Budgeting Practices in Manufacturing Firms in Kenya

Abstract

This study establishes the budgeting practices in the manufacturing industry in Kenya, their existence in the sector and the budget methods. A questionnaire was issued to 75 companies of which 45 (60%) responded. The majority of the firms in the sector prepare budgets. Incremental (prior year) budgeting is the most widely applied method. Budget's aid maximization of shareholders’ value. Firms in this study did not agree with the reasons that support the introduction of “beyond budgeting," except one firm indicated that budgets stifle innovation. The conclusion is that in the manufacturing industry in Kenya, budgeting in its traditional form is still widely accepted. As a way forward, management should adopt more modern budgeting methods like zero based and activity-based budgeting.

Keywords: Budgeting Practices, Beyond Budgeting, Manufacturing Firms