Budgeting in small manufacturing firms in South Africa

J C Ford,M Lurie

doi:10.4102/sajbm.v20i2.942

Abstract

This paper reports on a general investigation into budgeting in small manufacturing firms in South Africa. The study was undertaken using 18 semi-formal interviews and 175 questionnaires addressed to the Chief Executive Officers (CEOs) of small manufacturing firms in six industry sectors in the greater Johannesburg region. The 63 usable responses (a response rate of 36%) were analysed using the SAS statistical package. Several results and conclusions were reached. A wide range of budgetary processes and procedures are used by small manufacturing firms. Budgeting is short-term, informal, simple and flexible, and is considered an essential element of management. There is room for much improvement in certain areas of budgeting. Although accounting reports are perceived to be adequate, CEOs may lack the necessary knowledge to develop more effective reporting systems. The degree of budgeting used is probably influenced by the nature of the business, and the background and training of the CEO. CEOs are completely involved in budgeting, but there is little participation by managers and staff. The major benefits of budgeting are perceived to be its use in planning and control, particularly of cash, and the major problems relate to the uncertainty of future conditions.

Highlights

The work of management involves four broad functions : planning, organizing and directing, controlling and decision making
As managerial skills are one of the most important key success factors in small business (Ibrahim & Goodwin, 1986), it is essential that small firms engage in efficient and effective budgetary procedures
Effective budgeting means effective management, and effective management leads to business success

Summary

Introduction

The work of management involves four broad functions : planning, organizing and directing, controlling and decision making. This paper reports on the use of budgeting in small manufacturing firms in South Africa. The objectives of the research reported on were broad in scope, with no detailed examination of any particular aspect of budgeting in small manufacturing firms It should be regarded as a general exploratory study providing information for further, more in depth, investigation into selected areas related to the subject. Hypothesis 6: Managers and staff of small manufacturing firms are committed to and participate in budgeting. The interviews provided an important insight into the major themes and issues in budgeting in small manufacturing firms, and led to certain questions being discarded for the questionnaire, and other questions being included (both instruments are available from the writers). Hypothesis 1 proposes that budgeting is perceived to be important in small manufacturing firms.

Amtrep

Business is decentralized

Findings

21. Forces proper organization structure