The impact of human factor on SMEs’ capital Budgeting planning and practices

Abstract

Budgets are the foundation of any business, manifesting in its practices to provide the direction for actions and inactions. The management of small and medium enterprises (SMEs) has to maintain proper and appropriate capital budgeting processes and techniques to ensure survival and possible growth. There is a high risk of SMEs failing soon after they are established, with one likely cause being poor capital budgeting strategies. Thus, the study aims to ascertain the factors impacting SMEs' capital budgeting planning and practices, which are carried out by determining the degree of staff participation. The study adopted the quantitative method by administering questionnaires to the staff of 108 SMEs based in the Springfield Industrial Park, Durban, South Africa. The study's findings indicate that most staff are lowly skilled in computer literacy and financial skills, thus impacting the capital budgeting and planning process. Secondly, upward and downward communication levels were not prevalent; hence, more effective communication channels are fundamental. The study was limited to staff in the SMEs and, therefore, cannot be generalized to any other area or subject/s. It emerged that the implication of excluding staff may lead to poor decision-making. Therefore, more consideration should be given to active staff participation upgrading computer literacy and financial skills in business processes.

Keywords: Capital budgeting; human factor; planning and practices.

JEL Classification: M12; M41