Case Study On Budget Management Of The Highway Company

The thesis presents a study of a highway operating company that derives the bulk of its revenue from toll charges. Using data collated during the course of research it describes the present operating budget management of KS Highway Enterprises. The factual information was then analysed and suggestion of change to the present system is presented with the aim to improve the management efficiency and profitability.The first section of this thesis describes the problem associated with operation budget management of KS Highway Enterprises. The annual overall budget estimate is drawn up by the finance department based on the operational target set by the senior management. However there are short comings in the budget forecasts that various sections within the company submitted to the finance department. The inaccurate forecast leads to either under or over budgeting within divisions. The rise in operating cost is not adequately reflected. Although there is rigorous audit of the toll gate section there is no performance appraisal system for other departments. As a result, the company suffers nine consecutive yearly operating deficitsThe second part of the thesis analyses the cause of these problems. The members of staff of the company have insufficient understanding of the science of operating budget management. The departmental estimates were drawn up without taking sufficient consideration of various factors that can affect the outcome. There is a deficiency of communication between different divisions. The preparation of the annual budget lacks scientific basis. Budgetary control is not adequate enforced. There is no performance appraisal system.The last part of the thesis presents suggestions to improve on the existing system. There must be a total commitment to scientific management method by all members of staff within the organisation. In the management of forecast, adequate allowance should be given to the needs and requirements of different departments. Budget should be drawn up based mainly on the methodology of zero-based budget, complimented by flexible budget method with the actual operations controlled through closed loop feed back control. In performance appraisal, a performance standard system should be established. Individual efficacy is then judged based of the criteria inculcated with rewards or penalty awarded accordingly.The latest budget control theory as applied to the management of modern enterprises is discussed in this thesis. It summaries the existing management system of KS Enterprise, suggests avenues of improvement in order to build an efficient budget forecast and control system.