The Usefulness of Cash Budgets in Micro, Very Small and Small Retail Enterprises Operating in the Cape Metropolis

Abstract

The concept of Small Medium and Micro Enterprises (SMMEs) were introduced by the South African government by way of the Small Business Act No. 102 of 1996. Here SMMEs are defined as small business entities that are managed by one or more owner(s) while operating in any sector or sub-sector of the national economy. The main roles of SMMEs are to alleviate poverty, reduce unemployment and uplift the South African economy. South African SMMEs are responsible for employing more than half of the national workforce and are believed to contribute up to 34.8% towards the national Gross Domestic Product. Unfortunately an estimated 80% of South African SMMEs fail within their first 5 years of existence; particularly due to the realisation of micro economic factors and macroeconomic factors. Included in micro economics factors which influence SMMEs is the utilisation of formal financial performance measures. For this research study the main objective of this paper was to establish the extent to which cash budgets (a formal financial performance measure) assist SMME leaders to make sound business decisions in the Cape Metropolis. The study was descriptive in nature and quantitative research methods were used to collect data from 51 SMME leaders. All respondents had to adhere to a set of pre-determined delineation criteria. From the analysed data it is evident that SMME leaders (managers and/or owners) regard cash budgets as important to make sound business decisions however, respondents made limited use thereof.

Keywords

• cash budgets
• budgets
• financial performance measures
• SMMEs