AN EVALUATION OF EFFECTIVENESS OF FINANCIAL PLANNING AND CONTROL IN THE BANKING SECTOR

CHAPTER ONE

1.1     BACKGROUND OF THE STUDY 

Planning is required in all forms of decision making in order to ensure an effective and efficient utilization of available scarce resources.

The resources to satisfy the basic needs of the people and relatively scarce in relation to their demand. Therefore, there is need to plan for available resources in such a way that maximum satisfaction could be attained with minimum resources. In planning consideration has to be given to the form of control that should be exercised to ensure that the plan overall attains its objectives.

Finance is the most vital part of process of banking. This is because the level of success a bank achieves is related to the size of its financial resource. Even with the most liberal manpower, a bank cannot register any appreciable position. So, financing of resources in bank does not only mean the acquisition of resources but also efficient planning, management and allocation of this resources and valuation of the capital of the organizational objectives or goals.

In any business sector, an adequate balance and flow cash is essential. A business must therefore, be able to meet its commitment at all times, for this a bank must plan its capital requirements well in advances to ensure that it can get the funds it needs and when it needs them most.

A bank cannot afford to stand still. It needs cash for its daily transactions. It is essential for any bank   to effect improvement to introduce other means of sourcing funds, and to expand where conditions are favorable.

All these cannot be achieved without effective financial planning and control. A bank definitely does not remain static, there is always the tendency to go forward or backward but not neglected to stagnancy. The direction the bank takes therefore depends on the effectiveness of the financial management planning and control team.

More than ever before, a bank should mobilize its financial resources for the attainment of their corporate goals. Financial and material wastes cannot be afforded in this time of economic recession whatever the nature of the bank, the same principles are followed regarding financial planning and control.

A lot of banks liquidate due to resources today. Had the money realized at the time of economic boom been invested wisely, the country would still have been comfortable today inspite of the fall in the oil prices. This is what exactly happens to some organization where knife and flesh are given solely to one who does not know anything about management considering the investment of the country surplus money made from profitable project and venture which would have been beneficial in the future for the improvement of telecommunication, settling upon research, Development project (R and D) and institute for both engineering and Agricultural field as well as improving electricity supply in the entire economy. Instead the resources are wasted on grandiose project for some individuals, personal benefits. This paramount in most of the disable organizations, where finance are embarked upon without planning within the short time may lead to obsolesce, deterioration etc.

1.2     STATEMENT OF THE PROBLEM

It is very important to emphatically stress the importance of planning and control in today banking section, which includes the followings:

a.                 In choosing rationally money among risky endeavours.

b.                 It provides us with a bench mark or print reference against which accomplishment can be measured and also focuses attention on the objective of the organization.

The paramount consideration in business is profit without it, there can be no business because the essential discipline in business is profit planning and control and this requires the application of budgeting procedure.

1.6     SCOPE OF THE STUDY

The topic “An Evaluation Of The Effectiveness Of Financial Planning And Control In The Banking Sector”, is a very wide one that requires a lot of resource work. In view of these facts, the researcher has decided to limit the scope and to deal on how resources are being procured, effectively and efficiently managed (i.e. how assets and liabilities of an organization are being managed how are they being allocated and valued in an overall basis for the achievement of organizational objectives and goals. We shall look at fixed Assets management, working capital management, internal control, budget and budgetary controls in this respect.

1.7     HISTORICAL BACKGROUND OF THE STUDY

The background of the study is to carry out an evaluation of effectiveness of financial planning and control and budgetary control system in service industry. It deals with how service industry like first Bank of Nigeria Plc secure adequate means of financing, provide complete method or procedure that will allotted for the bank budgetary control system and ensuring re cords as far as possible accurately the reliability of accounting records, the promotion of operational efficiency policies and adherence to management and administrative policies.

In planning, consideration has to be given to the form of control that should exercised to ensure that the plan attain the objective of the resource being carried out.

Financial is the most vital part of the process of banking, the objective of the study is primarily aiming at ascertaining the effectiveness of the financial management, planning and control in banking sector or otherwise.

The research collection would be in a primary and  secondary form of  data collection; the project will hope to come out some out come: –

–                     Improves the manpower of the organization so as to gear the bank management towards effective financial planning and control.

–                     Internal control system should be overhauled to ensure appropriate use of resources

–                     Determining the bank investment needs and choices has given it growth objectives and overall strategy.

–                     Analyzing the consequences of its financial plans for the long term health and survival to banks

–                     Forecasting the bank revenue and expenditure and needs for funds based on it investment where financial planning is defective.

This project work shall comprise of five chapters, chapter one shall deal with the background of the study, statement of problems, objectives of the study etc. Also chapter two focuses on theories of financial planning and control etc chapter three has to do with the basic research methods, observation, interviews and questionnaires. Chapter four is the data  presentation, analysis, interpretation and test of hypothesis. Chapter five being the final  chapter shall deal with the summary, conclusion and recommendation for the research findings.

1.8     DEFINITION OF TERMS

a.       PLANNING: “Planning proceeds control” it is the selection objective and their means of attainment.

b.       RESOURCES: This can be defined as supplies of goods, raw materials, etc which a person, organization, country has or can use in the process of production.

c.       CONTROL: The implementation of decision model and the use of feed back so that objectives are optionally attained.

d.       FINANCE: To raise money necessary to organized to extend an enterprise, whether by the sale of stocks, notes or otherwise

e.       FINANCIAL ANALYSIS: This is the concentration of financial statement of an organization in relation with other organization within the same environment (sector) over a given period or time.

f.       FIXED AND CURRENT ASSETS: Fixed Assets can be stated as those material whose value are of long life, which are held to be used in banking and are not primarily for resale or for conversion into  cash. Current assets are those materials whose value changes with the change in the volume of investment.

g.       BUDGET: A financial or quantitative statement prepared and approved prior to a defined period of time, of the policy to be pursued during that period for the purpose of attaining a given objectives.

h.       BUDGETARY CONTROL: “The establishment of budgets relating to the responsibilities of executives to the requirements of a policy and the continuous comparison of actual with budgeted results either to secure by individuals actions, the objectives of that policy or to produce a firm’s basis for its revision”.

i.        FORECAST: This is a prediction of future events which a re expected to happen in a life time.

j.        MANAGEMENT: This is the process of getting things done through other people in an organization which can be either profit or non profit making.

k.       ORGANIZATION: This means to structure or arrange relationship between people, the work to be done, and the facilities in doing such works so that goals and objectives of the organization can be achieved.