Challenges in Utilising Budgets among SMES in the Manufacturing Sector Is the Cape Metropole

Abstract

As management accounting tools, budgets are internationally recognised for their role in planning of activities, and efficient allocation of resources in business entities. Preparation and utilisation of budgets for managing businesses is not without challenges. The purpose of this study was to establish the extent of preparation and utilisation of budgets by SMEs in the manufacturing industry in the Cape Metropole, with a focus on identifying the challenges faced by these entities in using these management accounting tools. To this end the study pursued a descriptive research design, collecting data from 108 owners/managers of SMEs in the manufacturing industry in the Cape Metropole. The data was collected through a questionnaire which contained closed questions and Likert-scale questions. Data analysis was conducted using SPSS version 24, and the results were presented through descriptive statistics in the form of percentages, means, standard deviations, graphs and tables. The results of the study show that close to 30 % of SMEs in the manufacturing industry in the Cape Metropole do not prepare budgets at all. Amongst the 70% who prepare budgets, 67% face challenges in utilising budgets. Overall, only 23% of the surveyed SMEs prepare budgets and utilise them without facing challenges.