Exploring Budget usage by Small Businesses within a South African Township

Abstract

The majority of unemployed South Africans reside in townships. Many individuals who start informal businesses do so because of their employment status. Budgets are generally recognised as management tools that possesses the capability to support the planning process and ensure efficient administration of assets. The aim of the study is to explore if small formal and informal business owners in the retail and service sectors in the township of Sharpeville make use of budgets as part of the managerial process. The first objective is to explore the usage and purpose of budgeting within small formal and informal businesses in Sharpeville. The second objective is to establish an understanding of whether budgeting is viewed as a tool for achieving business goals within small formal and informal businesses in Sharpeville. The third and final objective is to identify possible reasons for not using budgets by these small businesses in Sharpeville. The study is quantitative in nature where data were collected from 100 respondents through convenience sampling. A self-administered questionnaire was used as collection tool. IBM SPSS was applied to analyse and summarise the collected data. The results of this study revealed that formal and informal small business owners who operate in the retail and service sectors of Sharpeville, do not make use of budgets due to a lack of knowledge on how budgets should be prepared. This study indicates that small business owners do not possess the necessary knowledge to set budgets and stresses the need for accounting education for small formal and informal business owners. The findings in this study fill the knowledge gap with regards to the use of budgets by small businesses, concentrating on the retail and service sectors operating within the township of Sharpeville.

Keywords: Small, Micro and Medium Enterprises; Budgets; Formal and Informal Businesses, Township Businesses.