An assessment of the impacts of budgets and budgetary controls on the profitability of an organisation: a case study of Zimbabwe Spring Steel (Pvt) Ltd T/A load Agropower

Abstract

The aim of this study was to assess the impact of budgets and budgetary controls on the profitability of an entity operating in an unstable economy, using a case study of Zimbabwe Spring Steel (Pvt) Ltd t/a Load Agropower. The study was based on the period from 2015 to 2017 which was majorly characterized by economic instability. Load agropower experienced a decrease in its profitability growth rate in spite of the existence of a budget system and this prompted the researcher to seek an in-depth insight on the impact of budgets on profitability in light of such economic shocks. The researcher made use of questionnaires and interviews to collect qualitative data about the opinions and attitudes of employees and management at Load Agropower regarding budgets and budgetary controls. The researcher found that budgets and budgetary controls contribute positively to operational efficiency through coordination, planning, motivation and accountability. However, the effect on profitability is indirect and in the case of Load Agropower, it has been compromised by poor communication, obsolete technics, use of historic data and estimates and failure by workers to understand and interpret the budgets adequately. To add on, the budget system was not sufficiently flexible to combat the negative effects of the dynamic nature of the economy during the period under study. After analysing the results attained, the researcher came up with recommendations for Load Agropower which include; the adoption of budget software, adoption of forecasting techniques and human resources training and development in order to improve the efficiency of the budgets and budgetary controls.