The effect of budgets on financial performance of manufacturing companies in Nairobi County

Abstract

The aim of this study was to determine the effects of budgets on financial performance of manufacturing companies in Nairobi County. The study used cross-sectional research method targeting eighteen (18) manufacturing firms listed in the Nairobi Securities Exchange by employing a census survey to cover all manufacturing firms within Nairobi County. The researcher used both primary and secondary data. A statistical package for social sciences was used as analyzing tool and also regression model was adopted to determine the association between dependent and independent variables. The study findings revealed that there is a strong positive effect of budgets on financial performance on manufacturing companies as measured by return on assets (ROA). The study recommends that effective budget implementation should be facilitated through capacity building, robust systems and processes prioritization, and close monitoring for evaluation. Stakeholders should get involved in budget execution to enhancing the overall budget implementation. Further, financial management systems should be supported in order to ensure prudent management of funds and adequate sensitization of both the employees and the public on best financial management practices to enhance the oversight role. In addition, manufacturing companies need to establish a strong link between the planning process and the budget process.