Budget And Budgetary Controls, Its Link To The Performance Of An Organization

Project and Seminar Material for Business Administration and Management BAM

Budget And Budgetary Controls, Its Link To The Performance Of An Organization


Every organization doing exceedingly well on the face of the earth rely heavily on budgets, and budgetary control measures to improve performance, through adequate resource allocation. Budget and Budgetary control, both at management and operational level looks at the future and lays down what has to be achieved. Control checks whether or not the plans are realized, and puts into effect corrective measures where deviation or shortfall is occurring.

This study identifies the link between budget and budgetary control and performance of the selected organization in Ghana, as considered in this study, being a sample of the entire population of the organizations in Ghana.

The sources of data for the research were both primary and secondary sources. Census technique was used for the study instead of a sampling technique. Questionnaires and interviews were used as the data collection methods for the study. Based on the analysis, internal control system was seen to be significant in detection and prevention of fraud in banks in Ghana, hence the need for an effective and adequate internal control system. Data captured in this study, was analyzed through descriptive method. Quantitative technique was also used to analyze the response of the respondents as well as a computer program known as SPSS. The descriptive analysis involves the use of percentage, tabulations, and graphical presentation.

Findings from this study reveal that budgets and budgetary controls are factors that can influence the performance of an organization, as they have a very mutual relationship. Concerning how budgets are linked to performance, budgets and budgetary controls mainly form and give every organization the structural support to achieve its goals and objectives, and maximising performance, through resource allocation and control.

Chapter One


1.1 Background of Study

Following the uncertainties prevailing in the Ghanaian business environment today, managers and stakeholders must be poised and prepared to compete favourably under these rapidly shifting conditions. In order to survive under these environmental complexities and vagueness managers and stakeholders of both private and public sectors need sharp tools, proven management techniques to forecast the major changes which are likely to affect the business while they choose future direction and dimension of resources needed to attain selected goals.

Budgetary control as a proven management tool helps organization management, and enhances improved performance of any economy in different ways. Its primary function is to serve as a guide in financial planning operators; it also establishes limits for departmental excesses. It helps administrative officials to make careful analysis of all existing operations, thereby justifying expanding, eliminating or restricting present practice. Budgeting and control entails a distinct pattern of decisions in an organization which is capable of determining its objectives, purposes or goals, and how these goals are achieved by establishing principal policies and plans. However, the inability to recognize the problem concerned and fixing a boundary off investigation creates an obstacle for the successful implementation of budgeting and control. Some organizations only look for narrow ranges of alternatives which they arrive at from their past expenses and present situation, other management levels even avoid long-term planning and budgeting in favour of today’s problems thereby making the problems of tomorrow more severe. The foregoing reflects on the need for organizations to set up a formal mechanism for scanning its environment for opportunities and give early signs of future problems, this course of action will improve the system of budgeting and control, resulting in an appropriate expectation of improved performance, in the manufacturing sector as seen in this study.

1.1 Background of the Study and Profile of the Organization

Various researches on budgets and budgetary controls have clearly shown that organizations need to pay serious attention to budgetary processes, budgets, and budgetary controls. In light of these various issues facing organizations as a result of poor/mismanaged budgetary control systems/budgets, the researcher went ahead to research more on the topic, and came out with various recommendations and findings to help curb the problems organizations have with their various budgetary control systems.

Interviews and casual discussions with managers, employees, government agencies etc, formed the initial and informal stages of this study. When enough materials were gotten and reviewed by the researcher, it later developed into a full and complete academic research. Various issues affecting budgetary processes, budgets and budgetary control are fully addressed in this study.

This study was mainly undertaken to help organizations in Ghana to grow, thereby also helping the economy of Ghana to grow, because when enterprises and businesses do well, the economy will definitely do well.

1.1.2 Profile of the Organization

Merchant Bank Ghana Limited (MBG) is a limited liability company is one of the leading Banks in the country. It was incorporated in August 1971 and commenced business in March 1972 as the first merchant bank in Ghana.

Merchant Bank Ghana Limited (MBG) provides a comprehensive range of banking services to its customers and clients, using its worldwide network of correspondent banks and their agencies. The range of MBG’s banking services includes:

  1. Domestic and International Banking Operations for Corporate Customers, Small & Medium Enterprises (SMEs) and, High Net-worth Individuals;
  2. Treasury Services
  3. Money and Capital Market Operations
  4. Hire Purchase and Leasing Services; and
  5. Foreign Remittances

The Bank has two wholly owned specialised subsidiaries namely;

Merban Investment Holdings Limited (MIHL) – dealing in Funds/Portfolio Management, Money Market Operations, Investment Advisory Services, Trustee Services and Custodial and Nominee Services;

Merban Stockbrokers Limited (MSL) – dealing in Brokerage Services, Underwriting of new Issues, and Investor Search & Joint Venture Arrangement; and

The MBG group also has the following additional specialist services tailored to meet its customers’ needs:

Registrar Services – maintaining records of Shareholders and Creditors, facilitating dividend payments to Shareholders; and

Corporate Finance & Advisory Services (CFAS)- handling Corporate restructuring, Joint Venture Arrangement, Company Valuation, Project Finance; Funds Sourcing, Issuing House Services and General Financial Advisory Services. And also dealing in Hire Purchase transactions and Leasing.

The bank has taken advantage of the opportunities offered by the introduction of Universal Banking Business in Ghana and MBG has fully developed all three areas of universal banking namely; Retail, Corporate and Investment. The branch network of Merchant Bank currently stands at twenty-two (22).


As a universal Bank in Ghana, Merchant Bank (Ghana) limited is committed to providing quality financial products and services to our customers across our chosen market and maintaining our place as a leading and preferred financial institution in Ghana.


To become the leading, the most influential and best performing financial service provider in Ghana by 2012 and one of the leading banks in West Africa by 2015

Core Values
  • Performance-oriented organization
  • All decisions and actions must be based on Unshakeable Facts.
  • Must at all times conduct business with a sense ofCompetitive Urgency.
  • We must maintain High Ethical Standardsin all our internal and external relationships.

The bank has over its 30 years of existence achieved a lot, notable amongst which are:

  • The establishment of hire purchase and leasing business in Ghana.
  • The promotion and formation of the first Discount House in Ghana.
  • Handled the share issues of 8 out of 10 companies when there was no Stock Exchange in Ghana in the 1970’s.
  • The initiation of the preparatory work in the establishment of the Ghana Stock Exchange (GSE).
  • The sponsorship and registration of about 50% of the companies on the GSE.
  • The arrangement and the formation of the mortgage company (which is now the HFC Bank Limited)
  • Served as an advisory body in the acquisition of SSB Bank by Societe’ Generale; and the merger of Ashanti/Anglo Gold.

1.3 Statement of the Problem

In recent times, companies have performed poorly due, to the fact that they lack effective and efficient budgets, and budgetary control systems to adequately and judiciously allocate resources to meet organizational goals, and maximize performance. A study conducted by Boquist (2001) observed that companies continue to blunder and fail because they have flawed budgetary planning and control systems, which they apparently fail to recognize. Some firms sense weakness of their budgetary analysis but viewed them as individual problems rather than systematic deficiencies. They misdirect efforts and produce greater frustration. As a result, corporate strategy and capital allocation become misaligned and remain so, despite disapproving financial performance.

Some business organizations do not even know the link between budgetary control and performance, and this affects their performances negatively. Various organizations ranging from small scale businesses to large scale businesses, fail to recognize the power of budgets and budgetary control over performance outcomes. These organizations go ahead without paying more attention to improving their performances through their budgets.

1.4 Research Objectives

The objectives for this study are:

  1. To identify the link/relationship between budgetary control and organizational performance.
  2. To identify the problems associated with budgets and budgetary control in an organization.
  3. To identify ways to improve organizational performance through budgetary control measures.

1.5 Research Questions

In order to achieve the above objectives the following research questions will be used:

  1. What relationship exists between budgetary control and organizational performance?
  2. What are the problems associated with budgets and budgetary controls in your organization?
  3. How can organizational performance be improved through the use of budgetary control measures?

1.6 Significance of the Study

The addition of knowledge is basically the aim of every research and this research work seeks to achieve just that. More importantly, this research is necessary in understanding how the budgetary control is established, and also how it affects organizational performance.

It is a tool which measures managerial performance of an organization and promotes good morale and harmony in the organization. It enable the organization verify whether or not the plans of the organization are understood by all members, and put into effect corrective measures where deviation or under deviation is occurring.

Since budget is a tool for planning, and financial planning is of almost significance to a business man, it enables the organization project the future consequences of present decisions in order to avoid surprises and understand the link between present and future decision.

I.7 Scope of the Study

The research would be concentrated on the Merchant Bank branch in Koforidua, the capital town of Eastern Region. The research would cover the budgetary processes and polices of Merchant Bank and how its performance is influenced and maximized.

1.8 Limitations

In undertaking this research, the researcher encountered the following problems;

  1. The time used to undertake the study was limited. The time was loaded with other academic activities and as a result limited time was made available the study.
  2. Also, response from the employees of the bank through the questionnaire provided by the researcher was also a bit slow. This is because of reasons such much work load on the part of the management and employees of the bank.

1.9 Organization of Study

The project will be organized around following chapters;

  1. Chapter one gives an introduction to the research work. It gives the basic information about the company and the research being undertaken. This chapter therefore consists of the background of the study and organizational profile, statement of the problem, objectives, research questions, significance of the study, scope of the study, and limitations encountered by the researcher.
  2. Chapter Two consists of the literature review and the theoretical framework
  3. Chapter three gives details of the research methodology. The research methodology represents the various ways and methods which the researcher used in order to gain his information.
  4. Chapter Four gives the analysis and interpretation of the information gathered by the researcher.
  5. Chapter five gives the findings and conclusion of the researcher. Here, conclusions will be drawn based on the findings and their implications will also be given.

Chapter Five

Conclusion, Recommendations and Policy Issues


This chapter considers the summary of findings, conclusion and policy issues of the study. The findings are what the researcher found out during the study based on the responses given and interviews conducted. This also includes the conclusion of the whole work and finally, what the researcher thinks can be done to enhance the performance and development of the Brewery industry.

5.1 Summary

The first objective of this study was to identify link between budgetary controls and the performance of an organization. Findings from the study show that budgetary control has a strong link with organizational performance, because, budget itself forms the basis for decision making, foundation for sound planning, measure for performance of an organization, budgetary controls provide structural support for performance and it also acts as a tool for resource allocation and control (see table 4.2.4).

The above findings strongly suggest that budgets are greatly linked to performance of an organization, hence, it should not be neglected. The study also revealed that budgets and budgetary controls have a greater link to the performance of an organization because, it provide structural support for performance. If the power of budgetary controls are not fully utilized or recognized by an organization, performance may not be fully maximized, as resources may be allocated and channelled to un-profitable projects/ventures.

The second objective of this study was to identify the problems associated with budgetary controls in an organization. The study revealed that the biggest challenge facing budgetary control is that the organization’s managers do not fully understand or appreciate the importance of budgets/budgetary controls in the organization (see table 4.6). other problems identified are: inadequate/in-complete financial records, lack of integration with overall organization’s strategy, kacj of financial experts, and overestimation of cost (see table 4.2.6). If these problems persist for long, it could lead to the organization performing below expectation. Losses may realised in the long run if organization do not address budgetary control problems effectively. The third objective of the study was to identify ways of improving the performance of an organization.

Findings revealed that in actual fact, the performance of an organization can be improved (see table 4.2.9). The study also revealed that the performance of an organization can be improved if budgets are linked with the overall organizational strategies. Keeping proper and complete financial records will also improve performance. Others are: using budgets as bench marks, getting more experienced and skilled financial analyst, revising and debating on past, current and future budgets, and creating an enabling environment for effective and efficient budgetary control. All of these solutions will go a long way in improving the performance of an organization if adopted.

5.2 Conclusions

This research examined the budgetary controls and concludes that the merchant banks generally have budgetary controls at different levels of organizations; it established that most of them have planning, monitoring and controls, and budget participation. Planning contributed the highest towards the positive performance of the MERCHANT BANKs followed by Monitoring and Control and finally budget participation. It also established that there is above average performance in all the MERCHANT BANKs in Ghana based on the findings, that is, both financial and non-financial performance indicators which include revenue growth, community participation, dollars spending, new donor acquisition and efficiency are above average at 71.11%.Most of the organizations have the required 30% administration cost and 70% program costs which a standard requirement for merchant banks.
Finally this research determined the effects of budgetary controls on performance of merchant banks using correlations and regression methods established the link and have also concluded that there is a low positive link between budgetary controls and performance. this means that budgetary controls might not be the only reason for high performance; many other factors may affect the performance of an merchant bank.

5.3 Recommendations

Budgetary controls are important in influencing performance therefore more efforts should be made by management of organizations both profit and non-profit to sensitize the employees on its importance so as to enhance performance. It also recommends that organizations should develop more formal practice in the development of budgetary controls, that is, Planning, Monitoring and Control and budget participation. Most organizations have minimal formal budget controls in their organizations hence the need to develop a clear policy on budget control processes.

Based on the findings, organizations need to investigate other factors that contribute to better performance apart from budgetary controls, like employees motivation and invest more in staff development in order to enhance their performance. Monitoring and Controls shows the highest contribution towards performance hence. More training should be done to the managers on how to conduct more efficient controls and monitoring.

The findings also indicate that budget participation has an impact on the organizations Performance hence the budgetary controls should not be top-down in nature, instead the top management should make efforts to elicit feedback from subordinates at different levels in developing the organizations budget. As such, top management needs to understand that the positive impact of budgetary participation on managerial.

Performance works both directly, as a consequence of management involvement in the budgetary process, as well as indirectly, when managers’ commitment to the organization increases due to their participation and involvement in the budgetary control process.

Policy Issues

After a preliminary investigation of how budgetary control are linked to the performance of an organization, the researcher through her findings and analysis, came up with the following recommendations to help organizations maximise performance:

  1. First, organizations must recognize that budgets and budgetary controls are heavily linked to organizational performance. Managers should endeavour to fully utilize the budget resource, since it has the power to completely transform the organization. Organizations without budgetary control systems should endeavour to put it in place in their organization.
  2. Second, organizations must at all times link their budgets to their overall corporate strategies and goals. Budgets/budgetary controls must always be prepared in a strategically manner to fit into the organization’s goals and aims. Budgets should not be prepared as a mere formality or function.
  3. Third, accurate and complete financial records must be always kept by the organization. Without proper financial records, organizations may not be able to achieve maximum performance. Budgets will never be a useful tool for improved performance if financial estimates and records are in-complete or in-accurate.
  4. Fourth, budgets/budgetary controls should be used as an internal control measure to check and measure performance in an organisation. As observed by the study, budgets/budgetary controls form an integral part of an organization’s internal control, hence, it should always be used to control most of the organization’s financial operations and activities.
  5. Finally, budgets/budgetary control should be made the sole tool and mechanism for resource allocation and control. All resources needed for a project should be authorized by the budget of the organization, as this will enhance greater accountability and transparency in the organization.

Get Complete Project Material

5,000 5000

The Complete Material Will Be Sent to You in Just 2 Steps

Quick & Simple…

Step One Purchase

Make Payment (Through Transfer) of ₦5,000 to the Account Below

Zenith BankAcc No: 1225513212
Samphina Academy
Current Account

Or CLICK HERE To Pay With Debit Card

CLICK HERE To Purchase Material ($15)

Step Two Purchase

Send the Following Details on WhatsApp ( 08143831497) After Payment

  1. Payment Details

  2. TOPIC: Budget And Budgetary Controls, Its Link To The Performance Of An Organization

The Complete Material Will Be Sent To You On WhatsApp After Receiving Your Details
T & C Apply

  Contact Our Help Desk

Need a Different Topic? Perform a Quick Search

List of Related Works

Click on Any Topic to Preview the Content


Samphina Academy

Samphina Academy is an Online Educational Resource Center that is aimed at providing students with quality information and materials to aid them in succeeding in their academic pursuit.