Budgeting, Risk Planning, Internal Control and Financial Performance of Kenyan Manufacturing Firms

Abstract

Manufacturing companies, integral to a nation's economic fabric, wield significant influence on financial prosperity. This article explores the imperative of nurturing these entities with the utmost care to ensure optimal financial performance. The paper discusses the significance of budgeting, planning, and control in enhancing the financial performance of manufacturing companies, particularly in developing countries. Budgeting involves creating spending plans to ensure effective use of resources, and it has been successful in countries like Kenya, India, and Somalia. Four theories related to budgeting, planning, and control in manufacturing companies are outlined in the study: organizational theory, stakeholders' theory, contingency’ theory, and goal-setting theory. The study observed that manufacturing companies significantly contribute to national economies through their export-driven models, facilitated by prudent budgeting, robust internal controls, and proactive risk planning. Budgeting stands as a fundamental tool for resource allocation, encompassing stages from planning to periodic evaluation. Risk planning emerges as a proactive shield against potential losses, considering both probability and impact. By harmonizing budgeting, internal control, and risk planning, manufacturing companies not only fortify their financial standing but also augment the economic vitality of their respective nations. In conclusion, the article presents a holistic perspective on the interconnected strategies of budgeting, internal control, and risk planning in bolstering the financial standing of manufacturing enterprises.