This research project examined, the problems associated with lack of proper and adequate financial planning and control in the retailing business. These problems have caused a high rate of retail store failures. Capital should be determined, obtained and well managed, in order to enhance business growth. This involves planning and control, which means calculating costs of men, machines, materials, land, building and capital. It also means making certain that actual costs do not exceed estimated costs. The main objective of this study is to assist retailers to determine their capital requirements, to enable them obtain and use adequate capital to start a business, or continue an existing business, at different points in time. It is also aimed at evaluating alternative courses of action and how to maintain effective performance appraisal. The researcher administered questionnaires to 100 retailers in Port Harcourt, among whom he interviewed 50 personally. The questions asked were based on the problems the research intends to solve. The researcher also collected his data from secondary sources i.e. textbooks on finance, accounting, auditing, marketing and relevant professional journals. The 50 retailers interviewed responded to the questions and there were 65 responses out of the 100 questionnaires administered (i.e. 65% response rate). The data received were analyzed, using the chi-square test at 0.05 level of significance. The major conclusions from the findings include: (a) That the retailers with more formal education grow more than those with little or no education (b) That the higher the initial capital the greater the proportion of the retailer’s growth. (c) That most retailers neither maintain internal control systems nor internal audit, but have ways of appraising the performance of the stores. Based on the findings and conclusions, the researcher made very necessary recommendations, which are believed will help most retailers to grow and succeed, and not to fail.
CHAPTER ONE 9
1.1 BACKGROUND OF THE STUDY 9
1.2 STATEMENT OF THE PROBLEM 11
1.3 OBJECTIVE OF THE STUDY 11
1.4 RESEARCH QUESTIONS 12
1.5 RESEARCH HYPOTHESIS 13
1.6 SIGNIFICANCE OF THE STUD 13
1.7 SCOPE OF THE STUDY 15
1.8 LIMITATION OF THE STUDY 15
1.9 DEFINITION OF TERM 15
CHAPTER TWO 19
REVIEW OF RELATED LITERATURE 19
CHAPTER 3 50
RESEARCH METHODOLOGY 50
3.1 RESEARCH DESIGN 50
3.2 POPULATION OF THE STUDY 50
3.3 SAMPLING TECHNIQUES 50
3.4 INSTRUMENT OF DATA COLLECTION 51
3.5 MODEL SPECIFICATION 51
3.6 DATA ANALYSIS TECHNIQUES 52
CHAPTER FOUR 54
DATA PRESENTATION, ANALYSIS AND INTERPRETATION 54
4.1 PRESENTATION OF DATA 54
4.2 DATA ANALYSIS AND INTERPRETATION. 54
CHAPTER FIVE 64
SUMMARY OF FINDING, CONCLUSION AND RECOMMENDATION 64
5.1 SUMMARY OF FINDING AND CONCLUSIONS 64
5.2 RECOMMENDATION 68
1.1 BACKGROUND OF THE STUDY
Financial planning and control has become a complex management function for both small and medium retailing organizations. Whatever the size of the retail business, adequate and proper financial planning and control are necessary and inevitable.
There is no substitute for adequate and proper financial planning for either a new or an existing retail business, many small independent retailers often begin business without adequate funds or proper financial planning, and this has led stores failures. Inadequate financial planning is not limited to small retailers in some instances large chain stores miscalculate their revenues and expenses, thereby causing financial hardships.
These errors in judgment may be offset by the overall profits of the chain, however, and may not be readily apparent to the casual observer. (Redinbaugh, L.D. 1987).
The financial planning and control function in an organization has the main objective of assisting the management of that organization.
This assistance is directly towards the planning and control activities of manager, but other activities well benefit as well, if the system is well conceived and used; for example, the co-ordinating and motivating aspects of management a good financial planning and control system is one which is in “contex” what is done is relevant to the purposes of that particular organization and the managers who work for it, whatever, those purposes and however they may be measured and appraised.
Inevitability, financial fall short of this ideal systems in practice fall short of this ideal, either in their design or in the way they are used. (Professor Robson, A.P. 1988).
In essence, the management of capital is concerned with obtaining funds and using them well. The implication is clear enough if involves planning. It means calculating cost of men, machine and materials. It means evaluating the market and the potential success of the product. It means figuring the cost of land, building and capital.
And once everything has been decided on, it means making certain that schedules are kept, quality is maintained and that actual cost do no exceed estimated costs.
In another words, it also means control. (Anreder, S.S. 1977P.4).
1.2 STATEMENT OF THE PROBLEM
The problem of financial planning and control in the retailing business is associated with the following:
The availability of adequate finance
Budgeting and budgetary control
Pricing policies and product lines
Credit control policies
Merchandise (Inventory) control
Use of internal control system and internal audit.
1.3 OBJECTIVE OF THE STUDY
The objective of this study is to:
Determine how the retailing business can obtain and used adequate finance.
Evaluate the use of budgeting and budgetary control
Evaluate a general pricing policy for each product or product line
Evaluate the credit control policies
Determine the retailer’s potential market and a sales forecast for the ensuring quarter year.
Determine a suitable inventory control system
Determine an expense control system
Evaluate the system of cash management
Evaluate the profitability position of the retailing business by using break-even analysis, profit analysis and other tools.
Evaluate the use of internal control system and internal audit.
1.4 RESEARCH QUESTIONS
The extent to which the above variables are likely to contribute to the growth or failure of the retail business will be measured: based on this objective the following research question will need to be answered at the end of the study:
Is there a relationship between the retailer’s growth and the retailer’s level of education?
Is there a relationship between retailer’s growth and the initial capital investment?
Is there a relationship between the retailer’s growth and choosing between alternative courses of actions?
Is there a relationship between the retailer growth and action planning for a specified period of time?
Is there a relationship between the retailer’s growth and performance appraisal?
1.5 RESEARCH HYPOTHESIS
This hypothesis will be used to determine the financial planning and control in small and medium enterprises.
Hi: Financial planning and control have significant relationship on small, medium enterprises.
1.6 SIGNIFICANCE OF THE STUDY
The significance of the study is that it will help to improve the financial management and the general operation of the retailing business in the following ways:
The evaluation of the systems of budgeting and budgetary control will help to refine the existing knowledge on how to effectively determine (and manage) adequate financial (cash) requirement suitable for the successful operation of any size of the retailing business.
The evaluation of the forecasting and planning methods will helps to effectively choose between alternative courses of action, e.g. product, product lines, sources of raising finance etc.
The determination of appropriate potential markets, sales forecasts, pricing policies and credit control policies.
T he evaluation of the systems of merchandise and expense control, will help to extent the existing knowledge, in order to effect more stringent control system.
The study will evaluate the system of profit planning and refine the existing knowledge on how to use some tools, including the break-even analysis. A break-even analysis can be made for any condition to reveal profitable, less profitable and unprofitable products or product line.
The general evaluation of the system of financial control, will help to refine and introduce appropriate and effective system of internal control and internal audit.
1.7 SCOPE OF THE STUDY
The scope of this study is to determine the appropriate financial planning and control tools techniques and or systems which will help the retailing business to:
Provide and manage adequate finance for it’s operations.
Choose between alternative courses of action
Establish an effective action planning for a specified period of time.
Establish an effective performance appraisal.
1.8 LIMITATION OF THE STUDY
The limitation of this study will be finance and the time period within which the study is expected to be completed.
There will be no enough time and finance to enable the researcher to reach retailers within Nigeria.
1.9 DEFINITION OF TERM
FINANCE: Sound business financing may be defined as the allocation of a concerns liquid assets to assure their most productive use. In other words, the limited supply of capital available to any business, whether we are talking about a corner drug store or a steel mill, must if the business is going to be successful, be used in a way in which it can do the most good in terms of profitability. (Anreder, S.S 1977 P.2).
Planning: Planning is deciding in advance what to do, how to do it, when to do it, and who is to do it. Planning bridge the gap from where we are to where we want to go.
It makes it possible for things to occur which would not otherwise happen.
Planning is an intellectually demanding process, it requires the conscious determinations of courses of action and the basing of decision on purposes, knowledge and considered estimates. (koonte, O’ Donnel and weihrich 1980 p.156). Planning is also defined as a delineation of goals and a formulation of a decision model for selecting means of achieving them. (Horngren, C.T. 1977 p.5).
Control: Controlling implies measurement of accomplishment of events against the standard of plans and the correction of deviations to ensure attainment of objectives according to plans (Koontz, O’ Dennell and Weinrich 1980, P. 717). Control is the implementation of the decision and the use of feedback so that the goals are attained.
The main purpose of control is to ensure that the firm’s activities conform to its plans, hence it is closely linked to the planning function.
Retailing: There are many of “retailing”, but there is little agreement as to the precise explanation of the term. According to Redinbaugh, L.D. (1987 P.9). “Retailing” include all those business activities associated with selling goods and services to an ultimate consumer or final user for personnel consumption.
A “retailer” is an independent merchant middleman, this merchant middleman” stands between a producer or whole saler and a consumer, and is the one who serves as the consumer’s purchasing agent. Thus, the retailer makes the consumer’s job of buying goods and services much easier by offering a convenient location and a wide assortment of merchandise, for this purchasing function, the retailer hopefully receives a reward (profit) from the operation of the business.