Abstract
Financial planning and control when properly employed can assist management to achieve its objectives effectively. The objective of this study is to develop a realistic picture on how financial planning and control can help to make efficient and effective success in business organization which where properly addressed. The researcher make use of questionnaire, interview and chi square method. The researcher recommends that there should be coordination of functional management in planning and controlling the operations of the company. This will help to achieve maximum profitability and efficiency.
CHAPTER ONE
INTRODUCTION
1.1Background to the Study
It is a fact that we are living in an era of planning and control, whether it is house wife with her household keeping allowances, or an industrialist with his responsibilities to the shareholders or even the government has to plan and control its operational activities in order to achieve their goals. Planning and control are part and parcel of our activities and it is an essential factor in business decision making.
In a competitive world where the key factors are cost, price, turnover and profit, planning and control enables every individual, firm and government to have a sound appreciation of the financial implication to his plan and action. Planning and control can be used by any type of organization that want to survive from a complete system covering decentralized department to organization with only a single procedure.
As a tool of management, it can increase the efficiency of the organization as a whole since all the departments are involved.
Besides no business prospers unless all its functions, accounting, finance, production, marketing personnel and so forth are fully staffed with competent individual. The efficiency and effectiveness of any organization therefore depends on a number of factors which may be categorized as clarity of purpose, management planning, control and communication. There is need to have a clear knowledge of the objectives of the organization otherwise it will not be possible to identify goals, set target for their achievement in form of planning, control and management of its finance (flow of funds).
According to Brigham & Campsey (1999), defines “financial management as the planning for acquiring and utilizing funds in a way that maximize the efficiency and value of the firm”. Most especially, finance is the evaluation and acquisition of production assets, procurement of funds and disbursement of funds. It involves four basic steps which are the functions, they includes:
- Raising of funds to finance project.
- Employment of these fund in valuable project.
- Management of the cash flow arising from these project.
- Returning of funds to their original sources
Financial manager’s duty is to employ the acquisition, location and management of these resources, finance therefore speeds into all segments of firms activities thus its function must be understood by all the managers in the firm. Having known the future financial needs of a firm; the question is how are these finance or funds be raised, this require knowledge of the financial market through the manager from which funds are drawn.
It also requires knowledge of how to make sound investment decisions and to stimulate efficient operations in the organization. These are alternative involved in financial decisions, the choices include the use of internal or external sources.
According to Azubuike, (2007) before looking for funds outside a firm, the possibility of providing such funds internally should be examined.
This internal sources is mostly used for the firms operations and should not be over looked when planning finance. They are generated from the operations of the business, or retained profit, depreciation provisions, tax provision and reduction in current assets. The external sources on the other hand are made up of two main types namely: short term and long term funds. Short term consist of tradecredit, bank overdraft and promissory notes. Long term finance refers to funds obtainable from loans with a maturity date. The external source consist of two broad type which are; equity and debt funds.
Equity funds represent the total interest of the owners of the business in the form of original shares contributions plus subsequent addition either by additional investments or by ploughing back profits/reserves into the business, debt funds on the other hand are the long term debt obligation of the business and it is usually made up of secured and unsecured debentures and bonds. The main sources of these long term funds are capital markets and banks. The need for financial planning and control therefore arises because financial resources are limited and costly and even where the resources are available the areas into which they could be applied profitably are diverse. Moreover, planning and control act as a device that enable management to anticipate changes and adopt it. No business can exist well, without some form of planning and control. Success in business is proportionate to its planning and control and the skill with which it affairs is being managed by the management.
1.2 Statement of Problem
Some business organizations are not performing well as a result of poor financial planning and control, some are left uncompleted after committing a very huge sum of money due to inadequate financial management while others will remain in operation successfully. There has been situation where organization after years of establishment will collapse, many of them are even well planned, financed and managed while others will stand the test of time. The questions to ask in these situations include:
1. Whether inefficient financial management and control is the reasons for corporate failures.
2. Most organizations are well planned and managed yet facing problems of liquidity.
3. Some organizations with high capital base and others with low capital still having the same chances of collapsing as a result of inefficient management of working capital.
This research project is an attempt to address these and other problems militating against financial planning and control as key towards achieving management efficiency
1.3Research Questions
For proper guidance and in-depth investigations of the research work, the researcher presented research questions which form major problems of the investigation these questions includes:
- Does proper management of working capital enhance profitability?
- Is the use of financial management and control techniques essential for achievement of corporate goals?
- Can it be said that financial management and control are part of internal control procedure.
1.4Objectives of the Study
Planning and controlling are successful ingredients of management at all levels, proper exercise of planning and control is often the key managerial efficiency and growth in view of this, the objectives of this study are:
1. To develop a realistic picture of how financial planning and control can help to make an organization more efficient, effective, successful and ensure growth.
2. To find out the extent to which proper financial planning and control can reduce business failures.
3. To see how financial planning and control can be adopted and improved to aid efficient and effective operation and suggest practical solution to these problems.
4. To know the extent to which financial planning and control affected various banks.
1.5Statement of Hypothesis
This research project is based on the null hypothesis (Ho) and the alternative hypothesis (Hi).
1. Ho: Proper financial planning and control do not contribute to management efficiency.
Hi: Proper financial planning and control contributes to management efficiency.
2. Ho: Long-term planning cannot affect the company’s objectives.
Hi: Long-term planning affects the company’s objectives.
3. Ho: Proper management of working capital does not enhance adequate profitability.
Hi: Proper management of working capital enhances adequate profitability.
.