Introduction
1.1 Background Of The Study
Planning is generally recognized as the most difficult task facing the manager, and it is one that is very easy to procrastinate. Planning rests upon the view that the future success of an entity can be enhanced by continuous management action. It presupposes that an entity will be more successful, interms of its broad objectives, with management actions to implement the feed-forward process than if there is no activation by the management.
A firm should be managed effectively and efficiently. This implies that the firm should be able to achieve its objectives by minimizing the use of resources. This managing implies coordination and control of the efforts of the firm for achieving the organizational objectives. The process of managing is facilitated when management charts its future course of action in advance, and takes decisions in a professional manner, utilizing the individual and group efforts in a coordinated and rational manner. One systematic approach for attaining effective management performance is financial planning. 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 involves the preparation of projected or proforma profit and loss account, balance sheet and funds flow statement. Both financial planning and profit planning help a firm’s financial manager to regulate flows of funds which is his primary concern.
Growth in sales in an important objective of most firms. An increase in a firm’s market share will lead to higher growth. The firm would need assets to sustain the higher growth in sales. It may have to invest in additional plant and machinery to increase its production capacity. Also, it would need additional current assets to produce and sell more goods or services. The firm would have to acquire raw materials and convert them into finished goods after incurring manufacturing expenses. It may have to sell goods on credit because of the industry norms or to push up sales. This gives rise to debtors or accounts receivable. The suppliers of raw materials may extend credit to the firm, the firm may use its internally generated funds to finance current and fixed assets. When the firm grows at a higher rate, internal funds may not be sufficient, thus the firm would have to raise external funds either by issuing equity or debt or both. The process of estimating the funds requirements of a firm and determining the sources of funds is called financial planning.
Financial planning and implementation bridges the gap between where the organization is and where it wants to be. Financial planning involves analyzing the short term and long-term money flow to and from the firm. The overall objective of financial planning is to optimize the firm’s profitability and make the best use of its money. It is one of the key responsibilities of the financial manager. Financial planning involves three steps:
forecasting both short-term and long-term financial needs, developing budgets to meet these needs, and establishing financial control to see how well the firm is doing what it set out to do.
Financial control is designed to ensure the attainment of financial objectives, goals and standard of an enterprise. Financial control has many facets such as direct observating, policies and procedures, reports of actual results and performance reports. Therefore, comprehensive financial planning and control should focus on performance reporting and evaluation of performance to determine the cause of high and low performance as well as taking corrective measures.
1.2 Statement Of The Problem
Financial planning and control ensures a sound financial health of an enterprise. It ensures that money are available as at when needed. Thus, financial planning ensures smooth operation of business activities, this leads to high profitability of the enterprise. Financial planning and control ensures the maximization of shareholders wealth which is the primary objective of financial management. An enterprise with efficient financial planning and control system has both strategic and competitive advantages over its competitors.
However, small scale businesses in Akwa Ibom State and Nigeria in general have failed ultimately in their business operations due to inefficient financial planning and control system in their respective enterprises. This has led to the closing down of many small scale businesses. Since finance is the “life wire” or “engine room” of any business, inadequate planning of the financial needs of a business enterprise must obviously lead to low profitability of the business, this problem has hampard the rapid development of the private sector of our economy. The researcher is therefore interested in studying this problem with the aim of providing solution by way of recommendations.
1.3 Objective Of The Study
This study is conducted in pursuance of the following specific objectives:
- To determine whether or not financial planning and control aids the attainment of organization goal
- To determine whether or not financial planning helps in optimizing the firms profitability.
- To ascertain the benefits of financial planning and control
- To determine whether or not financial planning and control enables an enterprise to make the best use of its money.
1.4 Research Questions
- To facilitate the achievement of the objectives of this study, the following research questions are developed:
- Does financial planning and control assist in the achievement of organizational goals?
- Does financial planning and control help in optimizing the firm’s profitability?
- What are the benefits of financial planning and control?
- Does financial planning and control enable an enterprise to make the best use of its money?
1.5 Research Hypothesis
The following hypothesis are formulated in this study:
- Financial planning and control aids the attainment of organization goals
- Financial planning and control help the firms in optimizing its profitability
- The firm employ the benefits of increased profit and availability of working capital through financial planning and control
- Financial planning and control enable the firm to make the best use of its money.
1.6 Significance Of The Study
This study apart from being a partial fulfillment of the requirement for the award of Bachelor of Science (B.Sc) in Business Management, will be beneficial in the following ways:
Loopholes inherent in the financial planning and control system in the firm will be made known to the management of the firm.
The study will broaden the researchers horizon in financial planning and control in small-scale businesses.
1.7 Scope/Limitation Of The Study
This research work shall focuse only on small scale businesses, due to the constraint and other variable, it will be limited to Ritman Nigeria Limited, Ikot Ekpene, Akwa Ibom State.
1.8 Definition Of Terms Used In The Study
To facilitate the accurate understanding of this study, the following terms are defined:
Controlling:
This is the process of assuring efficient performance to attain the enterprise objectives.
Decision Making:
It involves a commitment or resolution to do or to stop doing an act, or to adopt or reject an action.
Capital Budgets:
An estimates of a firm’s spending plans for major asset purchases that often require large sum of money.
Management:
This is the process of planning, organizing, directing and controlling organizational resources (which are money, manpower, time, etc) in a manner that ensures attainment of organizational goals / objectives. Management is also seen as a group of people who take decisions in an organization.
Planning:
This is the process of developing enterprise objectives and selecting appropriate course of action to accomplish them and to assist the future.
Profitability:
The ability of an enterprise to generate earnings.
1.9 Historical Background Of Ritman Nigeria Ltd
This is a brief history of Ritman Nigeria Limited from inception till date. The business is owned and managed by Mr. Richard Magnus who hails from Ifuho in Ikot Ekpene Local Government Area, Akwa Ibom State. Ritman Nigeria Limited started business in 1993, it is into farming, the farm is divided into five section, that is, poultry, piggery, fishery, snail farming and plantain plantation. The business, in 1993 started with four hundred birds (400) and one hundred and ten pigs (110), with a physical amount of one hundred and fifty thousand naira (N150,000.00). The business, through the years have gone some difficulties, interms of loss of birds, pigs, and even mismanagement of funds, etc. Presently, the business is not doing bad, it has a staff strength of thirty-two (32), over eight hundred birds, three hundred pigs, a large area of plantain plantation, five different ponds for fish, though the precise number of snail could not be accounted for.
1.10 Organisation Of The Study
The study will be conducted and completed within five chapters. Chapter one is the introduction, it consist of the background of the study, statement of the problem, objectives of the study, research questions, research hypothesis, significance of the study, scope/limitation of the study, definition of terms used in the study, historical background of Ritman Nigeria Limited, and Organisation of the Study.
Chapter two is the review of related literature. Chapter three is designed for research methodology, chapter four is designed for the presentation, analysis and interpretation of data. Finally, chapter five consist of summary, recommendations and conclusion.
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