1.0 INTRODUCTION The growing complexity of the business environment and the ever increasing competition among firms in the modern time, make planning an invaluable tool for business success. Successful management is no longer just a matter of flair, skill and determination, a conscious effort is needed to harness available resources towards the achievement of enterprise objectives. Budgeting is one of the tools adopted by management for effective cost planning and control. A budget is commonly understood the forecast by a government, organization nor society of its expenditures and revenues for a specific period of time. The period covered by a budget is usually a year known as financial year. Budgeting is concerned with the utilization of financial resources to serve human needs. Although a budget may be characterized by a series of goals with price tags attached. It is mainly a mechanism for making choices among alternative expenditure. When such are coordinated so as to achieve desired goals, the budget becomes a plan. If there are specifications on how the goals are to be achieved, the budget becomes a psychological device to make administrators thin. If however, the emphasis is placed on achieving the desired objective at the lowest possible cost, then the budget is an instrument for ensuring efficiency. An enterprise which is effectively and efficiently managed produces good and rewarding result. Management is efficient if it is able to accomplish the objectives with minimum efforts and costs. Profit planning and control or budgeting is an integral part of management. The financial manager has a particular interest in profits planning and control because he helps to regulate flows of funds which is his function. The decision making process of management starts with planning. ‘Planning is the design of a desired future and of effective ways of bringing it about. In other words, planning involves the determination of the future course of action for accomplishing the objectives of the enterprise. The basic purpose of planning is to provide guidelines for making decisions. It is a forward process to reducing uncertainty about the future. Planning is a continuous process which would generally involve four fundamental steps. 1. Establishing the objectives 2. Determining the goals 3.Developing strategies 4.Formulating profits plans or budget. Objectives are the statements of broad and long term desired state or position of the enterprise in the future. They are directional and motivational in nature and are generally the qualitative expressions of the desired future state. For instance, the primary objective of an enterprise may be customers satisfaction, employee welfare, long-run- survival which depends upon the maximization of the long-run profit, that is wealth maximization. Goals represent the operational specifications of the broad objective with time and quantity dimensions. Goals are the quantified targets to be attained within a specific period e.g. long run profit maximization in order to increase the market value of the firm to shareholders is the broad objective of the firm. But the goal for the next year may be to earn a 20% after tax profit on investment or a 5% profit on sales. Strategies specify the ways of achieving the goal operationally. For example, the strategies of a firm may include the use of retained earnings for expansion, keeping debt at a reasonable level, expanding sales through price reduction and aggressive advertisement. Financial plans may take many forms, but any good plan must be related to the firm’s existing strength and weakness. The strengths must understood, if they are to be used for proper advantage and the weakness must be recognized if corrective action is to be taken. Finally, the formalization of objectives, goals and strategies for operational purposes is called the profit planning or budgeting. It is called the profit plan or budget because it explicitly state the goals in terms of time expectations and expected financial results for each major segment of the entity.
1.1 HISTORICAL DEVELOPMENT OF THE FIRM It is important at this point to review briefly the history of the company mobile telecommunication Network Nigeria Limited (MTN). It was incorporated in Nigeria on November 8. 2000 as a private company. It secured a license to operate digital (Global system for mobile telecommunications GSM) telephony on February 9 2001, from the Nigerian communications commission. On May, 2001, MTN emerged as the first to make a call on its GSM network in the new dispensation. Thereafter, the company launched full commercial operations beginning with Lagos, Abuja and Port Harcourt in the company now provides coverage to 85 cities and well over 5,000 communities and villages, spanning every geo-political zone and 31 of Nigeria’s 36 states. It is the first to erect a country wide microwave radio transmission backbone, offering unrivalled value for money evidenced by a loyal customer base attracted by MTN’s convenience, mobility, roaming on 30 international networks and economical Tarrifs. MTN’s product and services are available at its friendship centres and a nationwide network of dealership, banks and convenience channels including entries, petrol stations and neighourhood stores.
1.2 BACKGROUND OF MOBILE ELECOMMUNICATION NETWORK NIGERIA LIMITED/PRESENT STATE OF AFFAIRS The company through systematic planning and control represents several millions of Nara in investment. The company as at May 31, 2004, had a total of 21 mobile switching centres and over 940 radio base stations across the country. Several more are in the process of being installed. On January 20, 2003, MTN commissioned the first phase of its digital microwave transmission backbone, Y’ello Balm. Constructed at a cost of $120 million.Y’elloBalm is Africa’s most extensive transmission infrastructure and has significantly helped to enhance call quality on MTN’s network. Y’ello Balm spans 3,400 kilometers and traverses over 120 cities, villages and communities; while coverage has been extent to more than 90 major towns and a total of over 5,000 villages and communities across Nigeria. The second phase of Ye’llo Balm is currently on going and will spand another 4,500 kilometers. MTN subsists on the core brand values of leadership, integrity, innovation, relationships and a ‘can do’ attitude, a passionate optimistic focus on the future. It prides itself on its ability to make the impossible possible – connecting people with friends, family and opportunities. The ownership structure is currently as follows: Mobile telephone Networks International Limited 76.44% Nigerian partners 20.56% International finance corporation and infrastructure investment arm of the world bank 3% 100% TECHNICAL ASSISTANCE/COMEMRCIAL SERVICE AGREEMENT The company is technically supported by Nami Tech in south Africa who doe the prepaid voucher and supplier to MTN. COMPAY’S CONTRIBUTION TO NIGERIA ECONOMY MTN currently employs more than 1,200 Nigerians. In addition, more than 160 Nigerian companies are currently MTN distribution partners. Of these, more htan 25 are banks, many of which have spun off subsidiary companies, many of the dealerships have branches nationwide and employ dozens of people. Another 6,000 companies, including petrol statiosn, supermarkets and many others, serves as sub-dealerships. Yet a great may other Nigerians earn a living as self-employed proprietors, recharge card or mobile phone accessory vendors, many others operate the hundred of business centres scattered allover our cities. VISION - To improve telecommunications infrastructures and access throughout the countries in which we operate - Quality service - High profile distribution and accessibility of our services and products - Setting up a good base for future expansion. - Training and transferring skills to local staff. - Becoming a good corporate citizen and becoming a major player in the Nigerian economy. MISSION - TO BE A CATALYST FOR Nigeira’s economic growth and development, helping to unleash Nigeira’s strong developmental potential not only through the provisionof world class communiations but also through innovative and impactful corporate social responsibility initiaties. - We want the cals you make on our network to be of the best quanlity in Nigeira - We want our network to cover the broadest areas of Nigeira and athe continuous enhancing of convenience and value derived from using our network. - Every call made shoukd re-inforce your conviction that MTN is needed.
1.3 STATEMENT OF PROBLEM It is the primary duty of management of the organization to ensure the achievement of the company. The company was faced with high operational cost due to inadequate infrastructure, security of lives and property, low disposal income, high import tariffs. This research work is therefore intended to help in determining and highlight the problems that militate against the application and utilization of budgeting as a tool for profit planning and control. The research work will help in providing solution to the following problems; 1. Inability of the company’s objective. 2. Insufficient appraisal of the company’s performance based on budget. 3. Inability of functional officer in the cost centers to standard pre-planned by the company. 4. Insufficient mortuary of compliance as well as derivations from the departmental and over-all budget.
1.4 OBJECTIVES OF THE STUDY Budgeting, planning and control are the major components for a successful management in mobile Telecommunication Network Nigeria limited. These are the areas of responsibility of management, and to an extent, present a yardstick for performance evaluation of management function. Hence, this study includes in it’s purpose the following; 1. To highlight the importance of budgeting as a tool for planning and control in the operations of a Telecommunication company with profits maximization as it’s main objective. 2. To identify the procedures adopted in the reformulation and implementation of annual budgets in mobile Telecommunication Network Nigeria Limited Eungu. 3. To determine whether or not budgetary control as a management tool contributes to the improvement of managerial efficiency and highlight productivity. 4. To determine whether there is a correlation between the types of budget implemented and their actual performance.
1.5 RESEARCH QUESTIONS 1. Are workers communicated of the company’s objective (s) when preparing the budget? 2. Is there deviation of the actual from the standard set? 3. Does the budget imposes a threat to the managers rather than a challenge? 4. Does management ensure adherence to the budget
1.6 SCOPE AND LIMITATIONS Budgeting – a systematic approach to profit planning and control will be limited to Mobile Telecommunication Network Nigeria Limited Enugu both in accessibility to certain information and the distribution and collection of questionnaires. The major problems faced were insufficient fund to cover the cost of printing questionnaires, distribution and collection of same to and from the respondents. Fear on the part of the respondents for loss of their job should they disclose information without due authorization from their superior or the top management. Finally, demands were also enormous both in terms of time and finances, as well as final semester works. These problems were reasonably taken care of and allowing a limit of error, the project was competed.
1.7 SIGNIFICANCE OF THE STUDY In all business endeavours, the primary objective is profit maximization. This is achieved through provision of goods and services at fair, competitive and affordable prices. No management and ignore profit maximization, otherwise, at will find itself out of business. Hence the study is significant with the following reasons: (1) The study will determine whether budgeting as a tool for planning and control plays any significant role towards ensuring profitability and efficient rendering of goods and cervices. (2) Ascertain the role played by the management in budgeting and whether they ensure adherence to the budget (3) Ascertain the roles of budget as a tool for effective and efficient utilization of scarce resources. (4) The study will help future researchers on budgeting and budgetary control with emphasis on mobile telecommunication Network Nigeria limited.
1.8 DEFINITION OF TERMS BUDGET: The chartered institute of management Accountants (CIMA) defines budget as “a plan quantified in monetary terms, prepared and approved prior to a defined period usually one year, showing planned income to be generated and expenditure to be incurred during that period, and he capital to be employed to attain that objective. BUDGETARY CONTROL: This is the establishment of a budget relating the responsibilities of executives to the requirements of a policy and the continuous comparison of actual with budgeted results either to secure the individual actions with the objective of that policy or to provide a basis for its revision. PLANNING: This is the establishment of objectives, and the formulation, evaluation and selection of the policies, strategies, tactics, and action required to achieve these objectives. CONTROL: This s the process of ensuring that a firm’s activities conform to its plans and that its objectives are achieved. VARIANCE: this is the difference between planned (budgeted) and actual results. FAVOURABLE VARIANCE: This is excess of the budgeted result over the actual result, in the case of cost. But in the case of revenue it is the excess of that result over the budgeted. UNFAVOURABL VARIANCE: this is the excess of actual result are the budgeted in terms of cost and vice-versa in terms of revenue BUSINESS: Any establishment which has profit motive or maximization as its major objectives. ORGANIZATION: All establishment whether government or privately owned.
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