EFFECT OF BUDGETING ON FINANCIAL SUSTAINABILITY OF DAIRY CO-OPERATIVE SOCIETIES IN UASIN GISHU COUNTY, KENYA

Abstract

Financial sustainability is key to the survival of an organization because it leads to long-term survival and effectiveness of the organization. The challenge however for all organizations is howto achieve their goals such as financial sustainability which solely depends on its ability to manage cash. The purpose of the study was to establish the effect of budgeting, cash accounting on the financial sustainability of dairy co-operatives. The study adopted the theory of budgeting. This study adopted a descriptive survey research design. The target population of the study was 260 employees from the accounting and finance department of 65 dairy co-operatives. The sample size was 160 respondents. Stratified and simple random sampling were employed. A pilot study was conducted in Nandi County to test for validity and reliability of the research instruments. Content validity was used as a validity test while reliability was tested using Cronbach's alpha coefficient. Descriptive statistics including mean, percentages and frequencies and inferential statistics were employed to analyze the data. In addition, inferential statistics that is correlation coefficient was used to make inferences of the population using data drawn from the population whereas descriptive statistics was used to summarize data from the population. The study findings found that budgeting had a positive and significant effect on financial sustainability of dairy cooperatives (β=0.170, p<0.05). The study concluded that budgeting, enhances financial sustainability of dairy cooperatives.It also concluded thatwitheffective budgeting, one can predict the future expenses and costs and accordingly work towards the expected revenues hence may realize the required level of financial sustainability. This study recommended that budgeting should be practiced to ensure cash is allocated to all items and that all allocations as well as expenditures are done as per the budgets. The investors, government, employees and the researchers benefit from this research because it gives insight into cash management practices that can be used in achieving financial sustainability. It also forms a basis for policy makers in policy development on financial sustainability of dairy co-operatives