Abstract:
The tea sub-sector plays an importance role in the economy of the country through employment
to many Kenyans both directly and indirectly and contributes over 26 percent of the total foreign
exchange earnings according Kenya’s Economic. Nevertheless, tea factories in Kenya have had
many problems ranging from the high manufacturing costs and other operating costs together
with the declining global tea prices due to oversupply of tea to the world market and this results
to low returns to the farmers. The purpose of the research was to established the relationship
between budgeting process (independent variable) and financial performance (dependent
variable) of tea processing factories. The study employed correlational research design as it
enabled establishment of relationship between variables. The census survey method was
appropriate as the sample size was small. The study targeted all the KTDA parent tea factories in
Kericho and Bomet counties with a sample of 96 respondents drawn from 7 factories. The study
found that 80.8% of variations in financial performance was predicted by the dependent variables
(R2 =0.808; p<0.05). Specifically, there was positive relationship between budgeting process
variables (planning, monitoring and control and participative budgeting) and financial
performance and as indicated by b=0.631(p<0.05), b=0.631(p<0.05) and b=0.631(p<0.05)
respectively. The equation Model Y = α + 63.1 X1 + 50.2X2 + 69.5 X3 + ε was therefore
formulated. The research findings may be used by policy makers in emphasizing the importance
of budgetary control on companies’ performances. Equally, the findings may serve as a basis for
further research in similar field.
