of the ten respondents interviewed, two representing 20% were professionals and eight representing 80% were tertiary certificate holders. None of the respondents were neither secondary nor basic certificate holders. It can be concluded that, majority of the respondents were tertiary certificate holders.

4.5 INDUSTRIAL DATA
Question five: What is the Name, Address, Primary business, Date of establishment and the number of departments of the organization? PARTICULARS | RESPONSES | PERCENTAGE (%) | Name | 10 | 100 | Address | 10 | 100 | Primary business | 10 | 100 | Date of establishment | 10 | 100 | Number of department | 10 | 100 | Total | 10 | 100 |
Table 6. Source: Field Data, May 2013 Table 6 shows that, all the respondents, representing 100% said:
Name of organisation is West African Mills Company Limited.
Address: P. O. Box 257, Takoradi.
Primary Business: Processing of Cocoa butter and Shea butter
Date of establishment: Initial Established Date 1949.
Number of departments: 5.

4.6 BUDGET PREPARATION
Question six: Does the company prepare budget? Answers | Responses | Percentages(%) | Yes | 10 | 100 | No | - | 0 | Total | 10 | 100 |
Table 7. Source: Field Data, May 2013
Table 7 shows that, all the respondents representing 100% said the company prepares a budget. It can therefore be held that, the company prepares a budget.

4.7 BUDGET PERIOD
Question seven: What is the budget period? Answers | Responses | Percentages(%) | Monthly | - | 0 | Quarterly | - | 0 | Semi-annual | - | 0 | Annual | 10 | 100 | Total | 10 | 100 |
Table 8. Source: Field Data, May 2013
From the above table 8, all the respondents representing 100% admitted that the budget period is annual. The conclusion is that, the budget period of the company is annual.

4.8 BUDGET UNIT
Question eight: Does the company have a budget unit? Answers | Responses | Percentages(%) | Yes | 10 | 100 | No | - | 0 | Total | 10 | 100 |
Table 9. Source: Field Data, May 2013
Table 9 seeks to find out whether the company has a budget unit. All the respondents representing 100% said that, the company has a budget unit. It can therefore be concluded that, the company has a budget unit.

4.9 BUDGET COMMITTEE
Question nine: Does the company have a budget committee? Answers | Responses | Percentages (%) | Yes | 10 | 100 | No | - | 0 | Total | 10 | 100 |
Table 10. Source: Field Data, May 2013
Table 10 question asked whether the company has a budget committee. All the ten respondents representing 100% said that, the company has a budget committee. It can therefore be concluded that, the company has a budget committee.

4.10 DURATION FOR BUDGET PREPARATION
Question ten: How long does it take the company to prepare its budget?
To this question, all the ten respondents representing 100% said it takes the company annually to prepare its budget. It can be concluded that, it takes the company annually for its budget to be prepared.

4.11 PROBLEMS IN BUDGET PREPARATION
Question eleven: Does the company face problems when preparing its budget? Answers | Responses | Percentages (%) | Yes | 10 | 100 | No | - | 0 | Total | 10 | 100 |
Table 11. Source: Field Data, May 2013
From the above table, all the ten respondents representing 100% admitted that, the company does face problems when preparing its budget. It can therefore be concluded that the company faces problems when preparing its budget.

4.12 PROBLEMS FACED IN BUDGET PREPARATION
Question twelve: What are some of the problems the company faces when preparing its budget?
To this question, all the ten respondents representing 100% identified two major problems. These problems were the information needed for the preparation of the company’s budget and the time involved in its preparation. It can therefore be concluded that, the company faces the problem of information and time when preparing its budget.
4.12.1 ANALYSIS OF THE PROBLEM FACED
The two major problems faced are as a result of delaines from the various departments within the organization. The information required from the various departmental budgets are not in good structure to help carry out with the final budget and also this departmental budget are also not presented on time in other to prepare the final budget this paves way for the limited time used in preparing the final or master budget.

4.13 BENEFIT OF BUDGET PREPARATION
Question thirteen: In what ways does the budget preparation benefits the company?
This question asked on the benefit of budget preparation. To this question, all the ten respondents representing 100% admitted that, it helps the company to forecast and plan its activities ahead of time. It can therefore be concluded that, budget preparation benefits the company.
4.13.1 ANALYSIS OF THE BENEFIT OF BUDGET PRAPARATION
Without the annual budget preparation, the pressure of day to day operating problems may tempt managers not to plan for future operations. The budgeting process ensures that managers do plan for future operations, and that they consider how conditions in the next year might change and what steps they should take now to respond to these changed conditions. This process encourages managers to forecast and anticipate problems before they arise, and hasty decisions that are made on the spur of the movement, based on expediency rather than reasoned judgment will be minimized

4.14 APPROACHES TO BUDGETING
Question fourteen: What are the approaches to budgeting? Answers | Responses | Percentages (%) | Top down | 10 | 100 | Bottom up | - | 0 | Total | 10 | 100 |
Table 12. Source: Field Data, May 2013
The table 12 shows that, ten respondents representing 100% said that, the company’s approach to budgeting is top down (participative). It can therefore be concluded that, most of the employees are involved in the budgeting process.

4.15 BUDGET REVISION
Question fifteen: Does the company revise its budget? Answers | Responses | Percentages (%) | Yes | 10 | 100 | No | - | 0 | Total | 10 | 100 |
Table 13. Source: Field Data, May 2013
The table 13 shows that, all the ten respondents representing 100% admitted that, the company revises its budget. It can therefore be concluded that, the company revises its budget.

4.16 BUDGET REVISION PERIOD
Question sixteen: How often is the budget revised? Answers | Responses | Percentages (%) | Monthly | - | 0 | Quarterly | - | 0 | Semi-annually | 10 | 100 | Annually | - | 0 | Total | 10 | 100 |
Table 14. Source: Field Data, May 2013
From the table, all the ten respondents representing 100% admitted that, the company revises its budget semi-annual. It can therefore be concluded that, the company revises its budget semi.-annually.

4.17 BUDGETED TARGETS
Question seventeen: Are there budgeted targets for which managers can be assessed? Answers | Responses | Percentages (%) | Yes | 10 | 100 | No | - | 0 | Total | 10 | 100 | Table 15. Source: Field Data, May 2013
From table 15, all the ten respondent representing 100% said that, there are budgeted targets for which managers can be assessed. It can therefore be concluded that, the company has budgeted targets for which managers performance can be assessed.

4.18 PERCEPTION OF BUDGETED TARGETS
Question eighteen: How does an individual see these targets? Answers | Responses | Percentages (%) | Easy | - | 0 | Moderate | 10 | 100 | Difficult | - | 0 | Total | 10 | 100 |
Table 16. Source: Field Data, May 2013
From table 16, all the ten respondents representing 100% sees the budgeted targets to be moderate. It can therefore be concluded that, individuals in the company sees these targets to be moderate.
4.19 ACCEPTANCE OF BUDGETED TARGETS
Question nineteen: Are these targets accepted by individuals? Answers | Responses | Percentages (%) | Yes | 10 | 100 | No | - | 0 | Total | 10 | 100 |
Table 17. Source: Field Data, May 2013
To this question, all the ten respondents representing 100% said, the budgeted targets are accepted by individuals of the company. It can therefore be concluded that, budgeted targets are accepted by employees of the company.

4.20 PERCENTAGE OF ACHIEVEMENT
Question twenty: What is the level of achievement of budgeted targets in percentages? Answers | Responses | Percentages (%) | Below 50 | - | 0 | 51-60 | - | 0 | 61-70 | - | 0 | 71-80 | 6 | 60 | 81-100 | 4 | 40 | Total | 10 | 100 | Table 18. Source: Field Data, May 2013
From table 18 above, six (6) respondents representing 60% said, the level of achievement is between 71-80% and four (4) respondents representing 40% said, the level of achievement is between 81-100%. It can therefore be concluded that, most respondents sees the level of achievement to be between 81-100%.

4.21 REWARDS
Question twenty-one: Does the company reward employees when budgeted targets are met? Answers | Responses | Percentages (%) | Yes | 10 | 100 | No | - | 0 | Total | 10 | 100 |
Table 19. Source: Field Data, May 2013
From table 19 above, all the ten respondents representing 100% admitted that, there are reward packages for employees when budgeted targets are met. It can therefore be concluded that, the company has a system in place for rewarding its employees when budgeted targets are met.

4.22 TYPES OF BUDGET
Question twenty-two: What type of budget is prepared? Answers | Responses | Percentages (%) | Incremental | 7 | 70 | Zero-based | 3 | 30 | Activity- based | - | 0 | Total | 10 | 100 |
Table 20. Source: Field Data, May 2013
Table 20 shows that, seven respondents representing 70% indicated that the company uses an incremental budget whiles the rest three representing 30% said zero-based budget. It can therefore be concluded that, the company uses an incremental budget.

4.23 MANAGEMENT COMMITMENT
Question twenty-three: Is management committed to the budgeting process of the company? Answers | Responses | Percentages (%) | Yes | 10 | 100 | No | - | 0 | Total | 10 | 100 |
Table 21. Source: Field Data, May 2013
Table 21 shows that, all the ten respondents representing 100% admitted that, management is committed to the budgeting process. It can therefore be held that, the company’s management is committed to the budgeting process of the company.

4.24 ANY OTHER COMMENTS

CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATIONS
5.0 INTRODUCTION
This final chapter dealt with the summary of the whole research work, the conclusion from the researchers point of view based on the findings and recommendations made by the researcher based on the findings gathered from the field work that will help solve the problem at hand on BUDGETARY PLANNING AND CONTROL PRACTICES.

5.1 SUMMARY
The purpose of this research was to assess budgetary planning and control practices at West African Mills Company. In addressing the budgetary planning and control practices, the major topics on which literature was reviewed included; nature of a budget, role of budgeting and budgetary control in business, problems of budgeting, behavioral aspects of budgeting, approaches to budgeting , types of budgets, budgetary planning and control, concepts and components of budgetary controls, effective budgetary control and reasons why variance occurs. Some of the research questions which guide the study were as follows; * What are the objectives of budgeting and budgetary control practices in .West African Mills Company? * How does the budget measure the performance of Managements at West African Mills Company? * How does budgeting facilitate the process of planning and control in West African Mills Company? * Challenges posed in implementing budgetary planning and control practices at West African Mills Company?
Also data used for this research work was of primary data which were obtained through a self structured questionnaire which covers the objective of the study and secondary data obtained from text books, journals and articles on budgetary planning and control practices. The following were the major findings from the self structured questionnaires administered to the some of the staff and management of West African Mills Company. * Majority of the staff fell within the ages of 31-40 years. * The company employs more males than females. * Majority of the staff were tertiary certificate holders. * Most of the respondents also indicated that, it takes the company annually for the preparation of its budget, which is one year. * All the responses indicated that, the company faces problems when preparing its budget. * Budgeted targets are being set for which managers’ performances can be assessed and rewarded where targets are achieved. * There are indications that, management is committed to the budgeting process. * Also the of level of achievement of budgeted target falls within 71% to 100%
5.2 CONCLUSION
The following conclusions were drawn by the researcher based on the findings above. There are indications that, the budgeting process is relevant to the company’s success but there are some difficulties faced when preparing its budget. These are information accessibility and time constraints.
Budgeted targets are in place for which performances of divisional managers are evaluated and rewarded when these targets are achieved.
Finally, the budgeting process helps the company to plan its activities ahead of time to ensure that, their activities are in line with company’s objectives.

5.3 RECOMMENDATIONS
Based on the conclusion, the researcher would like to make the following recommendations; * The targets set by the company should not be too high as to demotivate staff, and should also not be too easy to achieve, so that managers may strive for optimal performance. * Adequate and reliable information must be provided to the various divisions to aid in the budget preparation process in order to minimize deviations. * The commitment of management to the budgeting process should be maintained and improved upon to the highest level. * Various departmental budgets must be prepared on time in other to enhance the preparation of the master budget of the company. * Motivational packages must be put in place for staff and management team in other to boost their morale. * To prepare a good budget for individual department, adequate information must be made available so that departmental budget can be prepared and improved in order to achieve its budget.

APPENDIX 1
ACCOUNTANCY DEPARTMENT
SCHOOL OF BUSINESS STUDIES
TOPIC: BUDGETARY PLANNING AND CONTROL PRACTICES
CASE STUDY: WEST AFRICAN MILLS COMPANY
QUESTIONNAIRE
Purpose: This questionnaire is prepared to solicit information in order to investigate into the above topic. It is purely for academic purpose.
Security: All information provided shall be treated with utmost confidentiality.
Instructions: Please tick ( √ ) where appropriate and supply full responses where necessary.
PART A: PERSONAL DATA 1. What is your age in the distribution below? i. 20 and below ii. 26 – 30 iii. 31 – 35 iv. 36 – 40 v. 41 and above 2. What is your sex? i. Male ii. Female

3. What is your marital status? i. Married ii. Single 4. What is your educational background? i. Professional ii. Tertiary iii. Secondary iv. Basic

PART B: INDUSTRIAL DATA 5. What is the Name Address, Date of establishment and the number of departments of the organisation?
Name:................................................................................
Address:............................................................................
Primary business:..............................................................
Date of establishment:......................................................
Number of department:....................................................

6. Does the company prepare budge? i. Yes ii. No

7. What is the budget period? i. Monthly ii. Quarterly iii. Semi-annually iv. Annually

8. Does the company have a budget unit? i. Yes ii. No 9. Does the company have a budget committee? i. Yes ii. No 10. How long does it take the company to prepare its budget?
................................................................................................................................................
11. Does the company face problems when preparing its budget? i. Yes ii. No 12. What are some of the problems the company faces when preparing its budget?
...............................................................................................................................................................................................................................................................................................

13. In what ways does the budget preparation benefits the company?
................................................................................................................................................................................................................................................................................................

14. What are the approaches to budgeting? i. Top down ii. Button up

15. Does the company revise its budget? i. Yes ii. No 16. How often is the budget revised? i. Monthly ii. Quarterly iii. Semi-annual iv. Annual 17. Are there budgeted targets for which managers can be assessed? i. Yes ii. No 18. How does an individual see these targets? i. Easy ii. Moderate iii. Difficult

19. Are these targets accepted by individuals? i. Yes ii. No 20. What is the level of achievement of budgeted targets in percentages? i. Below 50 ii. 51 – 60 iii. 61 – 70 iv. 71 – 80 v. 81 – 100 21. Does the company reward employees when budgeted targets are met? i. Yes ii. No 22. What types of budget is prepared? i. Incremental ii. Zero-based iii. Activity-based

23. Is management committed to the budgeting process of the company? i. Yes ii. No.

24. Any other comments
....................................................................................................................................................................................................................................................................................
Thank you.

REFERENCES 1. ACCA Study Text (2011), Performance Management 2. Drury C. (2004), Management and cost accounting, 6th edition, p, 589 3. GyasI K. (2005), Management accounting. p,214. 4. Horgren T. (2005), Cost accounting a managerial emphasis.p,224 5. Institute of Cost and Management (2011), Basic finance for marketers.p,143 6. Izhar T. (2000), Accounting, Costing and Management, Oxford University press. 7. Light bulb Press Inc. (2008), Dictionary for financial terms.p,234 8. Lucey T. (2003), Management accounting 6th edition, pp. 267,384 9. Lucey T. (2002), reprinted, Management accounting. 5th edition, pp. 182,192 10. Sheffrin M. (2003), Economic principles in action.p,121
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References: 1. ACCA Study Text (2011), Performance Management 2 3. GyasI K. (2005), Management accounting. p,214. 4. Horgren T. (2005), Cost accounting a managerial emphasis.p,224 5 6. Izhar T. (2000), Accounting, Costing and Management, Oxford University press. 7. Light bulb Press Inc. (2008), Dictionary for financial terms.p,234 8 9. Lucey T. (2002), reprinted, Management accounting. 5th edition, pp. 182,192 10