THE ROLE OF BUDGETING AND BUDGETING CONTROL IN LAPO MICROFINANCE BANK

THE ROLE OF BUDGETING AND BUDGETING CONTROL IN LAPO MICROFINANCE BANK

CHAPTER ONE

INTRODUCTION

1.1 Background of Study

The success of every organization either private or public depends largely on effective planning and control. Planning and control are preconditions for the achievement of organizational goals and objectives. The objectives of organization are accomplished through a careful plan of action and control. Both public and private organizations are established for the purpose of achieving specific objectives. Budgetary planning and control are managerial functions responsible for setting specific targets or expectation to be met. Budgeting is not only a management planning device but also a basic accounting model for managerial control. In manufacturing organisation, planning and control are used to set profit target, revenue, prices and cost. Hence, planning is the process of deciding ahead of time, what a firm seeks to achieve and how it seeks to achieve them. Planning is future-oriented. Control on the other hand, is the evaluation of performance and the putting in place of corrective measure where necessary. Control seeks to compare plans with actual goal realized. Control entails restrain, supervision, safeguarding, checking or even to correct deviations.(Oporiopo Michael Godknows,2012).

Budgeting is essentially, a process of planning and control. A well-prepared budget provides management with a planned program based upon investigation, study, and research on the part of the entire organization. In addition, a well-prepared budget provides complete co-ordination of the marketing, production and financial activities of a business. Budgeting alone, however, does not bring realization of the plans. Control over operations is necessary in order that deviations from the plans may be noted and corrected so that the business may be kept on the planned course. (Okafor, Angela U,2010)

Budgetary Control originated in the 1920’s as a means of planning and control. Businessman wanted to see the possible outcome of their plans and forecasts, and budgets were prepared for this purpose.

THE ROLE OF BUDGETING AND BUDGETING CONTROL IN LAPO MICROFINANCE BANK