THE NEED FOR EFFECTIVE BUDGETING AS A TOOL FOR PLANNING IN BANKING INDUSTRY

THE NEED FOR EFFECTIVE BUDGETING AS A TOOL FOR PLANNING IN BANKING INDUSTRY

CHAPTER ONE

1.0     INTRODUCTION

A substantial advance has been made in the act and science of managing group efforts in industry, government and other endeavours. The complexity of modern management problems has led to the development of those management tools, techniques and procedures which are commonly and collectively referred to as scientific management. If business is not operated under some sorts of plans, it is merely an incoherent unit without any sense of direction and certainly it cannot be referred to as an organization.

Planning is inherent in the very nature of modern business conditions. Banks and other organizational activities must be well planned so that the firm may operate effectively and efficiently utilize all resources economically to achieve the desired result.

One of the most important approaches that has been developed for facilitating performance of the management process of the bank is comprehensive effective planning and control (management budgeting).

The concepts and techniques of the need for effective planning can be said to be a means by which complex organization can be guided so as to make or produce intended results. One of the objectives of budgeting is to secure economic stabilization in order to achieve desired goals.

Another objective of budgeting is to see how the organization accomplishes its set objectives and this can be inform of what organization does and what it achieves.

Budgeting also tries to allocate and secure adjustment in resources availability this is achieved with the aim of placing some of the laudable programme on priority list prompt alienation.

Planning on the other hand is of course decisions making since it involves selecting among alternative planning is referred to as future circumstances and requirement, deciding objectives, making short and long term plans, determining policies to be followed and also standard to be set.

Planning is based upon a clearly define objectives and it considered factors in the environment which will help or hinder organization goals, planning provides a tools so that performance can be evaluate with established standard, it should be precise, practicable and simple operate and understand. Planning should also be flexible to ensure that circumstances necessitate changes without disrupting the plan. However, budgeting drawn up a financial plan which contain certain financial proposals, these financial proposals

1.1     BACKGROUND OF THE STUDY

One of the most important approaches has been developed for facilitating performance of the management process of the bank is comprehensive effective planning.

The need for effective budgeting as a tool for planning in the banking industry in Nigeria involved use of budgeting to plan, planning is significant in the functional areas of management, which are brought into focus, creating a mutual enrichment of performance that is a vital focuses on the usefulness of planning to aid the management on how profit can be realized. Also, the planning function of the budget is very central to the realization of budget objective.

Planning involves the determination of objectives. This aimed at studying the meaning and importance of budgeting in banks, the problem face by this bank and also how budgeting procedure in planning can be used in bringing possible solution to their problems. As a result, a budget reflects the status of an organization.

1.2     STATEMENT OF PROBLEMS

The bank still finds it difficult to administer their operation effectively to the public because of the fluctuating effect of some factor ranging from economic political socio-cultural and religion factors.

1. Are there prospect of these bank?
2. Have you experienced any problem as regards budgeting yet?
3. What benefit are derivable from the service of the bank?

Other related problems are unqualified staff employed at the influence of top management (directors) and non-repayment of credit facilities at the specific date proposed.

1.3     OBJECTIVES OF THE STUDY

The main objective of this study is to ascertain THE NEED FOR EFFECTIVE BUDGETING AS A TOOL FOR PLANNING IN BANKING INDUSTRY. The specific objective of the study includes:

1. To find out some problems facing the authority in the process of budgeting.
2. To determine the area of price rating of authority in planning process and policies in achieving the goal of the organization through budgeting.
3. To examine how budgeting influence specifically relating the plans to actual performance of UBA Plc. through budgeting can do planning and this.
4. To offer useful suggestions on the basis of finding and how best to improve the budgeting system through planning process.

1.4     SIGNIFICANCE OF THE STUDY

This researcher work is relevant in the following ways:

1. It will point the importance of budgeting and how UBA Plc uses it to achieve its organizational aims and objectives.
2. It is envisage that this project will provide an insight to the problem which is associated with the bank with respect to the topic and proper solutions.
3. It could serve as a “think tank” for other business owners, particularly for the fact that will involves a big and successful business like UBA.
4. It is also significance in the area of academics, as it could be used for future reference where it is relevant.

1.5     SCOPE OF THE STUDY

This research work covers the activities of UBA Garki Branch. AU information in respect of this study is based on the branch. The study covers the need for effective budgeting as a tool for planning in banking industry in Nigeria.

Therefore, with the Abuja branch located where researcher is based, it ensures the cost of transportation for the collection of data and necessary information from the other branch.

1.6     DEFINITION OF TERMS

It is essential to make know every bit of term used there in, therefore some terms must be explained in detail to avoid misconception and misinterpretations since there are different people’s interpretation.

The following terms are to be considered:

1. Budgeting: Is a carefully worked out financial plan, a co-ordinating tool as well as a control technique based on forecasts and the best possible estimate that can be made at the date when budgets are prepared.
2. Planning: This involves taking a view of an organization how to make it forward through the use of resources and strategies to ensure customer satisfaction.
3. Management: The act of running and controlling a business organization to achieve its objectives and identify potential problem area for detailed investigation and corrective measure or actions.
4. Organization: Is a group of people who form a business together in order to achieve a particular aim to ensure effective cost control and put an effective organizational structure.
5. Credit: Money at owner disposal in an account it could be a sale on trust without money at the time of sale.
6. Overdraft: This is allow customers to draw cheque in excess of his current account balance.
7. Current Account: Customer deposit that is with drawable by cheque.
8. Advance: These are monies lent by a bank general in firm of an overdraft on a current account holder by means of loan.
9. Loan Capital: Loan capital is normally represented by fixed interest security.
10. Loan: Lending money to borrowers.