ANALYZING THE IMPACT OF BUDGET ON PERFORMANCE OF SMALL AND MEDIUM ENTERPRISES: THE CASE OF SEBAGGALA AND SONS

ELECTRICAL CENTER

             INTRODUCTION

1.1       Introduction

This chapter covers the background of the study, Statement of the problem, purpose of the study, research questions, and scope of the study, significance of the study and definition of terms.

1.2 Background to the Study

Budgeting covers vast Areas of organizational activities and it is the cornerstone of organizational success that for an organization to stand out in this new era of high level of competition and the growing level of sophistication in the todays ever-changing world, therefore for companies  to stay profitable budgeting is necessary and imperative, Almaory, et al (2008).

Budgeting has had a huge impact on industries, the community in general and our daily lives. budgeting helps in many areas and its used by the different department of the organization to ensure cost reduction, profit maximization, increased customer satisfaction and better organizational competitive strength, this has further been made possible  by introduction of technology to ensure efficiency in budgeting and above all save time, Iorun, J. et al  (2014). The business environment today has been undergoing unprecedented change and many companies are seeking new ways to stand out from the competition by sustaining their competitive advantage. In today’s highly competitive global marketplace, the pressure on organization’s to find new ways of creating and delivering value to customers is growing stronger,  Kadiri, I. B. et al (2012)

Budgeting is a system which is very essential for business enterprises to stay in business and as such an institution with poor budgeting ability is at risk of collapse, (Lam, J. 2014) The money given out by banks with a future date of repayment (credit) is crucial to the economy due to its multiplier effect. Lam, J. (2014) further observes that the budgeting is important for the take-off and efficient performance of any enterprise. Such an enterprise may be small medium or large. Besides the entrepreneurs′ initial need for capital for investment purposes, it is equally required to coordinate other factors of production such as land and labour. Lam, J. (2014) also reiterated that bank credit influences positively the level of economic activity in the country. It is capable of influencing what is to be produced, for whom and how is it to be produced and even at what price the good or services is going to be available to consumers. Efficient budgeting is a prerequisite for a financial institution’s stability and continuing profitability, while poor budgeting is the most frequent cause of poor financial performance and condition. Small and Medium Enterprises Development (SMEs) has continued to be a popular phrase in the Business world. This is because the sector serves as a catalyst for employment generation, national   growth, poverty reduction and economic development. SMEs world over can boast of being the major employers of labor if compared to the major industries including the multinationals. According to Ward, J. L. (2011), SMEs both in the formal and informal sectors employ over 60% of the labour force in Nigeria. More so, 70% to 80% of daily necessities in the country are not high-tech product, but basic materials produced with little or no automation. Most of these products come from the Small and Medium Enterprises. (Ward, J. L. 2011).

Small and Medium-sized Enterprises (SMEs) play an important role in any economy through generation of employments, contributing to the growth of Gross Domestic Production (GDP), embarking on innovations and stimulating of other economic activities (Gamage, 2000). Therefore, for the developing countries, it is important to accelerate the growth of SMEs in order to gain sustainable development. The numbers of SMEs in uganda tend to increase continuously. In the context of SMEs, accounting information is important as it can help firms‟ mange their short-term problems in critical areas like costing, expenditure and cash flow by providing information to support monitoring and control (Mitchell et al., 2000, Son et al. 2006).

Sound Budgeting is a prerequisite for a financial institution’s stability and continuing profitability, while deteriorating credit quality is the most frequent cause of poor financial performance and condition. The prudent management of credit risk can minimize operational risk while securing reasonable returns, Ensuring lending staffs comply with the credit union’s lending license and by-laws is the first step in managing credit risk. The second step is to ensure board approved policies exist to limit or manage other areas of credit risk, such as syndicated and brokered loans, and the concentration of lending to individuals and their connected parties (companies, partnerships or relatives), (Odubanjo, 2000).

Small and medium-sized enterprises (SMEs) account for over 95% of firms and 60%-70% of employment and generate a large share of new jobs in OECD economies. They have specific strengths and weaknesses that may require special policy responses. As new technologies and globalization reduce the importance of economies of scale in many activities, the potential contribution of smaller firms is enhanced. However, many of the traditional problems facing SMEs perhaps may include; lack of financing, difficulties in exploiting technology, constrained managerial capabilities, low productivity; regulatory burdens become more acute in a globalised, technology-driven environment, Hughes, R. (2008).

Sebbaggala and sons is an SME located in Kampala Uganda the company has been trying to maintain an efficient budgeting system in order to realize flexibility, profitability and maintain a sustainable growth of its business in to a large corporate company, but though the company has tried it has failed to achieve a sustainable growth, this study therefore intends to analyze into the impact of budget on performance of small and medium enterprises with specific reference to Sebbaggalla and Sons Electrical Center, located at Kampala Uganda.

1.2 Statement of the Problem

According to Ogbonna et al (2010),budgets are essential in not necessarily violating the rules of the organization or infringe the law of the organization but also in enabling maintenance of organizational principles in timely reaction to customers needs, proper financial management , increase on organizational efficiency and better management in organization resources, however many businesses have failed in their infant stages, according to World Bank report (2006) 95% of the new global business fails with in their fifth birth day. Sebbaggala and sons electrical is a small and medium enterprise however, however despite its massive investment by the shareholders the business of Sebbaggala and sons has failed to grow into a multinational company, (Sebaggala and sons, 2010).  This therefore has continued to puzzle management as to what needs to be done in order to be able to grow , basing on this, therefore this study intends to analyze into the impact of budget on performance of small and medium enterprises with specific reference to Sebbaggalla and Sons Electrical Center, located at Kampala Uganda.

1.3       Purpose of the Study

The study seeks to analyze into the impact of budget on performance of small and medium enterprises with specific reference to Sebbaggalla and Sons Electrical Center, located at Kampala Uganda.

1.4       Objectives of the Study

1. To establish benefits of financial planning on performance of SMEs.

1. To examine the relationship between budgeting and performance of SMEs.

1. The influence of interest rates on performance of SMEs

1.5 Research Questions

1. What are the benefits of financial planning on performance of SMEs?
2. What is the relationship between budgeting and performance of SMEs?

1. What is the influence of interest rates on performance of SMEs?

1.6 Scope of the Study

1.6.1        Study Scope

The study will specifically look at the; the impacts of budgeting on the growth of small and medium enterprises,  the challenges of budgeting on performance of small and medium enterprises and the different ways of improving the performance of small and medium enterprises.

1.6.2 Geographical Scope

The study will be carried out at Sebbaggala and sons electrical center.

1.6.3 Time scope

The period of data to be considered in the organization will be from 2012-2016 and period of body of knowledge in reviewing literature will be from 2001-2016 while the study will be carried out from March to September 31^st 2016.

1.7 Significance of the Study

The study is expected to provide guidance to the Central Bank and other regulators in the credit risk management policy formulation.

The study will add to the already existing literature on factors that determine performance of small and medium enterprises

The study is expected to stimulate further research into the area of lending policy formulation and challenges of credit management.

The study is expected to enable commercial banks identify the credit management policies that are critical in ensuring the growth of small and medium enterprises.

The study will help the government in formulation of policies regarding credit institutions in the country.

1.8 DEFINITION OF TERMS

SMEs are defined as non-subsidiary, independent firms which employ fewer than a given number of employees. This number varies across national statistical systems. The most frequent upper limit is 250 employees, as in the European Union. However, some countries set the limit at 200 employees, while the United States considers SMEs to include firms with fewer than 500 employees. Small firms are generally those with fewer than 50 employees, while micro-enterprises have at most ten, or in some cases five, workers. Financial assets are also used to define SMEs. In the European Union, SMEs must have an annual turnover of EUR 40 million or less and/or a balance-sheet valuation not exceeding EUR 27 million, (world bank , 2008).

CHAPTER TWO

LITERATURE REVIEW

2.0 Introductions

This chapter reviews what various scholars have written about;  impact of budgeting on the growth of small and medium enterprises, challenges of budgeting on performance of small and medium enterprises and Different ways of improving the performance of small and medium enterprises.

2.1 BENEFITS FINANCIAL PLANNING ON PERFORMANCE OF SMES

Planning is a process which is concerned with deciding in advance what, when, why, how, and who shall do the work (Donald, Thomas & Rebecca, 2001). Generally, planning involves establishment of organizational objectives and policies; identification of alternative courses of action and programs and selecting the best course of action and programme. Financial planning is the task of determining how a business will afford to achieve its strategic goals and objectives (Awino, Muturia & Oeba, 2011). The financial planning activity involves assessing the business environment; confirming the business vision and objectives; identifying the types of resources needed to achieve these objectives; quantifying the amount of resource (labor, equipment, materials); calculating the total cost of each type of resource; summarizing the costs to create a budget; and identify any risks and issues with the budget set (Abdul-Jalil, Dzuljastri & Ferdous- Azam 2013).

Public sector organizations are facing more challenging times, thus Government executives are tasked with more strategic responsibilities of financial planning in the face of increasing costs of offering public services and falling tax revenues thus increasing the difficulty and importance of financial planning (Denhardt & Denhardt, 2006). Meanwhile, changing budget priorities at all government levels require the realignment of funding for public sector programs. When public organizations are in the business of utilizing other people’s money to provide for the community’s wellbeing, public administrators have a responsibility to best utilize the scarce resources available in serving the unending needs of society. Scarcity in public service necessitates proper financial planning for public organizations (Finkler, 2005).

Comprehensive financial planning process is essentially vertical as it is developed from a given base year and so estimates of revenue and costs are to be based on the base year financial decisions already taken (Hendrick, 2000). It would mean that alternative expenditure packages for a program are to be considered based on previously decided financial options. Financial Planning and Management in Public Organizations synthesizes the wide range of issues in public finance into three broad categories: cash management, financial planning, and management control (Kenneth, 2010). As public-sector organizations seek to become more responsive and dynamic, their systems are evolving from tools of organizational control into systems that also incorporate a strong planning perspective (Finkler, 2005).

An essential purpose of financial planning is to assess the financial resources that will be required to implement the programmes and activities to achieve the goals and targets of the plan, to ensure that funding is available as and when needed, and to monitor the efficient use of resources and of progress towards reaching the goals and targets (Rosilyn, 2007). Financial Planning helps to focus the attention of the managers and subordinates towards organizational objectives. It predetermines the objectives and defines line of action to complete the work. Thus, good management is the management by objectives.

The budget embodies a plan articulated in financial terms or allocation of funds for execution of projects and programs of government within a given time frame in order to achieve pre-determined program objective(s) (Willoughby & Julia, 2001). Budgets establish the amount of resources that are available for a specific activity (Rubin, 2000). As managers manipulate monies to accomplish specific goals, they are declaring where the values of the organization lie. Denhardt (2006) argues that in public organizations, “The budget is, essentially, a measure of support (or lack of support) for specific programs. “Budgets reflect choices about what government will and will not do. They reflect general public consensus about what kinds of services governments should provide and what citizens are entitled to as members of society” (Stillman, 2000).

Effective financial planning encourages managers to think about new knowledge, idea, procedures, technique and strategy for the completion of work. It also helps to create new modified course of action. This is essential for the growth and expansion of working areas of the business (Kenneth, 2010). Financial Planning is the basis of control and defines the minimum standard of work to be achieved and time to complete the job. It is helpful to compare the actual performance achieved with that of predetermined or standard fixed. The manager evaluates the actual achievement of work interval of time. This is helpful to identify the deviation, if any, between actual and planned performances (Awino, Muturia and Oeba, 2011). Risk monitoring and control is the processes of keeping track of the identified risks, monitoring the residual risks and identifying new risks. This process should also ensure the execution of the risk plan and continually evaluate the plan’s effectiveness in reducing risk (Finkler, S.A. (2005). Resource allocations can also be monitored as these too will have been pre-planned and, where appropriate, allocated to the agreed actions (Hendrick, 2000).

Although small and medium-sized enterprises (SMEs) typically employ a major share of an economy’s total employees, SME management suffers from an insufficient business-related knowledge base that top managers in SMEs possess. Indeed, formal plans or cost controls are often only provided on an irregular basis and planning instruments are usually only used by a small number of individuals and developed rather intuitively (Brinkmann, 2002).

Given the role of strategic instruments in large companies and the notion that rational decision-making should prevail in enterprises regardless of size, practitioners and academics alike have recently called for an increased use of strategic planning in SMEs.

In this vein, several empirical studies reveal a link between strategic planning and success (Schwenk and Shrader, 2009). At the same time, SMEs often do not have the means to ensure the successful continuous application of strategic planning. In contrast to larger companies, SMEs normally maintain a lower level of resources, have more limited access to human, financial and customer capital, and lack a well-developed administration. Thus, the application of formal planning instruments is often missing, especially up to a certain ‘critical size’ (Karagozoglu & Lindell, 2008).

Goal Clarity and Difficulty Apart from the extent of budgeting planning and budgetary control processes as we explored above that may have a positive impact on organizational performance, the previous literature on goal setting (Yuen, 2004) has long stressed the beneficial effect of budget goals on promoting performance in an organization. A large group of previous studies (Yuen, 2004) analyze the characteristics of the budget goal from two aspects and show their potential link with performance.

Enables the management to make decisions that helps the organization to achieve its goals and objectives, (Wooldridge et. al, 2001). It has been used in the short-term (twoto-one year) for the operational planning in standard costing. It has also been developed to support strategic planning with firm planning and to develop the five-or-ten year plan, So there is a link between budgeting and operational planning and a link between budgeting and strategic planning. However, operational planning, strategic planning, and budgeting are three different concepts with different characteristics but both of the concepts are necessary for the performance of SMEs. Operational planning is characterized as a wide diversity of practices in different organizations. Strategic planning is an irregular activity that takes place in the higher echelons of an organization,Whereas budgeting as an accounting-based system shows a regular and routine pattern common to all organizations. Aside from the planning role of budgeting, numerous articles on management accounting constantly stress the multi-purpose role of budgeting in business organization, the so-called ‘conventional wisdom’ as propagated by textbooks.

Financial planning provide a basis for directing and evaluating the performance of individuals or segments of organizations and also structure the decision-making environment (Bruns & Waterhouse, 2005), so they appear to be appropriate as control devices impacting performance of organizations. Therefore, a considerable stream of research6 (Stede, 2000) emphasize the function of budgeting in management control processes and sought to explore the influence of budgetary controls on organizational behavior.

Improvement of Financial performance (e.g. profitability, growth) is used, in the vast majority of existing studies, to measure business performance (Murphy et al., 1996). However, the use of financial performance measures to evaluate organizational effectiveness has been criticized for being too narrowly focused. In a pioneering work by Hopwood in 1972, he explores the role of accounting data in performance evaluation and points to five negative aspects of reliance on accounting performance measures (RAPM).

Strategic planning is an irregular activity that takes place in the higher echelons of an organization (Anthony, 1965). Whereas budgeting as an accounting-based system shows a regular and routine pattern common to all organizations. Aside from the planning role of budgeting, numerous articles on management accounting constantly stress the multi-purpose role of budgeting in business organization, the so-called

Chakravarthy (1986) states that accounting performance measures are considered necessary, but not sufficient to define overall effectiveness. Bento and White in 2001 also mention the limitations of using accounting data in a small organization. They explain that accounting based performance measures for SMEs research suffer from two key drawbacks: firstly, the non-homogeneity of data (for example, resulting from the use of different depreciation and stock evaluation methods) or different measures and reporting standards used by different organizations; and secondly, the non-availability of data for smaller firms. The latter is particularly pertinent in China, where SMEs will not open their financial information to the public. Mckiernan and Morries in 1994 claim that ‘overall’ performance measures with a set of multidimensional measures are more appropriate. So, more subjective criteria might be better to gain insight into the performance in small firms and would seem to be more closely aligned with the determinants of performance identified by Keats and Bracker (1988) and Lumpkin and Dess (1996) in their conceptual frameworks for assessing

According to research, credit control may be defined as an activity at serving the dual purpose of increasing sales revenue by extending credit to customers who are deemed a good credit risk and minimizing risk loss from bad debts by restricting or denying credit to customers who are not good credit risk. It is also directly related to operation, quality, sales and the effectiveness of credit control lies in procedures employed for judging a prospect’s creditworthiness, rather than in procedures used in extracting the owed money also called credit management (Keneth, 2004).

Holmes and Nicholls (1989) summarize that management accounting information is associated with success and failure in SMEs depending upon how they are produced and utilized in their companies. However, Horngren (1995) argues that cost accounting or management accounting concepts and techniques are neutral instruments. It is not the cause of poor management but primarily symptoms since it may be used wisely or stupidly by managers of the firms.

Drury and Tayles (1995) concludes that the same rules and procedures established for external reporting (financial accounting) are likely also to be applied to internal reporting (management accounting) even some rules, referred to theory, are inappropriate for management accounting. Though external and internal reporting tend to employ the same rules, it does not mean that management accounting is subservient to financial accounting. The reason that most companies adopt the identical practices for both reporting systems is that firms prefer their internal profit to be reported consistently with external financial accounting requirements in order that they will be comparable with outsiders‟ assessments of overall company performance. In the other words, companies would like to be ensured that internal accounting system do not have any conflicts with external financial accounting requirements.

Credit policy is defined as the rules and guidelines established by top management that governs the company’s credit department audits performance in the extension of credit privileges (Jim Franklin, 2010). Boah, (2010) adds that a credit policy is the primary means by which management and the board of an institution guides the lending activities. It therefore, provides the scope for achieving the loan portfolio quality and returns, guides the risk tolerance levels in a manner commensurate with the institution’s strategic direction. The credit policy also addresses the procedures of recovering loan from customers which are due for payment but stuck in the portfolio (Zeller, 2010). Ahamed, (2010) describes a credit policy as a management philosophy spelling out the decision variables of credit standards, credit terms and collection efforts by which managers in credit institutions. The credit policy also assures a degree of consistency among departments by writing down what is expected of each department as well as ensuring consistence in handling customers based on pre-determined parameters.

These are the criteria that the client should meet to qualify for credit (Kakuru, 2000). These require intensive analysis to ensure effectiveness. It is vital for the credit standards to be set basing on individual credit applicant by credit information, credit limits and default rate (Kakuru, 2001). Pandy, (1993) recognizes the 5Cs as measurement parameters in setting credit standards and these include; character, collateral, capacity, capital and condition

2.2 RELATIONSHIP BETWEEN BUDGETING AND PERFORMANCE OF SMES

Budget, a short term finance planning tool of management, is used to focus attention on company’s’ finance and overall operations of an organization. Budget highlights potential problems and advantages early, allowing management to take steps to avoid these problems or use the advantages wisely a budget is a tool that helps managers in both their planning and control. Budget can be used as a benchmark as a control system, that allows managers to compare actual performance with estimated or desired performance, Hence, the budget widely used as a managerial technique tool in an organization (Horngren, Sundem and Stratton, 2001).

Hilton, (1997cited in Abdullah, 1998, p.1) defines budget ‘as a detailed plan, expressed in quantitative  terms, that specifies how resources will be acquired and used during a specified period of time’. The budget is prepared for the primary purposes of planning, facilitating communication, coordination, allocating resources, control profits and operations, evaluating performance and providing incentives.

According to Gustafsson and Parsson (2010), the budget has in the past had a control function, however today there are several objectives and purposes of the budget and the purposes vary among organizations. Budgeting in this regard is viewed as enabling the different functions of management control further, state that the budget represents their numbers and their benchmarks against which their performance is measured (Herath and Indrani, 2007).

The budget process itself that identifying and understanding the motivational factors. Budget process enhance individual performance to achieve budget goals which granted by the organization through organization planning process. Those goals must be practical within the budget process (Otley, 2008).

Omolehinwa (1989) defined a budget as a plan of dominant individuals in an organization expressed in monetary terms and indicate how the available resources may be utilized, to achieve whatever the dominant individuals agreed to be the organization’s priorities. Abdullah (1998) mentions that Budgeting processing interaction with superior has significant relationship to performance goals of the cost centre managers of the institute. According to Hoper and Fisher (2003, p.4), Budgeting is not so much as a financial plan but as the performance management process that leads to and executes that plan. So budget is entire performance management process.

According to Cieslack and Kalling (2007), the inability of rational annual budgetary control to new management control system is required due to new operating conditions for companies caused by the pressure of global competition and constantly changing environment. The rolling budget is allowing assessment of the strategy and resource allocation, coordination and communication learning and strategy creation, performance evaluation and motivation, mainly through reward systems based on budgeting. The wider control framework embraces informal controls and other formal controls.

According to John and Ngoasong (2008), the practices of integrating strategic management and budgeting which enables it to be competitive and increase organizational performance. Budget facilitates the creating and sustaining of competitive advantage in the following management functions: forecasting and planning; communication and coordination; motivational device; evaluation and control; and decision making. Qi (2010) mentions

that the selected budgetary planning, budgetary control, budgetary sophistication, budgetary participation, budget goal clarity and budget goal difficulty as variables are impact of the budgetary process and organizational performance of SME’s in China.

2.3 INFLUENCE INTEREST RATES ON PERFORMANCE OF SMES

It is widely believed that fluctuations of market interest rates exert significant influence on the activities of commercial banks. Later investigation by Hancock (1985) confirms the conjecture that a higher level of market interest rates improves banking profitability. In addition, the effect of interest rate spread changes on banks’ profitability is shown to be asymmetric with the effect originating from lending rates being greater than those of deposit rates. The stochastic behavior of market rates is also argued to be a significant factor that determines the mode banks adopt in delivering their services. Demirguc-Kunt & Huizinga (1997) show that banks can be either brokers or asset transformers subject to interest rate uncertainty. In a volatile interest rate environment, banks minimize their risk exposure by performing the role of brokers, merely matching the arrival of assets and liabilities.

The behavior of interest rate spread is critical, theoretically, Ho and Saunders (1981) indicate that maintaining a positive spread is crucial for banking firms as this compensate them for taking the risk of providing immediacy of loans and deposits, that are viewed as stochastic, which arrive at different times. Their empirical estimate shows that the magnitude of ‘pure spread’ is significantly affected by interest rate volatility. In a related study, Slovin and Sushka (1983) modelled commercial loan rates as independent from deposit rates. This dichotomy of asset and liability rates is achieved as lending rates are shown to be sensitive to open market rates while deposit rates are not. Restrictions on interest rates are shown to be important factors that dichotomize lending and deposit rates.

Interest rate spread is defined by market microstructure characteristics of the banking sector and the policy environment (Ngugi, 2001). Risk-averse banks operate with a smaller spread than risk-neutral banks since risk aversion raises the bank’s optimal interest rate and reduces the amount of credit supplied. Actual spread, which incorporates the pure spread, is in addition influenced by macroeconomic variables including monetary and fiscal policy activities (Emmanuelle, 2003).

Analysis of the determinants of corporate financial performance is essential for all the stakeholders, but especially for investors: commercial banks focus on maximizing shareholder value. This principle provides a conceptual and operational framework for evaluating business performance. The value of shareholders, defined as market value of a company is dependent on several factors: the current profitability of the company, its risks, and its economic growth essential for future company earnings (Chiorazzo, Milani and Salvini, 2008).

According to D’Souza and Lai (2009) financial indicators based on accounting information are sufficient in order to determine the value for shareholders. A company’s financial performance is directly influenced by its market position. Profitability can be decomposed into its main components: net turnover and net profit margin. Jones & Hill (2008) argues that both can influence the profitability of a company one time. If a high turnover means better use of assets owned by the company and therefore better efficiency, a higher profit margin means that the entity has substantial market power.

Depending on the market structure and risk management, the banking firm is assumed to maximize either the expected utility of profits or the expected profits. And, depending on the assumed market structure, the interest spread components vary. For example, assuming a competitive deposit rate and market power in the loan market, the interest rate spread is traced using the variations in loan rate. But with market power in both markets, the interest spread is defined as the difference between the lending rate and the deposit rate.

Interest rate risk is an important financial and economic factor affecting the value of common stocks. There are important reasons why the stock returns of banks can be responsive to interest rate changes. Firstly, the volatility transfer hypothesis suggests that random shocks can induce higher volatility in financial markets and because of contagion

The impact of variations in market interest rates on banks’ profitability is ambiguous; it largely depends on the degree of responses of asset and liability rates. In general, since both sides of banks’ balance sheets are affected by market interest rates in a parallel fashion, the net impact on banks’ profitability can be deduced by tracing the responses of both assets and liabilities as market interest rates change (Emmanuelle, 2003).

Commercial banks’ activities greatly rely on their intermediation services, filling the gap between suppliers and demanders of funds. Their profitability is partly due to the difference in interest rates charged on loans and what is paid to suppliers of funds. Njuguna & Ngugi (2000) argues that the larger the spread between loan and deposit rates

CHAPTER THREE

METHODOLOGY

3.0 INTRODUCTION

This chapter presents the methodology which consists of the research design, area of study, study population, sample population and selection, sampling technique, data collection method, data quality control, data collection procedures and limitations of the study.

3.1 Research design

Qualitative and quantitative research designs will be used, the researcher will use the above methods because many aspects will be covered in the study analyzing the impact of budget on performance of small and medium enterprises, qualitative research method will be used because it collects information within a short time while quantitative will be through interview to cross check what has been given.

3.2 AREA OF THE STUDY

The study will be carried out at sebaggala & sons ltd.

3.3STUDY POPULATION AND SAMPLE SIZE

The study will include the staffs of ssebaggala and sons like sales men, cashiers, managers and technical stuffs.

3.4SAMPLING SIZE

According to (Amin, 2005) sampling involves selecting a sample of the population in such a way that samples of the same size have equal chances of being selected.

The sample will comprise of 30 respondents who will include sales men, cashiers, managers and technical stuffs. While carrying out research, purposive sampling will be applied to the above different categories of respondents.

3.5 Data Collection Instruments

The major instruments for data collection will be questionnaires and interview guide. Surveys will be one part of a complete data collection and evaluation strategy. The major method of data collection for the study will be survey, which will be done using selected instruments like questionnaires. The questionnaire will provide respondents with ample time to comprehend the questions raised and hence, they will be able to answer factually.

3.5.1 Questionnaires

The questionnaire will be used to collect quantitative data. The researcher will administer the questionnaires to all the respondents, which will be designed basing on study objectives and questions. Respondents who can read and write will fill in the questionnaires themselves. The questionnaires will be close ended.

3.5.2 Interviews

Qualitative data will be collected from the informants using interviews. The interview guide will be structured. The interviews will be held with senior management and cashiers and will take approximately thirty to sixty minutes. This will be used since it’s the best tool for getting first-hand information /views, perceptions, feelings and attitudes of respondents. Both formal and informal interviews will be used to get maximum information from the different respondents to participate in the research.

3.6 Reliability and Validity of data

Data analysis in this study will focus on data validity and reliability. To establish the validity of the questions, pre-testing will be done amongst the selected categories of respondents. Their comment will be incorporated in the final instruments to suit the data requirement of the study. The final amended research instrument will be reviewed jointly by the researcher and the supervisor. Reliability will be checked using the test –retest practice advocated for by Amin(2005). In other words, the questions will be put to course mates and their comments noted, they will then be presented to the respondents and their views will be compared with those of the course mates. On receipt of the questionnaires, manual editing will be done, followed by coding. Frequency count of different variables will be done and this will give the number of occurrences and percentages out of total occurrences.

3. 7 DATA COLLECTION METHODS

Source of data will be from both primary and secondary sources.

3.7.1 Primary data

Primary data will be obtained from the questionnaires administered on the target respondents to gain opinions on analyzing the impact of budget on performance of small and medium enterprises.

3.7.2 Secondary sources

Secondary data is data which has been collected by individuals or agencies for purposes other than those of a particular research study. It is data developed for some purpose other than for helping to solve the research problem at hand (Bell, 1997). This will comprise of literature related to analyzing the impact of budget on performance of small and medium enterprises in relation to the case study. Secondary data will be sourced because it yields more accurate information than obtained through primary data, and it is also cheaper.

3.8 DATA COLLECTION PROCEDURES

Upon receiving the University permission to carry out research, the area of study will be visited for purposes of familiarization.  The researcher will seek permission from staff and once allowed to proceed with research, questionnaires will be issued and an interview will be carried out with the selected staff.

3.9 QUALITY CONTROL OF DATA INSTRUMENTS

The instrument will be taken to the supervisor to check its correctness there after pilot study will be carried out to find out if it measures what it is meant for.

3.10 DATA PROCESSING AND ANALYSIS

The raw data will be coded, edited, and arranged ready for analyzing only completed raw data will be analyzed using statistical tables and graphs.

3.11 LIMITATIONS OF THE STUDY

Financial constraint, this is in terms of financial support for transport, printing questionnaires among other requirements that require finance. However this shall be overcome by soliciting money from friends, relatives and sponsors which will assist in making my work a success.

Respondents may delay in filling the questionnaire and fear to give information, but they will be persuaded that the information will be kept secret.

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