CC BY
339
ФИНАНСЫ, НАЛОГИ, УЧЕТ
M. AYUK EBAI (М.АЮК ЭБАЙ)
D. TAMULEVICIENÉ (Д.П. ТАМУЛЯВИЧЕНЕ)
УДК: 636.4.087.61
Budgeting Practice In Small And Medium Sized Enterprises In Cameroon: Empirical Study
Budgeting is the most important part of a company's activity planning and control system, ensuring efficient distribution of resources in order to achieve the company's goals. Large companies usually have their own budgetary systems but this is not the case with small and medium-sized companies. This problem is especially relevant in such countries, where the economy is still growing and Cameroon is one of them. Though the SMEs comprises about 90% of the total number of companies, these companies face a lot of problems when it comes to budgeting measures. However, there is no scientific and empirical research about using budgets in SMEs companies in Cameroon, so it was essential to investigate how SMEs in Cameroon implement budgeting measures. The questionnaire survey method was applied to evaluate the level of budgeting in small and medium-sized Cameroon companies. As the survey revealed, budgeting is a very important process in all the companies surveyed. Most of the SMEs in Cameroon apply budgeting in some way. This can be associated with increasing competition in the business environment due to globalization. Budgets implementation and planning processes will enable these enterprises to allocate their resources productively and maximize profits.
Keywords: budgeting practice, budgeting in SMEs, budgeting in Cameroon
Introduction
Budgeting is a very important managerial tool that enables management to plan and control business operations. This is evidenced by the research of various authors [1; 5; 6; 9]. No doubt, most companies have made this tool a central part of their planning and control system due to their ability through internal communication to coordinate the allocation of resources. Large companies usually have their own budgetary systems but this is not the case with small and medium-sized companies. It is at times more difficult to implement budgeting systems in SMEs despite that these enterprises are an integral part of any economy and play a vital role in supporting a stable economic environment. Though they are crucial in upholding the growth and existence of economy especially that of developing countries, SMEs face a number of hurdles while achieving the effective financial systems necessary for building up of their businesses. This is largely due to the lack of funding of the SMEs, expertise
© M. Ayuk Ebai, D. Tamuleviciene, 2017
knowledge and less employee motivation. This problem is especially relevant in such countries, where the economy is still growing and Cameroon is one of such countries. Though the SMEs comprises about 90% of the total number of companies, these companies face a lot of problems when it comes to budgeting measures. However, there is no scientific and empirical research about using budgets in SMEs companies in Cameroon, so it is necessary to investigate how SMEs in Cameroon implement budgeting measures.
The aim of the article is to evaluate the level of use of budgets in small and medium-sized enterprises in Cameroon.
Research object is budgeting practice in small and medium sized enterprises in Cameroon (SMEs). The value of the small business sector is recognised in economies worldwide, irrespective of the economy's developmental stage. The contribution towards growth, job creation and social progress is valued highly and small business is regarded as an essential element in a successful formula for achieving economic growth. SMEs play a very important role in the current development of the Cameroonian economy too. The official definition of SMEs in Cameroon is derived from the Law 2010/001 of April 13, 2010 on the promotion of small and medium-sized enterprises (SMEs) [10]. The law includes a set of criteria for classifying enterprises in the following categories: "Very Small Enterprises" (VSEs), "Small Enterprises" (SEs), and "Medium-Sized Enterprises" (MEs). Very small enterprises are enterprises that employs five persons at most and whose annual turnover net of taxes is below 15 million CFA francs. Small enterprises are those with a permanent staff of between 6 and 20 persons with an annual turnover net of taxes of between 15 and 100 million CFA francs while medium enterprises employ at least 21 and no more than 100 persons. The annual turnover net of taxes of medium enterprises is between 100 million and 1 billion CFA francs. According to these criteria, there are 87,422 formally registered SMEs in Cameroon in 2016. The breakdown of SMEs category by sector is shown in Table 1.
Table 1
Breakdown of SMEs Category in Cameroon by Sector
Sector Medium Sized Small Enterprises Very Small Enterprises Total
Number % Number % Number % Number %
Primary Sector (Agriculture, Livestock, Forestry, Fishing) 157 0.2 32 0.2 50 1.1 239 0.3
Secondary Sector (Extraction, Manufacturing Industry, Electricity & Gas, Construction) 9917 15.0 793 4.7 715 15.9 11,425 13.1
Tertiary Sector (Business, Transport, Banking & Insurance, Other Services) 55,751 84.7 16,112 95.1 3,734 83.0 75,758 86.7
Total 65,986 100 16,937 100 4,499 100 87,422 100
Source: compiled by authors based on the NIS data [3]
According to statistics provided by the Cameroon National Institute of Statistics [3], today, this category of enterprises accounts for over 90 percent of Cameroon's national economic fabric, with a share in the Gross Domestic Product (GDP) estimated at 34 percent. This shows the importance of SMEs in the development of the economy [3]. SMEs play an important role in the Cameroonian economy such as promote the development of the competitive market environment, fill consumer markets with goods and services and create new workplaces.
Research methodology
Research methods. Two important research methods are: quantitative and qualitative. The quantitative approach is based on answering questions with the use of numerical and statistical processes. Data are collected through questionnaires, surveys and data bases [7; 8]. In this study, the quantitative approach was used. This is because the purpose of the investigation is to disclose the facts and causes, as well as a large amount of the response planned to be surveyed.
The Survey Population. Cameroon is a country with 10 regions of which eight are French — speaking regions and two English — speaking. It is extremely difficult to obtain data industries in some parts of Cameroon, so in this study, the focus was on 3 out of the 10 regions. Samples was selected from companies in the Littoral, Centre and South West regions since most companies are located within these regions. About 60% of registered SMEs are located in these regions [3].
The Sample Size. A sample size is the representation of a population. In this study the minimum sample size was determined using the formula [7]:
_ zgJVp(l-p)
min (Ap)20V-l)+z2p(i-p) '
where,
— N — selective population size;
— p -we are interested in setting the proportion of the selective population; if previous studies have no information about the samples proportions assumed that p = 0.5;
— Ap — sampling error (the maximum sampling margin of error of ± 10 per cent.);
— za — normal distribution coefficient. In this study, we accept that all the results we receive a 95% probability, then the normal distribution za coefficient = 1.959. According to the Cameroon National Institute of Statistics [3], there are 87,422 enterprises as of the year 2016, so according to the formula, we get = 96.
Survey Sample. A sample size of 96 small and medium-sized firms is selected from the organizations listed in the Cameroon Business Directory [2]. All firms in the sample are from three provinces (i.e., Southwest, Littoral and Centre). Though the sample size for the study was 96, the number of distributed questionnaires were 120. For each province, 40 companies was selected. The selected companies should have run their business at least three years. The following criterion was used to make sure that companies have existed for a while and have experience in budget implementation. At the end, 110 questionnaires
were filled online which implies 92% responded while 8% did not respond.
Data Collection Methods. For primary data source, questionnaires were used. Russel Bernard, Saunders, et al., state that the validity and the reliability of the data you collect, as well as the response rate you achieve, depend, to a large extent, on the design and the structure of your questionnaire [7; 8]. The empirical study used questionnaire consisted of 17 questions. With regards to the types of the questions, the questionnaire includes a combination of open-ended questions and closed-ended questions. Open questions are used in the first section of the questionnaire to obtain general information from a company. The last section of questionnaire uses closed questions. Those questions either offer the respondent a list of answers, of which he/she can choose, or a Likert-scale rating to ask the respondent how strongly he/she agrees or disagree with a statement or series of statements. Most of the rating questions in the questionnaire use a five-point rating scale. The questionnaires are delivered and returned electronically using email (on-line questionnaires). Questionnaires are completed by senior managers, chief financial officers, or the lower level managers in the firm. All of them have more or less budgetary responsibility during the budget setting.
Research finding
Location of Company and Company categoiy. For the company's location, companies from the Center region had the most respondents 42 (39%), for the Littoral region 37 (33%), Southwest 23 (21%) and additionally 8 (7%) came from companies found in other regions of Cameroon. The study revealed that the respondents were from companies found in different categories. 67 (61%) of the respondents are from medium — sized enterprises (MEs), 31 (28%) from small enterprises (SEs) and 12 (11%) from very small enterprises (YSEs).
Budgeting practice in SMEs. Concerning the first question "Does your company use budgeting and budgetary control systems?", 52 (47%) of the respondents said their companies employ budgeting and control systems while 40 (36%) said they used them partly. Respondents who said "no" to this question were 18 (17%). The responses revealed that about 83% of the companies in some way use budgeting systems. This is due to the growing importance of budgeting which as a result has become an essential part of the management process. Due to the fact that it can be very time-consuming to create a budget, especially in a poorly-organized environment where many iterations of the budget maybe required, some companies do not employ budgetary systems.
Concerning the question "Which type of budget is been used in your company?", the response from the respondents revealed that 98 (89%) said operational budget was used in their enterprises while 67 (61%) choose financial budget. For investment and other budget types, the respondents were 35 (32%) and 10 (9%) respectively. The respondents could choose more than one answer. A greater number of respondents chose both operational and financial budget. Operational budget facilitate planning of anticipated income and expenses for a specified budget period. While the picture of a company's financial health is been presented by the financial budget. It should be noted that 28 (42%) of the surveyed medium-sized enterprises indicated that they also prepared investment budgets.
Meanwhile, very small companies pointed out that they did not form such budgets (see Figure 1). Ten respondents pointed that they use other budgets, but only two of them specified types of such budgets: it is zero — based and activity based budgets.
Operational budget
Financial budget
Investment budget
Other budget
0,0%
20,0% 40,0
60,0% 80,0% 100,0%
Other budget Investment budget Financial budget Operational budget
■ MEs 10,4% 41,8% 71,6% 89,6%
■ SEs 9,7% 22,6% 58,1% 87,1%
■ VSEs 0,0% 0,0% 8,3% 91,7%
Figure 1
Breakdown of respondents answers to the question "Which type of budget is been used in your company?" in context of the companies' size
Next question was"Who is involved in budget preparation in your company? ". The respondents could choose more than one answer too. Most of the respondents 72 (65%) said that the managers of the various departments and top management were involved in preparing budgets. However 14 (13%) chose budgeting team and 30 (27%) financial/ management accountant option. It shows that the budgeting process in the SMEs in Cameroon is mainly manager's activity field.
The respondents were also asked to indicate what kind of benefits the company generates. Respondents had to evaluate each of the statements on the Likert scale, where 5 is very important, 1 — not important. The mean values of responses are shown in Figure 2.
55
51
Figure 2
Breakdown of respondents answers to the question "What value does your company derive
from budgeting process?"
Figure 2 shows the different values derived by companies from their budgeting process. According to this, most of the respondents said budgeting helps the organisation allocate resources productively and profit maximization. Moreover, they also considered the ability to forecast the future and serve as a mechanism for monitoring, controlling and investigation variances important to the organisation. The responses from the different respondents are in line with what economist Milton Friedman said: "the main purpose of a business is to maximize profits for its owners" [4]. Profit making is the primary purpose of every organisation. However, companies must also be able to forecast and allocate their resources productively especially through budgeting and planning.
As the survey revealed budgeting is a very important process in all company surveyed. Most of the SMEs in Cameroon employ budgeting in some way. This can be associated with increasing competition in the business environment due to globalization. Budget implementation and planning processes, will enable these enterprises to allocate their resources productively and maximize profits.
References
1. Abogun S. The global debate on budgeting: empirical evidence from Nigeria. International Business Research, 2011, vol. 4 (4), pp. 248—254.
2. Cameroon Business Directory. Available at: http://www.businesslist.co.cm/ (accessed June 5, 2017).
3. Cameroon National Institute of Statistics. Available at: https://knoema.com/ atlas/sources/National-Institute-of-Statistics-Cameroon (accessed October 16,2017).
4. Friedman M. The social responsibility of business is to increase its profits. New York Times Magazine, 1970, September (13).
5. libby '/.', Lindsay R. M. Beyond budgeting or budgeting reconsidered? A survey of North — American budgeting practice. Management Accounting Research, 2010, vol. 21, pp. 56—75.
6. Lorain M.A., Domonte, A.G, Pelaez F.S. Traditional budgeting during financial crisis. Cuadernos de Gestion, 2015, vol. 15 (2), pp. 65—90.
7. Russel Bernard H. Research Methods in anthropology: qualitative and quantitative approaches. Lanham, Maryland: Rowman & Littlefield, 2017, p. 732.
8. Saunders M., lewis Ph., Thornhill A. Research methods for business students. Essex: Pearson Education Limited, 2009, p 649.
9. Shcherbina, G.; Tamuleviciene, D. Budget formation and implementation in Ukrainian companies: empirical study. Science and Studies of Accounting and Finance: Problems and Perspectives, 2016, vol.10 (1), pp. 162—176. DOI: https://doi.org/10.15544/ssaf.2016.19
10. The little data book on private sector development. Washington: World bank, 2013, p. 244.
