FINANCIAL PLANNING AND CONTROL
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FINANCIAL PLANNING AND CONTROL
Chapter one
INTRODUCTION
Background of the study
Planning is widely regarded as the most onerous duty confronting the management, and it is simple to delay. Planning is based on the belief that ongoing management activity can improve an organization’s future success.
It assumes that an entity will be more effective in achieving its broad objectives if management takes action to implement the feed-forward process than if management does not act.
A business should be handled successfully and efficiently. This indicates that the organisation should be able to meet its objectives while using as few resources as possible. This management means the coordination and control of the firm’s efforts to achieve organisational goals.
The process of management is facilitated when management plans its future course of action ahead of time and makes professional judgements, utilising individual and group efforts in a coordinated and sensible manner.
Financial planning is a methodical technique to improving management performance. According to Pandey (1999:228), “Financial planning indicates a firm’s growth, performance, investments and requirements of funds during a given period of time” .
Financial planning entails preparing a predicted or proforma profit and loss account, balance sheet, and funds flow statement. Both financial planning and profit planning assist a firm’s financial management in regulating the flow of funds, which is his major priority.
Most businesses want to increase their revenue. An rise in a company’s market share leads to faster growth. The company would require assets to maintain the higher sales growth. It may need to invest in more plant and gear to boost manufacturing capacity.
Furthermore, it would require extra existing assets to manufacture and sell more goods or services. The company would have to purchase raw materials and convert them into finished goods after paying production costs.
It may need to sell things on credit due to industry norms or to increase sales. This generates debtors or accounts receivable. The raw material suppliers may grant credit to the enterprise, and the firm may employ internally generated capital to finance current and fixed assets.
When the firm grows at a faster rate, internal finances may not be sufficient, and the firm may need to raise external capital by issuing equity, debt, or both. Financial planning refers to the process of assessing a firm’s funding requirements and determining funding sources.
Financial planning and implementation help to bridge the gap between an organization’s current state and its desired state. Financial planning include analysing the firm’s short- and long-term cash flows.
The overarching goal of financial planning is to maximise the firm’s profitability and make the best use of its funds. It is one of the primary responsibilities of the financial manager. Financial planning includes three steps:
Financial management involves projecting short-term and long-term demands, creating budgets, and monitoring performance to ensure success.
Financial control ensures that an enterprise’s financial objectives, goals, and standards are met. Financial control encompasses a wide range of activities, including direct observation, policies and procedures, real results, and performance reports.
As a result, comprehensive financial planning and control should prioritise performance reporting and evaluation in order to identify the root causes of high and low performance and implement corrective measures.
1.1 Statement of the Problem
Financial planning and control ensure the enterprise’s financial health. It guarantees that money is available when needed. Thus, financial planning guarantees that corporate activities run smoothly, resulting in the enterprise’s high profitability.
Financial planning and control ensure the maximisation of shareholders’ wealth, which is the primary goal of financial management. An organisation with an effective financial planning and control system has a strategic and competitive advantage over its competitors.
However, small-scale firms in Akwa Ibom State and Nigeria as a whole have finally collapsed due to poor financial planning and management systems in their separate organisations. This has resulted in the closure of several small enterprises.
Because finance is the “life wire” or “engine room” of any firm, inadequate planning of a commercial enterprise’s financial demands must inevitably result in low profitability; this issue has hampered the rapid expansion of our economy’s private sector.
The researcher is consequently interested in examining this topic with the goal of delivering a solution in the form of advice.
1.2 Objective of the Study
This study is being done with the following precise objectives:
To examine whether financial planning and control supports the fulfilment of the organization’s goal.
To examine whether financial planning contributes to the firm’s profitability.
Determine the benefits of financial planning and control.
To examine whether financial planning and control allow a business to make the best use of its money.
1.3 RESEARCH QUESTIONS.
To help fulfil the study’s aims, the following research questions were developed:
Does financial planning and control help organisations accomplish their goals?
Does financial planning and control help to maximise the firm’s profitability?
What are the advantages of financial planning and control?
Does financial planning and control help a company make the best use of its money?
Research Hypothesis
This study presents the following hypotheses:
Financial planning and control facilitates the achievement of organisational goals.
Financial planning and control help organisations optimise their profitability.
The firm utilises the benefits of higher earnings and availability of working capital through financial planning and control.
Financial planning and control allow the company to make the best use of its funds.
Significance of the Study
This study, in addition to fulfilling a portion of the requirements for the award of a Bachelor of Science (B.Sc) in Business Management, will benefit in the following ways:
Loopholes in the firm’s financial planning and control system will be disclosed to management.
The study will widen the researchers’ perspectives on financial planning and control in small enterprises.
Scope and limitations of the study
This research will solely focus on small-scale firms due to constraints and other variables, and will be limited to Ritman Nigeria Limited, Ikot Ekpene, Akwa Ibom State.
Definition of Terms Used in the Study
To promote an appropriate comprehension of this work, the following terminology are defined:
Controlling is the process of ensuring efficient performance in order to achieve organisational objectives.
Decision Making: It entails committing or resolving to do or stop doing something, or to accept or reject an activity.
Capital budgets are forecasts of a company’s spending plans for major asset purchases, which frequently need large sums of money.
Management is the process of planning, organising, directing, and regulating organisational resources (such as money, manpower, and time) to ensure that organisational goals and objectives are met. Management is also defined as a group of individuals who make choices inside an organisation.
Planning is the process of setting organisational objectives and deciding the best course of action to achieve them and benefit the future.
Profitability: An enterprise’s ability to create revenue.
Historical Background of Ritman Nigeria Ltd.
This is a brief history of Ritman Nigeria Limited, from its conception to the present. Mr. Richard Magnus, who is from Ifuho in the Ikot Ekpene Local Government Area of Akwa Ibom State, owns and manages the firm. Ritman Nigeria Limited began operations in 1993 and specialises in farming.
The farm is organised into five sections: poultry, piggery, fishing, snail farming, and plantain plantation. The firm began in 1993 with 400 fowl (400) and 110 pigs (110), with a physical investment of one hundred and fifty thousand naira (N150,000.00).
The business has had some challenges over the years, including the loss of birds and pigs, as well as financial mismanagement. Currently, the firm is doing well;
it employs thirty-two (32) people, has over 800 birds, 300 pigs, a vast plantain plantation, five different ponds for fish, and an unknown number of snails.
Organisation of the Study
The study will be undertaken and concluded in five chapters. The first chapter is the introduction, which includes the study’s background, problem statement, objectives, research questions, research hypothesis, significance of the study, scope/limitation of the study, definitions of terms used in the study, Ritman Nigeria Limited’s historical background, and study organisation.
Chapter two provides a review of related literature. The third part covers research technique, while the fourth chapter covers data presentation, analysis, and interpretation. Finally, chapter five has a summary, recommendations, and conclusion.
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