The Impact of Budgetary Control on Financial Performance: Evidence from SMEs in Ghana
Abstract
Small and medium-scale enterprises (SMEs) are important players in Ghana's economic growth but are often prone to financial volatility due to ineffective financial management systems. The study investigates the influence of budgeting control practices on financial performance of SMEs, guided by agency and goal-setting theories. Drawing on a crosssectional survey of 200 SMEs, four dimensions of budgetary control formal budgets, review frequency, participative budgeting, and variance analysis were examined. Findings show that formal budgets, regular review, and participative budgeting significantly influence financial performance, while variance analysis doesn't significantly influence financial performance. Managerial capacity and firm size mediate the relationships. The research concludes that effective budgetary control increases profitability and sustainability and recommends capacity building and flexible budgeting models to improve SME financial management in Ghana.
Downloads
How to Cite
References
J Abor, P &quartey (2010) Issues in SME development in Ghana and South Africa. 39, 218-228.
J Ackah, S Vuvor (2021) Digitalization and its Impact on Small and Medium-sized Enterprises (SMEs): An Exploratory Study of Challenges and Proposed Solutions. 10(1), 45-58.
N Ahmad (2019) Budgetary control, managerial performance and moderating effect of budget adequacy and budget feedback: Evidence from Malaysian local authorities. 32(3), 341-359.
H Ali, A Hassan, M Kadir (2023) The effect of planning and budget monitoring on SME performance in fragile economies: Evidence from Somalia. 18(2), 112-128.
G Amoako (2013) Accounting practices of SMEs: A case study of Kumasi Metropolis in Ghana. 8(24), 73-83.
J Barney (1991) Firm resources and sustained competitive advantage. 17(1), 99-120.
J Boakye (2022) Financial management practices and performance of small and medium enterprises in Ghana. 23(4), 567-584.
R Chenhall (2003) Management control systems design within its organizational context: Findings from contingency-based research and directions for the future. 28(2-3), 127-168.
W Cochran (1977) Sampling techniques.
A Danso, A Mensah (2022) Effect of Financial Literacy on Financial Performance of Small and Medium-Sized Enterprises in Kigali City, a case of Small and Medium-Sized Enterprises in Nyarugenge District. 8(1), 15-26.
Colin Drury (2018) Management and Cost Accounting.
Kathleen Eisenhardt (1989) Agency Theory: An Assessment and Review. 14(1), 57.
(2022) Ghana business register report: Performance of SMEs 2021-2022.
S Hansen, W Van Der Stede (2004) Multiple facets of budgeting: An exploratory analysis. 15(4), 415-439.
J Hope, R Fraser (2003) Beyond budgeting: how managers can break free from the annual performance trap. 41(05), 41-2908-41-2908.
M Jensen, W Meckling (1976) Theory of the firm: Managerial behavior, agency costs and ownership structure. 3(4), 305-360.
Debrah Kemunto, John Cheluget (2022) Budgetary Controls and Financial Performance of Micro Finance Institutions (MFIs) in Kenya. 6(4), 123-145.
B Kpodo, A Agyapong (2020) Budgetary practices and SME growth in Ghana. 9(2), 142-161.
T Libby, R Lindsay (2010) Beyond budgeting or budgeting reconsidered? A survey of North-American budgeting practice. 21(1), 56-75.
Edwin Locke, Karyll Shaw, Lise Saari, Gary Latham (1990) Goal Setting and Task Performance: 1969-1980.
A Nyakundi, M Nyamita (2019) Budgetary control and performance of SACCOs in Kenya. 11(3), 45-54.
S Nyarko, D Oppong (2023) Financial control mechanisms and sustainability of SMEs in Ghana. 11(1), 1-14.
D Otley (1980) The contingency theory of management accounting: Achievement and prognosis. 5(4), 413-428.
David Otley (1999) Performance management: a framework for management control systems research. 10(4), 363-382.
M Peteraf (1993) The cornerstones of competitive advantage: A resource-based view. 14(3), 179-191.
J Shields, M Shields (1998) Antecedents of participative budgeting. 23(1), 49-76.
M Susuawu (2020) Budgetary control and financial performance of SMEs in Ghana.
Published
2026-01-06
Issue
Section
License
Copyright (c) 2025 Authors and Global Journals Private Limited
This work is licensed under a Creative Commons Attribution 4.0 International License.