Recommendations for SMEs

Published: Last Edited:

This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.


1. SMEs need to be a visionary

Based on the survey, there are 50 % of SMEs running their organisations above 10 years by preparing budget for their financial year instead of 10 % less than 1 year, 6% of SMEs less than 2 years, 16% of SMEs less than 5 years and 18 % less than 10 years. This implies that ½ of 70 participants understand the importnace of budget for project ‘near to eye’ and project ‘far to eye’. These SMEs are prepared to face the present difficult towards to the goals of their organisation. Inaddition, they plan for the future project as well as the wave of problems. Even in the sacred book, The Holy Bible, God declares to everyine in Galatians chapter 6 verse 7; “Do not be deceived: God cannot be mocked. A man reaps what he sows.” Everything that someone do has repercussions. It comes back to them in one way or another. The enterpreneurs are advised to sow for the vision of their organisation through a proper budgeting process. JimBakker said; “Oh, I was never a businessman. I was a visionary, a dreamer.” SMEs are encouraged to prepare budget both for the present year and for the future ones.

2. Involvement of Subordinates/ Operation Workers

The participation of subordinates is very important in the preparation of the budget otherwise the proprietor acts as a “One Man Show”. A budget preparation is not the sole responsibility of a proprietor but also the operation workers. In other words, it gives each worker of the enterprise, a sense of belonging. According to Mc Gregor’s X and Y theory (1960) states that the manager’s approach effects on the outcome of the worker. “If you give your employees even a little attention, they will equate that attention to “special” treatment that is different from the treatment that others receive”. The basis understanding to proprietor- subordinate relationships lies in the foundation that the habits of the owner hold the power to create productive or counterproductive environments.There is a quotation of Groucho Marx (1970) “Behind every succesful man, there is a woman.” For a business context, “Behind every successful business, there are its workers”. Regarding to the section D (Budgetary Participation) of the survey, a few number of owners agree that subordinates have to participate in the budget preparation. Owner shall allow subordinates to have a saying for the organisational budget in order to create a motivation environment.

3. Training

Micro, small and medium business’ owners need training in order to acquire entrepreneurial skills and know-how of an entrepreneur to set up a formal budget to run their business effectively and efficiently. Unfortunately, a small percentage of the SMEs from the survey do still use the informal planning of the budget because lack of knowledge abd experience. In training session, the SMEs will familiarise too many simulations, case studies and role plays offered to them in order to enable them to practice behaviors as successful entrepreneurs. These sessions will bring the participants to develop some personal entrepreneurial skills, for example, research opportunities, perseverance, efficency and quality, persuasion, taking calculated risks, planning and systematic monitoring, research information, partnership, performance commitments and formal budgeting practices.However,informal budgetary planning counts a lot of failure. There are some sayings; “One warned man is worth two” or “A bird in the hand is worth two in the bush” by John Ray (1670). It implies that an individual advised of the possibility of a hazard is on gurad. It is thus more vigilant and ready to react. Hence, SMEs should train so as to know the usefulness of a budget.

4. Business Counselling, facilitation and incubator

At the SMEDA, there is a department for counseling the new entrepreneur,the facilities they have and the guarantee they need, for example, every entrepreneur need to map their business ideas then build a business plan, prepare a business budget and a cashflow forecast and set up their organisation. A bank needs two important documents; a business plan and a cashflow forecast in order to give the entrepreneur a loan.The Business Development Officers (BDOs) are like a mother who holds the fingers of her baby to make him walk. Some entrepreneurs see the procedures at the SMEDA as a waste of time. They want by snapping their fingers; everything is done as the difference between driving through Mc Donald’s and spending the evening at a fine restaurant. At Mc Donald’s, a person drives up, shouts into a microphone and drives around to a window where they hand him a bag of food. In a fine restaurant, a person sits down, savours every bite in a relaxed atmosphere and leaves satisfied and nourished. It is similarity for many SMEs; they want everything in a fast mode, not step by step. This is the key reason why many SMEs shut down their business after one year of operation because they have not built a strong foundation. In the Bible, Matthew chapter 7 verses 24 to 27, “Therefore everyone who hears these words of mine and puts them into practice is like a wise man who built his house on the rock. The rain came down, the streams rose, and the winds blew and beat against that house; yet it did not fall, because it had its foundation on the rock.But everyone who hears these words of mine and does not put them into practice is like a foolish man who built his house on sand.The rain came down, the streams rose, and the winds blew and beat against that house, and it fell with a great crash.” It is a clear picture how a wise builds his house. It is the same situation for an entrepreneur who builds his business from the advice of officers at the SMEDA.

5. Implementation of IT

There are several technological tools available for the SMEs to create a specific budget planning for their organisation. In the recent decade, the ICT sector has many recent developments which the SMEs can take advantage to expand their business or to see new markets for their products. The SMEDA is given trainning session for every entrepreneur in term of advice and consultancy on computerization. However, some entrepreneurs ignore this opportunity by referring to their age and their education background. It is similar a person goes to a doctor whose name he can not pronounce, gets a prescription he can not read, takes it to a pharmacist he does not know, gets medicine he does not understand, and takes it with confidence. Why is it so much easier to have confidence in these ‘unknowns’ than in the officers at SMEDA? These officers ease the tasks of SMEs through technological tools instead of sweating for tradintional methods to prepare a budget which costs hours of work.


Background of this dissertation

This dissertation is based on a successful entrepreneur who operated locally and internationally.His name is Mr. D.Sarjua. He was a simple vegetable seller. He started business with 5 Rupees in his pocket, from buying aubergine with a wholesaler and selling them in his village. With hardship, he settled up a company in 1992, ConserverieSarjuaIntLtee which is specialized in the production of pickles (achar), jams, spices, honey and original teas. He targets mainly Western Europe with an annual turnover US $ 1 Million to US $ 2.5 Million. Now, he employs more than 51 people. He is actually a model of entrepreneur that encourages others to preserve in their dream.

Dissertation Contributions

The first contribution of this dissertation is to assess whether SMEs’ organisation prepare budget? If yes, for how long do they prepare budget? It is done to have a clear picture why SMEs’ organisation does not prepare budget and its percentage from the sample of 70 participants. The closest answer is because of SMEs’ education background. These SME does business approxiately and does not have any written document.

The second contribution is introducting participation into SMEs’ research. Does budgetary participation exist in micro, small and medium sized organisations? If yes, to what extent? Does the budgetary participation in SMEs favourly affect the performance of SMEs? Past dissertation, unfornunately provides likely answers for these questions. To fill this research gap, this dissertation contains questions in its survey to link budgetary participation and performance in SMEs. Although,it is found in the empirical results in chapter Analysis that the extent of budgetary participation is low among Mauritian entrepreneurs. However, participation is found to have a strong and positive effect on the managerial performance of SMEs.

The third contribution is using both financial and non-financial measurement[1] to measure the performance of SMEs. Non-financial performance is claimed to be an important indicator to reflect the overall performance of an organisation(Otley, 1999; Van Veen-Dirks&Wijn, 2002). But, it is widely ignored by the past SMEs’ researchers. To solve this specific field lacking, non-financial performance is included in the questionnaire. It consists of budgetary performance, other performance and managerial performance. The empirical results in chapter Analysis show that budgeting strongly and posistively affect the budgetary performance of SMEs and that participation in SMEs leads to the improvement of managerial performance.

Lastly, this dissertation not only contributes more empirial data to the exiting SMEs research, but more importantly, gives some remarkable guidance in terms of budget activites to the owner-manager of small and medium organisations. It is advised by the research findings that:

  • SMEs who plan to improve their financial performance should give more important to develop the formality of the budgeting planning and the budgetary control.
  • SMEs with financial limitations are advised not to undetake a massive investment in budgetary sophistical development.

Research limitations and implications for future research

This dissertation has its limitations. To start with, the scope of this dissertation is limited by its sample size and sector coverage. Due to time limitation and the accessibility to data, this dissertation uses a simplest survey to test all hypotheses. The total number of responses is 70. The second limitation of this dissertation concerns the nature of self-reporting questionnaire data. Thornton (1968) declares that self-report measures of performance can be question to leniency bias. The third limitation is that this dissertation did not fully analyze the impact of budgetary participation on all performance measures. It only examined whether budgetary participation significantly impacts managerial performance. Further research may be undertaken to analyze whether budgetary participation also considerably impacts on budgetary performance, job satisfaction and job involvement. In addition, there is no attempt in this dissertation to address whether non-financial performance will affect the improvement of financial performance of SMEs concerning budget.

[1] In this context, subordinate of organisation has their saying in the decision making concerning budget.