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Advances in Social Sciences Research Journal – Vol. 8, No. 6

Publication Date: June 25, 2021

DOI:10.14738/assrj.86.10321. Mahroqi, R. M. A. A., & Matriano, M. T. (2021). Examining the Effect of Budgetary Controls on the Financial Performance of Oman

Telecommunication Company. Advances in Social Sciences Research Journal, 8(6). 83-95.

Services for Science and Education – United Kingdom

Examining the Effect of Budgetary Controls on the Financial

Performance of Oman Telecommunication Company

Raya Mohammed Amur AL Mahroqi

Department of Management Studies

Middle East College, Oman

Dr. Maria Teresa Matriano

Assistant Professor, Department of Management Studies

Middle East College, Oman

ABSTRACT

The budgeting process and budgetary control are one of the most important

activities that have great importance in the techniques used for planning and

monitoring activities and all the administrative and financial functions of the

organization. This study aims to assess the effect of budgetary control on the

financial performance of the Oman Telecommunications Company and verify the

effectiveness of budgetary control techniques in the company, in light of the support

and role of top management for budgetary control techniques in the company. This

study will allow financial managers in various companies to understand the nature

of the work of budgetary control techniques, their importance, and the extent of the

impact of each technique, and thus managers will be able to determine the best- used and appropriate techniques that will lead to raising efficiency in financial and

organizational performance. As for the research methodology used in the study, the

survey method based on questionnaires and interviews was used. Data were

analyzed using frequency distribution, correlations, and regression analysis.

Microsoft Excel was used to analyze the collected data. As for the interview, they

were analyzed by descriptive and explanatory methods. The results indicated that

there is a positive relationship between budgetary control and the financial

performance of the company, the differential impact of budgetary control

techniques, and the confirmation of the company’s use of the technique of variance

analysis and accounting responsibility, as well as the importance of budgetary

control procedures. The results also indicate the importance of support and the role

of top management for budgetary control techniques. Several recommendations

were made through the results of this study. The recommendation was made on the

need to understand and implement the company’s adjustment of funds technique

for its importance in improving and raising the company's financial performance

significantly in the company.

Keywords: Budgetary Control, Organizational Financial Performance, Budgetary Control

Techniques, Budgeting

INTRODUCTION

In this chapter, many issues and concepts related to budgetary controls and the financial

performance of the organization will be discussed. With reference to the literary works and

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Advances in Social Sciences Research Journal (ASSRJ) Vol. 8, Issue 6, June-2021

Services for Science and Education – United Kingdom

articles made by the authors on budgetary control and its relationship to institutionalist

financial performance, with main references for many different writers, who presented their

different views on the role of budgetary controls examination on the financial performance of

the organization, the role of budgetary control techniques and their effectiveness in controlling

the budget (Nafisatu 2018). Where in this chapter will analyze and review the definitions

provided by the authors and the adequacy of their scope, analyze the clarity of the definitions

included in the research, consider whether these definitions are consistent and whether the

authors' opinions are consistent in defining the budgetary controls, and know the budget

control techniques actually used and included in This literature relates its use and application

of budget control to the financial performance of organizations.

Theoretical Framework

Figure 2.1: Direct Relationship between Budgetary Control Technique and Organization

Financial Performance (Mohsin et al 2015)

Based on the literary reviews, the theoretical framework was developed according to the

studies conducted by Mazikana (2019) and Mohsin et al (2015) also through the exploratory

study that was conducted by the researcher with several managers in the financial departments

at the beginning of the research and verification of the subject of the study. It has been

discovered that some techniques in support of budgetary controls are being used in many

companies by financial managers. As for the support of top management, it is an idea that arose

through interviews conducted with managers, which is considered a variable intermediate

between the techniques of budgetary control and the financial performance of the company.

Budgeting

According to Mazikana (2019), who referred in his definition to Hoek (2017), and who defined

Budgeting as a financial plan aiming at looking into the future and allocating company

resources. He believes that it is a plan created for how to spend money through collecting

financial data and preparing a budget for the company's future activities, and when adding

monetary values to this plan, it becomes a budget. In the same research, Mazikana referred to

Lucey (2015), who specified that the budgeting is quantitative data and extends for a specific

period of time and includes all financial data such as the income and expenses of the company,

assets, and liabilities, and all cash flows that the company’s management has planned for.

Budgets are submitted before the start of the new year, meaning that they are estimated for the

following year, so their data are estimates and through it, the company’s business plan is

explained. Mazikana (2019), defined budgetary control as the proposed plan that is expressed

in financial terms and depends on it to achieve the success of the activities in the company that

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Mahroqi, R. M. A. A., & Matriano, M. T. (2021). Examining the Effect of Budgetary Controls on the Financial Performance of Oman

Telecommunication Company. Advances in Social Sciences Research Journal, 8(6). 83-95.

URL: http://dx.doi.org/10.14738/assrj.86.10321

is included in the budget, is the establishment of predetermined goals, and reporting and

evaluation of actual performance results to the management of the company (Kimani 2014).

From the above, it was concluded that the budget is a set of financial projections for the

company, which the company uses to control its financial activities in that period of time

specified in the budget; and the importance of budget controls in the comparison between the

financial plans developed for the expected management of the company's activities in the

budget and the actual results.

Budgetary Control

One of the most important techniques used for planning and controlling jobs within

organizations are budgeting and budgetary control. The management in the organization

should not focus on preparing the budget only but must give wide attention to following up and

controlling the work of the budget according to the data included in it because it is considered

an expression of the company's financial position for a specific period of time (Isaac et al 2015).

Budgetary control is the system through which the organization controls its costs by setting

budgets, and its task is to compare the actual performance of the prepared budget to ensure

that there are no deviations. Budget control works to verify the reasons for the existence of

deviations and the difference between the planned budget and the actual performance and

develops procedures and recommendations to reduce the difference gap. Among the most

important objectives of budgetary control are, advance planning, coordination, and control

over the actual and planned budget (K, 2013). Budgetary control is linked to the responsibility

of the decision-makers in the company and comparing the goals set for the budget with the

goals achieved by the company, due to the link between the budget goals and the growth that

the company aspires to achieve. The company achieves its goals through its activities, as budget

control is one of those financial and administrative activities (Gunawan et al 2020).

According to Hertati (2015), budgetary control is not only a catalyst for achieving what the

company aimed at but also being one of the most important administrative and financial control

factors that contribute to the organization of the company.

According to Nafisatu (2018), who referred in his research definition to Swaine (2017), the

Budgetary control indicates that the preparation and success of the budget are linked to the

responsibility of the executive directors towards the tasks required by the organization and to

compare the budget plans with the actual results of the budget to achieve what the institution

aims to do, and it is also a basic reference for the management of the organization.

According to Etale and Idumesaro (2019), that budgetary control is the system that controls

the costs incurred by the organization, and has a role in determining jobs, as it works to correct

the differences to achieve the goals of the organization. Mazikana (2019) confirm the necessity

and importance of budgetary controls because of their great role in knowing and verifying the

differences, those that arise in the budget between what the organization expects from the

results and the actual results, and it contributes and facilitates the process of controlling the

flow of activities.

Kinyua (2015), described budgetary controls as the method by which the organization’s goals

can be reached, which were set in the budget while following the procedures, practices, and