THE IMPACT OF BUDGETING PRACTICES ON THE PROFITABILITY OF

SMALL AND MEDIUM - SIZED ENTERPRISES 
IN TACURONG CITY

LORRAINNE JANE G. MUÑOZ

SYDNEY LEE OLYMPIA V. TORRES
CHRISTIAN JAMES F. TUDLAS

SUBMITTED TO THE FACULTY OF THE COLLEGE OF BUSINESS

ADMINISTRATION AND HOSPITALITY MANAGEMENT,
SULTAN KUDARAT STATE UNIVERSITY,
IN PARTIAL FULFILLMENT OF THE 
REQUIREMENTS FOR
 THE DEGREE OF

BACHELOR OF SCIENCE IN ACCOUNTANCY  

APRIL 2023
 ABSTRACT

LORRAINNE JANE G. MUÑOZ, SYDNEY LEE OLYMPIA V. TORRES, AND

CHRISTIAN JAMES F. TUDLAS, April 2023. “THE IMPACT OF BUDGETING
PRACTICES ON THE PROFITABILITY OF SMALL AND MEDIUM - SIZED
ENTERPRISES IN TACURONG CITY”. A thesis of College of Business
Administration and Hospitality Management, Sultan Kudarat State University,
Tacurong Campus, Tacurong City, Sultan Kudarat.

ADVISER: CHARMIE A. LAGDAMEN, MBA

The study was conducted to determine the impact of budgeting practices

on the profitability of SMEs in Tacurong City. Specifically, to assess the
budgeting practices used by SMEs, measure their level of profitability and
determine if budgeting practices has significant impact on the profitability of
SMEs in Tacurong City.

The study utilized descriptive research design and aimed to determine the
impact that budgeting practices has on the profitability of SMEs in Tacurong City.
A sample of one hundred forty – eight (148) enterprises was selected from SME
sector in Tacurong City and the data was collected from the owners and
managers using adopted questionnaire. The study adopted a descriptive
technique in analysing data and used techniques such as frequencies, mean,
and regression. The study findings were presented in figures and tables.

The result revealed that not all domains of budgeting practices which are
the budget planning, budget control, budget coordination, and budgetary
evaluation process have significant impact on the profitability of the SMEs.
Hence, the null hypothesis is accepted. However, there is significant impact of
budgeting practices on profitability of SMEs in Tacurong City in terms of budget
communication.
 Chapter I
INTRODUCTION

Background of the Study 

The concept of budgeting encompasses the process of setting goals,

reporting actual results of performance, and evaluating performance in relation to

the predetermined goals (Kimani, 2014). 

Poor performance and budgetary disparities will undoubtedly persist for

enterprises as a result of a lack of effective budgets and budgetary control

systems that adequately and judiciously allocate resources to meet

organizational goals and maximize performance. These enterprises proceed

without paying more attention to improving their budgeted performance. Since

budgets indicate the firm's plan of action, firm managers must keep proper,

updated, and reviewed budgets, or their businesses will remain small, stagnant,

or even close (Warue & Wanjira, 2013). Most of these enterprises, ranging from

small to medium-sized, fail to recognize the impact of budgets and budgetary

control on profitability outcomes (Matsoso et al, 2021).

It is inevitable that any organization that wants to survive in the

complicated business industry requires sharp tools and proven management

strategies to forecast and determine the significant changes that are likely to

influence the business. In addition, most organizations adopt new management

tools in order to improve their management and budgeting processes (Koech,

2015). In order to achieve the organizational objectives and goals, the budget

must be prepared effectively and adhered to. A budget may be described as a

quantitative expression of a plan and the process of converting plans into budget
is known as budgeting. Budget is one of the most widely used tools for planning

and controlling business organization. The budgeting process may be quite

formal in a large institution with committees set up to perform the tasks. On the

other hand, in a very small firm the owner may write down the budget on a piece

of paper or just budget in his head about the items he can remember easily

(Assey, 2014).

On this subject, research was conducted; namely, Yuen (2012) in which

the budgeting process influences performance among SMEs in China. In

comparison to a study established by Mungai & Mungai (2020), the effect of cash

budgeting practices on profitability of small and medium - sized enterprises in

Nyeri County, Kenya. Locally, Fortuna (2021) conducted an analysis of the

connection that exists between the budgeting practices of SMES in the

Philippines and their respective levels of profitability. The budgeting practices

and its impact on the profitability of SMEs in Tacurong City was not examined in

any of the studies. 

It is impossible to utilize those studies to describe the situation in

Tacurong City since Yuen (2012), Mungai & Mungai (2020) based their findings

on other settings and the differences in the market systems. This results in a gap

in knowledge, which this study tries to fill by answering the following question:

what impact the budgeting practices has on the profitability of the SMEs in

Tacurong City.
Statement of the Problem 

This study generally sought to determine the impact of the budgeting

practices on the profitability of small and medium - sized enterprises in

Tacurong City, Sultan Kudarat. 

Specifically, this research aimed to answer the following questions:

1.  What is the business profile of the respondents in terms of:

1.1. Type of the business;

1.2. Size of the business; and

1.3. Number of years in the business?

2.  What is the extent of budgeting practices of Small and Medium - sized

Enterprises in terms of:

2.1. Budget Planning; 

2.2. Budget Control; 

2.3. Budget Coordination; 

2.4. Budget Communication; and

2.5. Budgetary Evaluation Process?

3. What is the level of profitability of the business enterprise in terms of:

3.1. Growth in Sales/Revenues;

3.2. Profit Margin;

3.3. Return on Investment (ROI);

3.4. Return on Assets (ROA);

 3.5. Return on Equity (ROE); and 

3.6. Economic Value Added (EVA)?

4. What is the significant impact of budgeting practices on the profitability of

small and medium sized enterprises in Tacurong City?

Conceptual Framework 

The conceptual framework is a group of concepts that are systematically

organized to provide a focus, a tool and rationale for interpretation and

integration of information and is usually achieved in pictorial illustrations. The

conceptual framework of the study is made up of the independent and dependent

variables (Njeru, 2015). The paradigm presents the conceptual framework of the

study. This includes the budgeting practices that constitute the independent

variables. These are the planning process, coordinating process, controlling

process, communication process and evaluation process. budgeting practices

While the profitability of small and medium enterprises in Tacurong City

constitutes the study’s dependent variable with the indicators; growth in

sales/revenues, profit margin, return on investment (ROI), return on assets

(ROA), return on equity (ROE), and economic value added (EVA). Theoretically,

the whole budgeting practice is anticipated to have a positive impact on the

profitability of the small and medium enterprises in Tacurong City. 

The arrow from the first box to the second box signifies the direct

influence of budgeting practices to the profitability of small and medium

enterprises in Tacurong City. 

INDEPENDENT VARIABLE  DEPENDENT VARIABLE 

Figure 1. The Conceptual Framework of the Study

Hypothesis

The following null hypothesis was tested based on the 0.05 level of

significance:

1. There is no significant impact of budgeting practices on profitability of

SMEs in Tacurong City; and

2. There is no significant impact between the business profile and the

budgeting practices of SMEs in Tacurong City

Significance of the Study 

The significance of the current study, first, contributes to expansion of the

existing findings in the budgeting literature. This study draws on researchers’

observation from the obviously ignored area of financial planning and control in

small and medium-sized enterprises. It tries to fill the gap in previous literature

about how budgeting practices impact the profitability in small and medium

enterprises’ business context. The current study contributes to SME literature,

particularly in terms of the performance measurement in SMEs. It gives a fresh

insight into the possible correlation between budgeting and profitability in SMEs. 

To the SMEs Owners/Managers, the result can be used for better

budgeting practice to improve performance. The findings of this research will

provide more useful understanding about budgeting and participation, i.e., how

to apply the budgeting system; how to adjust budget practice within

organizations; whether it is useful to apply participation in a small organization.

They may change their attitude and/or behavior concerning budgeting activity,

and finally enhance the beneficial outcome of the management accounting

system at the firm level.

To the Local Government, The result of the study would help the local

government to build more industrial infrastructure, open more jobs creation and

increase the City’s revenue.

 To the Society, the study responds to the fast growth of SMEs. As the

SMEs grow faster in the society, it contributes to employment creation, wealth

creation, poverty alleviation and income generation.

To the Future Researchers, the research study can help future

researchers to have another reference or basis for related studies. They may

also use this to investigate more on the same problem presented in this study.

Scope and Limitation of the Study 

The scope of this study primarily focused on knowing the extent of

profitability, the extent of budgeting practices, and the impact of budgeting

practices on the profitability of SMEs. The respondents of the study are the small

and medium enterprises within Tacurong City, Sultan Kudarat where the

research was conducted. This study was conducted in S.Y. 2022 – 2023.
Definition of Terms

The following terms are operationalized and conceptualized in order to

fully comprehend the research study:

Asset

anything that has current or future

economic value to a business.

Budgeting Practices

a representation of a strategy for a

specific time period that helps the

enterprises to keep their finances in

order.
Business Profile

a professional introduction to inform

others about the details of the firm.

Equity

the total value of your company's

assets, minus the sum of its liabilities

Investment
an asset acquired or money Small - sized Enterprises

committed with a purpose to earn

income in future.

are enterprises with 100-199

employees and/or assets worth P15

Medium - sized Enterprises million to P100 million.

the measure of how much money a

company takes in overtime.

Profit

measures how long your ability to

generate profits will last.

Profitability
a measure of an investment's

performance over time

Return

are enterprises with 10 to 99

employees and/or assets valued

between P3 million and P15 million

 Chapter II
REVIEW OF RELATED LITERATURE 

This chapter presents related literature that is relevant to the topic and

gives significant insights from various authors about budgeting practices and

financial performance. The discussion on the independent variable, which is

budgeting processes, and its indicators is based on the study of Abongo (2017),

the budget planning, budget control, budget coordination, budget communication

and budgetary evaluation process. However, the dependent variable, which is

the profitability, is adapted from Fortuna (2021) with indicators of growth in

sales/revenue, profit margin, Return on Investment (ROI), Return on Asset

(ROA), Return on Equity (ROE) and Economic Value Added (EVA).

Business Profile

A corporate business profile is a brief overview of a firm that allows

various groups of people to gain a broad understanding of its products or

services, target market, distinctive strengths, track record, and whether it is a

good organization to do business with. It should be well-written in order to

express the dominant principles and corporate culture that give the firm its

unique personality. Good company profiles also demonstrate how effective a firm

is at satisfying the demands of its clients or consumers (Garcia, 2015). A

business profile is described as a professional introduction designed to capture

the reader's attention and tell him about the firm in a concise manner. It is
intended to establish a strong initial impression on potential investors or clients. A

business profile is essentially a synopsis of all the significant features of a

company. It takes the form of a statement that describes significant business

information. A business profile is a type of marketing collateral that performs

several functions. (Bhasin, 2020)

Domain of Business Profile

Company profile is used by many businesses as a marketing tool to create

an outstanding first impression on potential customers, as well as attract

partnerships or investors. This section outlines the company's overall description,

which should include the company's name, contact information, business

location, management, products and services, sales data, financial projections,

operational information, as well as any other relevant information that is relevant

to reaching a specific audience (Zambas, 2021). 

Type of Business

Business entities are an essential component of corporate operations and

economic output. A competent business practitioner must be familiar with the

features of the various types of business entities, since these qualities may have

a significant impact on the nature of business partnerships (Gordon, 2023).

According to the law, the single proprietorship's owner is solely liable for all acts

and omissions. The word simply signifies that there is just one firm owner who

oversees the whole organization (Panda, 2019) . The sole proprietor receives all
the company's profits, as well as its expenses and costs. A partnership is a type

of business in which two or more persons share ownership as well as

responsibility for managing the firm and its profits or losses.  Partnerships have a

positive impact on sustainable performance; information sharing plays a role in

mediating the relationships between trust, cooperation, and sustainable

performance; and government support can positively impact the effect of

partnerships on sustainable performance (Yue, Ye, and Chen, 2022). A

corporation is a legal body that exists independently of its owners. Corporations

have many of the same legal rights and obligations as people. The corporation is

one of the most powerful organizations of our day. Corporations organize much

of the world's labor and capital, define the contemporary world's tangible form,

and are a driving force behind globalization (Kirsch 2014). According to Mulani et

al.'s (2015) study, which examined how ownership structure affected company

performance and discovered that institutions with dispersed ownership and non-

owner managers improved the performance of the enterprises more than family-

run businesses with owners in charge and corporation Owner Directors

Size of Business

Growth is critical to a company's long-term sustainability. It aids in the

acquisition of assets, the attraction of fresh personnel, and the funding of

investments. It also influences corporate performance and profitability. A properly

sized firm is a machine for producing value for the owner, its stakeholders, and

the community. The optimal size for most enterprises is substantially larger than
the current status. One of the most essential things owners and their

communities of support can do is to encourage development (Rettich, 2018). The

study of Novak (2019) underlined the significance of business in her study, noting

that business size categories exist for a reason. When the size of a company is

considered, it offers a fuller picture of its health and economic influence. When

the size of the business is considered, it offers a more balanced view of how the

firms are functioning. Big firms have a lot of money and resources to expand. As

a result, they benefit from greater economies of scale, which allows businesses

to be more efficient. A strong market position and increased bargaining power

with consumers and suppliers are also supported by large resources (Nasrudin,

2022). 

Number of Years in the Business

The age and size group analyses in Mansikkamaki's (2023) study

demonstrate that the smallest young enterprises have the highest possibility of

success despite the growth plan since they face the fewest risks from non-

profitable expansion. With age and scale, a properly planned growth strategy that

prevents non-profitable expansion becomes increasingly crucial. Radipere and

Dhliwayo (2014) discovered a statistically significant association between

business age and company performance. Firm performance rises with age and

learning experience, according to the life-cycle approach. It goes on to claim that

the firm's performance increases until a certain age, when it starts to decline.

Firm age is a key predictor of financial success, both directly and indirectly via
foreign ownership. The positive connection implies that foreign investors favor

enterprises that have been in the market or in operation for a longer period than

start-ups or businesses in their early stages. One viewpoint is that younger

businesses are riskier, less experienced, and have less tangible and intangible

resources than older organizations (Mallinguh, Wasike & Zoltan, 2020).

Small and Medium - Sized Enterprises (SME)

SMEs are regarded as the economic backbone. The SME sector is well

known across the world for its substantial contribution to socioeconomic growth.

This sector has made important contributions to increased employment, output,

export promotion, and entrepreneurship (Gupta, Guha & Krishnaswami, 2013).

Small and medium-sized enterprises (SMEs) are critical to the growth of the

national economy. It is also regarded as the primary source of employment,

poverty reduction, lifestyle enhancement, and empowerment of low-income

communities (Lubis & Muchtar, 2019). The PSA classifies an enterprise as small

if it employs 10 to 99 people, and medium if it employs 100 to 199 people. The

Magna Carta for Micro, Small, and Medium Enterprises (MSMEs) classifies an

enterprise as small if its asset size is Php 3,000,001-15,000,000, and medium if

its asset size is Php 15,000,0001-100,000,000.

Budgeting Practices

The concept of budgeting encompasses the process of setting goals,

reporting actual results of performance, and evaluating performance in relation to

the predetermined goals (Kimani, 2014). A study conducted by Gupta and Deena

(2021) defined budgets as a measurable statement of revenues and expenses

for a specified period, which may contain fixed income, expenses, assets,

liabilities, and funds flow. As a result, organizations can maintain focus, as they

are able to integrate work, allocate resources, and manage jobs with ease.

Budgeting emphasizes foreseeing future financial requirements and quantifying it

in terms of money (Qi, 2010). This suggests that budgets set performance goals

for the organization in terms of expenditures and revenues for each of its

activities. 

The budgeting process lets an organization plan and prepare its budgets

for a set period.  It comprises reviewing prior budgets, calculating and projecting

future revenue, and allocating money to cover a company's various expenses

(Bailey, 2021). A solid budgeting process involves everyone who is accountable

for sticking to the budget and carrying out the firm's goals. Incorporating strategic

planning goals and preparing for income before spending are essential

components of a sound budgeting process (Abongo, 2017). A good association

between budgeting and organizational performance was identified by Kazeem,

Hakeem, and Reuben, (2014); they demonstrated that fiscal discipline,

transparency, efficiency and accountability had been introduced into the

operational system through budgetary control mechanisms.

Although the timing and steps of the budgeting process may differ from

organization to organization, common steps according to Schmidt (2016) include

determining the difference between the budgeted and actual amounts, identifying
and prioritizing business objectives and needs for the upcoming period, and

projecting and evaluating elements like current business trends. Putting in place

ways and procedures for plan implementation and monitoring; making sure the

funding proposal is in line with the company's strategic objectives; and, finally,

wrapping up and expressing the requests for funds to the board responsible for

assessing and approving the budget. As small and medium enterprises adopt

effective budgeting practices, their profitability increases, as reported in Fortuna

(2021). Based on the results of Musah, Gakpetor and Pooma (2018), SMEs'

profitability and growth can be significantly improved when a specific component

of financial management practices is adopted and implemented properly.

Domain of Budgeting Practices

Budgets are short-term financial plans, usually covering a period of one

year (Songini & Gnan, 2015). According to a recent poll, budgeting is a value-

adding activity for almost 90% of respondents from American and Canadian

businesses, underscoring the significance of budgets (Zor, Linder & Endenich,

2019). Budget planning, budget control, budget coordination, budget

communication, and the budgetary evaluation process were the indicators used

in this study to obtain budgeting practices from the Abongo (2017) study.

Budget Planning

A budget is a group of related plans that quantify the anticipated future

operations for a production. This suggests that budgets set performance goals
for the organization in terms of expenditures and revenues for each of its

activities. In this study, budgeting processes are based on Abongo (2017) with

the following indicators: budget planning, budget control, budget coordination,

budget communication and budgetary evaluation process. Budget planning

includes budget execution, budget accounting, budget reporting, and control over

budget execution, among other closely linked elements (Demianyshyn and

Pohrishchuk, 2017). According to the authors, a well-organized budget planning

process involves mutually beneficial relationships and constructive cooperation of

all participants at the state and local levels, from budgetary institutions to line

ministries and departments, and plays a significant role in identifying priority

areas of budget funds based on available budget resources.

 During the planning stages of a country's socio – economic development,

Sharov & Reznikova (2019) emphasize that it is very vital to consider potential

hazards, threats, and dangers. According to the study of Chugunov, Makohon,

and Krykun (2019), the income and expenditure budget planning should be

created in a way that ensures the accomplishment of the strategic goals and

objectives of the country's overall and its administrative territorial entities in

sustainable socioeconomic development while maintaining budgetary stability

and balance. According to the results obtained by Cheng, Chen, and Shih's

(2014) study, managers may coordinate budget planning with product ideas and

desire to produce substantial and unique products. In their investigation of formal

accounting planning in small and medium firms, Samuelsson et al. (2016) found

that adopting budgets for planning had a favorable impact on performance.

Additionally, Kung et al. (2013) looked at 132 Taiwanese manufacturing

companies to investigate the connection between two budgeting-related factors

and organizational performance. The model showed a statistically significant

relationship between organizational success and budget planning. 

Budget Control

Budgetary control approaches identify the amount, quantity, and timing of

resources required as well as the financial implications of corporate strategies

(Kerosi, 2018). Estimates of future sales revenues and expenses are provided by

budget and budgetary procedures, along with the setting of short- to long-term

objectives, to offer short- and long-term company goals. Sharma (2012) adds

that the task controls and management benchmarks are calculated by comparing

the actual results to the budgetary plans in order to make any necessary

corrections. Through the translation of corporate objectives and the provision of

benchmarks against which success can be measured, budgets have an impact

on how people behave and make decisions. As part of the budgetary control

process within a firm, costs are matched with revenues and analyzed accordingly

through effective financial monitoring systems (Adongo & Jagongo, 2013). 

The process of budgetary control entails creating a spending plan, which

should be periodically compared with actual spending to see if adjustments are

necessary or not (Hancock, 2015). In the study of Gooneratne & Hoque, 2019 it

was discovered that budget management and control had an impact on the

effectiveness of the financial firms that looked at the MAPs used in Nepalese

private banking firms using an illustration of 367 personnel. Managements'

participation in the creation of corporate industry budgets, the funding allocation

for various variables in the spending plan, as well as the articulation of each

manager's role during the budgeting process, were crucial tasks that contributed

to the achievement of the organizational objective. A significant variation in the

budget, budgetary control, and performance of the firms was discovered by

Egbunike and Unamma (2017) as they assessed the effect of budgeting and

budgetary control on the performance of hospitality firms in Nigeria. In contrast,

budget control is not a reliable predictor of business growth, according to Foster's

(2017) research, which found a weak association between the frequency of

budget reviews and financial performance.

Budget Communication

Communication is critical in the budgeting process, regardless of the

budgeting technique. If there is insufficient communication, procedures may

deteriorate, resulting in inaccurate financial information (Lazenby, 2013). Poor

communication might cause serious problems. According to Bartels (2013), a

lack of communication skills wastes valuable time, resources, and energy while

also harming trust, relationships, and desire to work. The organization's financial

decisions should be communicated to all relevant workers. Budgets serve a vital

role in communicating objectives, goals, and duties within the organization. If

done correctly, this can have significant benefits in terms of promoting

cooperation at all levels. 

 To ensure that the budget implementation process is successful,

management and employees should collaborate to ensure that the interests of all

stakeholders are fully represented when making key decisions involving

budgetary allocations in key projects (Mutinta, 2018). The research of Matsoso,

Nyathi, and Nakpodia (2021) strengthens the communication power of budgeting

and budgetary controls since SMEs and economic agents are not only aware of

company aims but are also incentivized to assist their achievement. Budget for

communication has a very good impact on how well people perform, as

demonstrated by the study Hutagalong (2017). The researchers explain that

managers perform better when they receive more feedback or have a larger

communication budget. Apart from that, the findings of the Kalogiannidis (2021)

study strongly imply that good corporate communication has a clear and

undeniable impact on business profitability and performance. 

Budget Coordination

The budget proposal, which entails the creation of a more formal and

precise budget procedure, appears to be more closely related to long-term

efficiency in large corporations than in smaller businesses (Merchant, 2020). To

carry out the business, coordination entails gathering and planning the necessary

workers, tools, and supplies. The institutional budgetary control in SMEs has two

components: a formal budget method planning and a formal financial control

method (Mulani, 2015). On the performance of the firm, the level of budgeting

planning and financial control methods may be favorable. The effectiveness of

the fiscal plan targets reduces unnecessary obstacles and, as a result, confusion,

which improves the financial company’s success (Schubert & Kirsten, 2021). 

A budget helps with coordination between various activity units so that

everyone in the firm is aware of their roles and how they all fit together. It reveals

the organizational structure's flaws. The budget outlines the expectations for the

workforce. It makes it possible for ideas, plans, and directions to be agreed upon

by Shim and Siegel (2022). The coordination process entails combining the

actions, resources, and several company divisions into a single plan. According

to the study, organizations that apply budgetary management to their operations

and plan, coordinate, and manage their spending see some improvement in their

performance (Susuawu, 2020).

Budgetary Evaluation Process

Budgetary evaluation, according to Yee, Khin & Ismail (2016), is the extent

to which budget differences can be linked back to the heads of specific

departments in assessing their performance. Employee behaviors, attitudes, and

performance have been found to be influenced by how budgets are used in

performance appraisal. More formal budgeting plans promote higher growth of

sales revenues in small and medium enterprises, clear and difficult budget goals

improve organizational budgetary performance, more sophisticated budgeting

procedures result in lower profit growth of small and medium enterprises, more

formal budget mechanism leads to higher profit growth in organizations, and

greater budgetary participation leads to better management (Fortuna, 2021). The

budgeting process involves participation, planning, control, and evaluation, which

encourages managers to plan, consider the stakeholders involved, provide

information for improved decision making, increase and enhance communication,

coordination among departments, and evaluation (Silva & Jayamaha, 2012). 

Budget evaluation is seen as the most important component of budget

operations and has the biggest impact on financial performance, according to

Laryea (2016) research on the influence of budgeting on the financial

performance of non-financial organizations in Ghana. The performance of the

firm is found to be strongly and favorably connected with the budgetary

assessment in large enterprises, according to research of Nair (2020) on the

relationship between budgetary evaluation, firm size, and performance among 62

Moroccan firms. A study on the factors influencing budgetary preparation at the

United States International University Africa (USIU-Africa) was done by Mkanjala

(2017). According to the survey, most participants thought that periodic

evaluations of budget preparation were appropriate given the current situation

and helped to avoid financial mismanagement. 

Profitability 

Profitability is a crucial issue to consider since a firm must be profitable in

order to function properly. Companies will find it difficult to attract outside

financing if they do not make a profit (Iskandar, 2021). The correlation between

production and financial performance in generating an annual rise in the

profitability value over the productive life of the industrial firm is critical in deciding
current and future productive strategies (Choudhary, 2018). Many businesses

attempt to boost profitability and improve financial performance without

sacrificing productive efficiency, whilst others want to improve operational

efficiency in order to improve financial performance (Fan, 2017). 

In addition, Alsughayir (2013) studied the link between quality

management, profitability, and productivity in the Saudi industrial sector. The

study discovered that the productivity rate acts as a bridge between profitability

and quality management. Harb (2019) discovered that profitability and financial

performance had a statistically significant influence on boosting productive

efficiency in Jordanian industrial firms. Based on this, the researcher made many

critical recommendations to Jordanian industrial firms, including increased

interest in profitability and financial performance in order to boost productive

efficiency. According to Hussain (2018) literature analysis, the primary

challenges influencing SMEs' profitability were unfavorable selection and a lack

of basic financial skills. 

  

Domain of Profitability

The basic aim of all business enterprises is profitability. Without

profitability, the company won't last very long (Hofstrand, 2019). The most crucial

elements for an enterprise's present planning are production profitability

indicators. They are considered while figuring out an enterprise's financial

capacity. It is obvious that an organization's profitability indicators can be viewed

as a general indicator of economic production efficiency (Shvachych & Kholod,

2017).  In this study, profitability is determined through the analysis of Fortuna

(2021), which includes an indication of growth in sales/revenue, profit margin,

Return on Investment (ROI), Return on Assets (ROA), Return on Equity (ROE),

and Economic Value Added (EVA).

Growth in Sales/Revenues

Sales growth is defined as the annual change in sales. According to

Hariyanto & Juniarti (2014), sales growth is defined as a rise in the quantity of

sales from year to year or from time to time.  Increased sales will be reflected if

sales growth is substantial. Sales growth is used to assess the extent to which

the sales department has succeeded in meeting its sales objectives and is

frequently used as an indicator of the company's survival and financial progress.

If the sales increase, the profit will rise, and the profit divided per share may rise

as well (Sivathaasan & Rathika, 2013). Companies that experience sales growth

might enhance earnings, according to Ismaida and Saputra (2016). In addition to

the capacity to expand revenues, the corporation requires more capital. Ghozali,

Handriana, and Hersugondo (2018) discovered that the growth rate of sales

mediates the impact of investment and company performance. The study

empirically proves that the influence of investment and firm performance will be

greater if it uses Growth rate of sale, which means that the higher the desire of

investment that aims to increase sales, such as investment in real assets to

update the production process to become more efficient, with the use of

technology in production, then the company's performance will improve in the

eyes of investors. In contrast, Nur and Mahiri (2022) research, shows that sales

increase has no effect on profitability of the firm. Profit growth cannot impact

profitability since the level of profitability is primarily dominated by corporate

debt. 

 Profit Margin

Net Profit Margin (NPM) is a measure that displays a company's net sales

income. Net Profit Margin is a profit statistic that compares earnings after interest

and taxes to sales. The higher the Net Profit Margin figure, the greater the firm's

capacity to earn net income from sales, indicating that the company is more

successful and efficient. Based on the findings of Mulyadi, Sihabudin, and Sinaga

(2020), current ratio, net profit margin, and excellent corporate governance all

have a substantial impact on changes in firm performance.  According to Bionda

and Mahdar (2017) research, Net Profit Margin has a favorable and significant

influence on profits growth. However, this contradicts the findings of Wardhani

(2019) research, which found that Net Profit Margin had no significant influence

on earnings fluctuations.

Return on Investment (ROI)

Return On Investment (ROI) is a measure of a company's management's

performance in managing its investment. ROI can be used as an indicator in

assessing the company's performance in this case to assess its effect on the
value of the company reflected in stock prices, investors will see the company's

performance and decide whether to invest or not by looking at the value of the

return on investment ratio (Sunaryo, 2015). Several research have been

conducted, yielding various results on the profitability of return on investment

(ROI) and financial risk in stock price. According to Tyas and Saputra (2016),

based on the study's findings, NPM and ROI via the t-test had a significant

influence on stock prices, however ROE and EPS through the t-test had no

significant effect on stock prices. According to the findings of Kurnia (2017)'s

study, Return On Investment (ROI) had a substantial influence on stock prices,

however Financial Risk had no significant effect on stock prices. Wangarry,

Poputra, and Runtu (2015) discovered that Return on Investment (ROI) and Debt

to Equity Ratio (DER) had no significant influence on stock prices.  Net Profit

Margin (NPM) has a small but considerable impact on stock prices. At the same

time, Return on Investment (ROI), Net Profit Margin (NPM), and Debt to Equity

Ratio (DER) all have a substantial impact on stock prices.

Return on Assets 

Return on Assets (ROA) is a ratio that demonstrates how important an

asset is in generating a profit (Hery, 2015). Ratio analysis is a form or manner

that is commonly used in analyzing the financial statements of a company. The

higher the ROA ratio, the more efficient and effective the company's asset

management is. By using tools such as ratio analysis will be able to explain or

illustrate the analyzer about the good and bad circumstances or financial position
of a company (Heikal, Khaddafi & Ummah, 2014). ROA refers to how efficient an

organization is with the use of its assets. Parhusip, Topowijono & Sulasmiyati

(2016) discovered that Return on Assets (ROA) has a substantial influence on its

worth and Supriyadi (2021) demonstrated that Return on Assets and Return on

Investment on Equity have a beneficial impact on the company's value. However,

Cahyanto, Darminto & Topowijono (2014) and Agustiani (2016) demonstrate that

the ROA variable has no meaningful partial influence on the company's value.

Return on Equity (ROE)

ROE shows how effective a firm is in utilizing its equity (Pointer & Khoi ,

2019). The ratio Return on Equity (ROE) measures the profitability of the

investment made by owners of the company's own capital or shareholders and

demonstrates how successfully businesses manage their own money (net worth).

McClure (2018) indicates that ROE is one of the most important of all the

essential financial ratios. These ratios are also related to the capital structure of

various organizations. Majed (2012) discovered that three ratios of ROA, ROE

and ROI together showed a strong and positive relationship with share prices

with 45.7% relationship. High profitability shows good company prospects so that

investors will respond positively to these signals prompting the increase of firm

value (Husna & Satria, 2019). This is understandable because the company that

managed to record increased profits indicates that the company has a good

performance that generates a positive sentiment for investors and increases the

company’s stock price. Cahyanto et al. (2014) demonstrate that ROE factors
have a marginally significant influence on their value. Agustiani et al. (2016) and

Rosikah (2018), on the other hand, determined that Return on Equity (ROE) had

no meaningful influence on the company's value. Increasing stock prices in the

market will increase the firm value. This is supported by the results of (Terpstra

and Verbeeten, 2014) finding that profitability ratio as measured by ROI or ROA

has a significant effect on firm value. 

Economic Value Added (EVA)

Economic Value Added (EVA) has been acclaimed as the most current

and interesting invention in the managerial performance evaluation measure.

Previous study deems EVA to be more powerful than standard accounting profit

metrics in explaining market appraisal of the organization. EVA is a value-based

financial performance metric that represents the absolute amount of shareholder

wealth created each year, both rising and falling (Sikarwar & Gupta, 2016). In

other words, EVA can assess how much a firm has enhanced shareholder value.

According to Parvaei and Farhadi (2013), among other indicators, EVA is the

best tool for analyzing business and management performance. According to

Sirbu (2012), EVA offers an efficient strategy to manage shareholder value by

aligning management's objectives with those of shareholders, improving

accountability, and enabling improved performance monitoring.

Budgeting Practices and Profitability

 The study of Mulani (2015) investigated how the budgetary procedure

affected the performance of India's SME sector. The budgeting procedure has a

positive effect on the firm's success, according to the study. The study also found

that companies with strict but attainable goals improve the success of SMEs in

India by raising employee engagement levels and helping them stick to

budgetary goals. The study also found that the nature of the budget targets

affected how well SMEs in India performed.

 In the study of Silva and Jayamaha et al. (2012) the researchers

evaluated the garment industry's budgetary process using factors like planning,

coordination, control, communication, and evaluation. Return on Assets was

utilized in the study to assess the performance of Sri Lanka's garment sector.

The researchers discovered from the data taken from the financial accounts that

there is a strong correlation between a firm's performance and its budgetary

process. The study came to the additional conclusion that garment businesses

maintain a successful financial approach, which raises their performance

standards. (Salva and Jayamaha, 2013).

An empirical review of small and medium-sized enterprises (SMEs) in the

Czech Republic. The primary objective of the study was to review recent

research on important SME financial management concerns. The study found

that the key choices financial managers must make are financial, capital

budgeting, and working capital management choices, all of which have a direct

and significant impact on the profitability and performance of the company as a

whole. The researcher also found that a big issue for SMEs is poor financial

management, including bad budgeting (Jindrichovska, 2013).

Chapter III
METHODOLOGY

This chapter describes the techniques and approaches that was employed

in the study's execution. It consists of the research design, study respondents,

data collection instrument, data collection technique, and statistical treatment to

achieve the research objectives.

Research Design

A descriptive research design was applied to this study to examine how

the budgeting practices affects the performance of small and medium enterprises

in Tacurong City, Sultan Kudarat. The research design is the overall strategy for

addressing research questions. It includes specific objectives derived from

research questions, such as the sources from which the researchers intend to

collect data and how the researchers intend to collect and analyze it (Egbunike &

Abiahu, 2016). The research design refers to the various methods that can be

utilized to answer the question at hand.  A descriptive approach establishes a

quantitative paradigm, which will serve as the primary paradigm in the current

study. The quantitative paradigm provides quantitative evidence to all questions

concerning 'what' the extent of the budgeting process in Tacurong SMEs and

'whether' the budgeting practices has a significant impact on the firm’s

performance. 

The scientific method of descriptive survey research was defined as which

data is gathered without altering the environment. It includes various types of

surveys and fact-finding inquiries that seek to obtain information that reveals

existing phenomena. Primary research methods were used in the design to

collect primary data. The justification for using this design is that it will investigate

the current status of two or more variables at a given time while taking advantage

of up - to - date data.

Respondents of the Study

The study's respondents were the small and medium-sized business

owners in Tacurong City, with a focus on SMEs that have been in operation for at

least a year. According to the City Government's Licensing Office, Tacurong City,

Sultan Kudarat has 182 small enterprises and 56 medium enterprises, for a total

of 238. The respondents were the 113 small and 35 medium enterprises of

Tacurong City with a total of 148 respondents. The sample was taken with a 5%

margin of error and 95% confidence level. The sample size for this study has

been determined using the Slovin’s formula. 

The study employed probability sampling, which is choosing a sample

from a population based on the idea of randomization, often known as random

selection or chance. The researchers will specifically employ the stratified

sampling technique. 
Data Gathering Instrument

An adapted and modified questionnaire was used to measure and

establish the relationship between the two variables. The researchers used two

instruments. The first instrument measured the level of budgeting practices of

small and medium enterprises. The instrument is based on Abongo (2017). The

budget process has the following indicators: budget planning, budget control,

budget coordination, budget communication and budgetary evaluation process.

The respondents indicated their answers using a five-point Likert scale that

ranges from 5 - 1 with descriptions from "Strongly agree" to "Strongly disagree". 

Table 1. Scale and Interpretation of Budgeting Process used by

SMEs

Range of Descriptive Interpretation

Means Level

3.21 - 5.00 Very High The extent to which budgeting practices are
followed is very high

3.41 – 4.20 High The extent to which budgeting practices are

followed is high

2.61 – 3.40 Moderate The extent to which budgeting practices are

followed is moderately

1.81 – 2.60 Low The extent to which budgeting practices are

followed is low
 1.00 – 1.80 Very Low The extent to which budgeting practices are
followed is very low

The second instrument measured the level of profitability of small and

medium enterprises. The instrument is based on Fortuna (2020). The profitability

has the following indicators: growth in sales/revenues, profit margin, return on

investment (ROI), return on assets (ROA), return on equity (ROE), and economic

value added (EVA). The respondents indicated their answers using a five-point

Likert scale that ranges from 5 - 1 with descriptions from "Very High" to "Very

Low". 

Table 2. Scale and Interpretation of Profitability used by SMEs

Range of Means Descriptive Level Interpretation

4.21 – 5.00 Very High The profitability of SME's is very high

3.41 – 4.20 High The profitability of SME's is high

2.61 – 3.40 Moderate The profitability of SME's is moderate

1.81 – 2.60 Low The profitability of SME's is low

1.00 – 1.80 Very Low The profitability of SME's is very low

Data Gathering Procedure   

The researchers adapted the survey questionnaire and modified it

following the objectives and setting of the study.  The survey questionnaire was

then given to the research adviser, statistician, and the research panel members
to be reviewed for errors, corrections, suggestions and validation. After being

validated, researchers made revisions based on the suggestions of the key

personnels to complete the survey questionnaire. Thereafter, requested

permission was sent through a letter to the campus director to conduct the study

within the area, which the adviser, department chairman, and college dean

officially noted. The letter for conduct was then forwarded to the respective

municipality and after receiving the approval of the mayor, the researchers

started to gather data for the pilot testing. With the approval of the statistician for

the reliability of the study, the researchers began to conduct their final survey. 

After the data collection from the respondents were obtained, the

researchers tallied the with the guidance and assistance of the statistician.

Finally, based on the results from the statistician, the researchers with the help of

the adviser, the findings were interpreted. Conclusion and recommendations

were then provided. Nevertheless, the outcome helped determine whether or not

the variables have a significant relationship.

Statistical Treatment

The data gathered through the questionnaires were tallied and treated

using the following statistical tools:

Frequency and Percentage. This was used to determine the business

profile of the respondents in terms of type of the business, size of the business,

and number of years in the business.

 Mean. This was utilized to assess the extent of budgeting practices of

Small and Medium - sized enterprises and level of profitability of the business

enterprise.

Multiple Regression. This was applied to identify the significant impact of

budgeting practices on the profitability of small and medium sized enterprises in

Tacurong City.
 Chapter IV 
RESULTS AND DISCUSSION 

The analysis of the data collected from the small and medium - sized

enterprises of Tacurong City is presented in this chapter. Adopted questionnaire

were sent to respondents who were the owners or managers of the small and

medium - sized enterprises in Tacurong City

Business Profile of SMEs in Tacurong City, Sultan Kudarat

The following tables show the business profile of SMEs in terms of their

type of the business, size of the business, number of years in the business, and

the structure of budgeting practices of enterprises.

Table 2.1 Business Profile of the SMEs in terms of their Type of

the Business

Frequency Percentage
Type of the Business
(n = 100) %
Sole 104 70.3
Corporation 44 29.7
Total 148 100.0

Table 2.1 above summarizes the demographic profile of the respondents

in terms of their type of business. With regards to the type of business, sole

proprietorships have the highest percentage of respondents (104 or 70.3% out of

148 respondents). While 44 or 29.7% were corporations, and 0% for partnership.

According to Mulani et al. (2015) study, which examined how ownership structure

affected company performance and discovered that institutions with dispersed

ownership and non - owner managers improved the performance of the

enterprises more than family - run businesses with owners in charge and

corporation owner - directors.

Table 2.2 Business Profile of the SMEs in terms of their Size of

the Business

Frequency Percentage
Size of the Business
(n = 100) %
Small 113 76.4
Medium 35 23.6
Total 148 100.0

Table 2.2 above summarizes the demographic profile of the respondents

in terms of their size of the business. Regarding the size of the business, most of

the respondents were small - sized enterprises (113 or 76.4% out of 148). In

comparison, 35 or 23.6% were medium - sized enterprises. The result implies

that small - sized enterprises dominate the industry. As per record of Philippine

Statistics Authority of the 2016 List of Establishments, there are a total of

915,726 businesses operating in the Philippines, of which 9.50% (86,955) were

small enterprises, and 0.44% (4,018) were medium enterprises. 

When the size of the business is considered, it offers a more balanced

view of how the firms are functioning. Big firms have a lot of money and

resources to expand. As a result, they benefit from greater economies of scale,

which allows businesses to be more efficient. A strong market position and

increased bargaining power with consumers and suppliers are also supported by

large resources (Nasrudin, 2022).

Table 2.3 Business Profile of the SMEs in terms of their Number

of Years in Business

Frequency Percentage
Number of Years in Business
(n = 100) %
1 - 5 years
39 26.4
6 - 10
74 50.0
11 - 15
35 23.6
Total 148 100.0

Table 2.2 above summarizes the business profile of the respondents in

terms of their number of years in their business. It revealed that most of the

respondents are operating for 6 - 10 years with 50% or frequency of 74 and the

least number of respondents operate for 11 - 15 years with 23.6% or frequency

of 35.  

There is a statistically significant association between business age and

company performance. Firm performance rises with age and learning

experience, according to the life-cycle approach. It goes on to claim that the

firm's performance increases until a certain age, when it starts to decline

(Radipere and Dhliwayo 2014).

Table 3 The extent of budgeting practices of Small and Medium

Enterprises

Item Mean Descriptive Level

Budget Planning 4.23 Very High
Budget Control
3.99 High

Budget Coordination 4.03 High

Budget Communication 3.99 High

Budgetary Evaluation Process 3.99 High

Overall 4.23 Very High

Table 3 shows the extent of budgeting practices of Small and Medium

Enterprises (SME) in Tacurong City. Budget planning had the highest mean of

4.23 which has a descriptive level of very high among respondents. It was

followed by budget control that has a total mean of 4.03 and a descriptive level of

high. The other variables which are the budget communication, budget

coordination and budgetary evaluation process has the lowest mean which is

3.99. The result shows an overall mean of 4.05 with a high descriptive level. It

shows that SMEs in Tacurong City have a high extent of budgeting practices.

This supports the study of (Qi, 2010) that suggests that budgets set performance

goals for the organization in terms of expenditures and revenues for each of its

activities.
Table 3.1 The extent of budgeting practices of Small and Medium

Enterprises in terms of Budget Planning

Descriptive
Item Mean
Level
1. The enterprise creates budgets for their
respective departments which are
subsequently combined to create the 4.43 Very High
master budget.
2. The enterprise communicates budget
strategies to people responsible for budget
preparation. 4.26 Very High

3. The enterprise past data is used as a

starting point to develop budget plans 4.35 Very High
4. The budget plan in the enterprise specifies
the allowances and variances to the
4.11 High
different parameters.
5. The procedures that should be followed in
the enterprise throughout the budgeting
3.99 High
processes are specified in the budget plan
Overall 4.23 Very High

Table 3.1 shows the extent of budgeting practices of Small and Medium

Enterprises in terms of budget planning, and it has an overall mean of 4.23 and

has a descriptive level of very high. According to Whatman (2023) budget

planning is one of the most important components of the plan since it keeps you

focused and on track as the company expands, new issues occur, and
unanticipated crisis strikes. Therefore, the results demonstrate that SMEs in

Tacurong City have a budget and construct processes and plans that they follow.

Table 3.2 The extent of budgeting practices of Small and Medium

Enterprises in terms of Budget Control

Descriptive
Item Mean
Level
1. Budgeting control allows the enterprise to
3.91 High
match actual outcomes with the strategy.
2. The strategic planning and operational
management in the enterprise are connected
3.96 High
through budgeting control.

3. The operational budget control in the

enterprise comprises comparing actual costs
4.05 High
and spending to the plan and taking the
appropriate corrective action.
4. The process of managing the budget in the
enterprise starts at the bottom and moves 4 High
up.
5. Budget 5management in the enterprise helps
in recognizing budget fluctuation which 4.05 High
allows the elimination of some
Overall 3.99 High
 

Table 3.2 shows the extent of budgeting practices of Small and Medium

Enterprises in terms of budget control, and it has an overall mean of 3.99 and

has a descriptive level of high. When corporate organizations adopt continuous

budgetary management, it is usually simple to foresee operational changes and

respond immediately to them by making certain modifications (Chaudhary, 2019).

Thus, the result implies that budgetary control plays an essential role in the

proper allocation and mobilization of resources, which reduces wasteful costs

and increases income creation.

Table 3.3 The extent of budgeting practices of Small and Medium

Enterprises in terms of Budget Coordination

Mea Descriptive
Item
n Level
1. The enterprise guarantees
that increasing employee
participation in planning 4.06 High
would increase effective
budgeting processes.
2. The enterprise places a
strong emphasis on
information sharing and 3.97 High
exchange amongst all
levels of management.
3. Computers are used by the
enterprise to help in 4.04 High
budgetary coordination.
Overall 4.03 High

Table 3.3 shows the extent of budgeting practices of Small and Medium

Enterprises in terms of budget coordination, and it has an overall mean of 4.03

and has a descriptive level of high. According to Assey (2014) research, the

numerous operations inside a corporation should be coordinated via the

formulation of action plans for future periods. The results reveal that SMEs

maximize proper resource use in appropriate and right methods.

Table 3.4 The extent of budgeting practices of Small and Medium

Enterprises in terms of Budget Communication

Mea Descriptive
Item
n Level
1. The enterprise is clear about its
roles in developing an effective 4.06 High
budgeting process.
2. The enterprise develops a
budget to describe the goals
3.97 High
and aspirations in order to
increase understanding.
3. The enterprise provides a
justification for their budget 4.04 High
choice.
4. The enterprise enhances
communication when it comes 4.07 High
to budgeting.
5. The enterprise notifies all
significant parties of the effects 4 High
of budget decisions.
Overall 3.99 High
 

Table 3.4 shows the extent of budgeting practices of Small and Medium

Enterprises in terms of budget communication, and it has an overall mean of 3.99

and has a descriptive level of high. Strong budget institutions, together with clear

communication and budgetary openness, increase confidence, according to

Rosenberg (2021). Credibility, in turn, enhances access to loans and provides

more leeway in times of crisis. Based on the result, the firm promotes budgeting
communication and notifies all relevant stakeholders of the consequences of

budget decisions.

Table 3.5 The extent of budgeting practices of Small and Medium

Enterprises in terms of Budgetary Evaluation Process

Mea Descriptive
Item
n Level
1. The enterprise actively
participates in the evaluation
3.99 High
and oversight of the budgetary
process.
2. The enterprise assesses the
effects of budget 4.19 High
implementation.
3. Assessment is done by a body
that is independent of the
4.07 High
enterprise and has sufficient
resources and capacity to do so.
4. The enterprise assesses
whether resources have been 4.05 High
used properly and effectively
Overall 3.99 High

Table 3.5 shows the extent of budgeting practices of Small and Medium

Enterprises in terms of budgetary evaluation process, and it has an overall mean

of 3.99 and has a descriptive level of high. The budgeting process includes

actions such as development and implementation. The development, execution,

and assessment of a plan for the supply of services and capital assets provides a

chance for subordinates to become involved in planning and performance

measurement, a process that has historically been viewed as top management's

responsibility (Gudeta,2017). Thus, the results shows that budgetary evaluation

process is implemented by the enterprises in Tacurong City. 

Table 4 Level of Profitability of Business Enterprise

INDICATORS Mean Descriptive Level

Growth in Sales/Revenue 3.79 High

Profit Margin 3.95 High

Return on Investment (ROI) 4.06 High

Return on Assets (ROA) 4.05 High

Return On Equity (ROE) 3.93 High

Economic Value Added (EVA) 3.89 High

Total 3.95 High

Table 4 represents the degree of profitability among business firms.

Return on Investment had the highest mean of 4.06 among respondents. (ROI).

All of the indications are quite profitable. Furthermore, the grand mean of 3.95

indicates that the respondents had a high degree of profitability. As a result,

small and medium-sized businesses appear to be profitable. The study by Harb

(2019) confirmed the finding that increasing productive efficiency was

significantly influenced by profitability and financial performance.

Significant Impact of Budgeting Practices on the Profitability of Small and

Medium Sized Enterprises

Table 5. Model Summary

Model R R-Square Adjusted R Square Std. Error of the estimate

1 .425a .180 .152 .33515

a. Predictors: (Constant) budget planning, budget control, budget

coordination, budget communication, budgetary evaluation process

       The model summary shows that correlation coefficient of R was .425. An

adjusted R square of .152 means that budget planning, budget control, budget

coordination, budget communication and budgetary evaluation process can

impact the profitability by 15.2% while the remaining 84.8% are affected by other

variables that were not within the scope of the study.

Table 6. ANOVA

Model Sum of Squares df Mean Square F Sig.

 1 Regression 3.512 5 .702 6.253 .000b

Residual 15.951 142 .112

Total 19.462 147

a. Dependent Variable: profitability

b. Predictors: (Constant) budget planning, budget control, budget

coordination, budget communication, budgetary evaluation process

In this study, the confidence interval is 95% and the level of significance is

5%. It can be seen in table 6 that the degree of freedom is at (5, 147) with the F

value of 6.253 and with a significant value of .000 which is less than 0.05. As a

result, it demonstrates that the dependent variable is statistically substantially

predicted by the regression model. 

Table 7. Regression Coefficient

Budgeting Unstandardized Standardized

Practices Coefficients Coefficients

(Indicators) B Std. Error Beta T Sig.

(Constant) 1.748 .442 3.952 .000

Budget Planning .095 .095 .087 .999 .320
Budget Control
.096 .115 .102 .831 .407

Budget
.052 .114 .056 .454 .651
Coordination
Budget
.252 .095 .251 2.653 .009
Communication
Budgetary
.054 .096 .050 .557 .578
Evaluation Process
R .425a
R2 .180

F 6.253

P .000

a. Dependent Variable: Profitability

Presented in Table 7 is the result of regression analysis made on

budgeting practices and profitability of SME’s in Tacurong City. The data

revealed that not all domains of budgeting practices have significant impact on

profitability of SME. The result showed a budget planning domain, t=.999, p=.320

which is greater than 0.05. Thus, the null hypothesis is accepted, which means
that there is no significant impact of budgeting practices on profitability of SMEs

in Tacurong City in terms of planning. This is in contrast to the study of

Samuelsson et al. (2016) discovered that adopting budgets for planning has a

positive effect on output.

Budget control domain has, t=.831, p=.407 which is more than 0.05.

Hence, the null hypothesis is accepted. This implies that there is no significant

impact of budgeting practices on profitability of SMEs in Tacurong City in terms

of budget control. It complements Foster's (2017) research, which discovered a

weak link between the frequency of budget reviews and financial performance.

Budget control was highlighted by the researcher as being an unreliable indicator

of company growth.

Budget coordination domain has, t=.454, p=.651 which is higher than 0.05.

Therefore, the null hypothesis, according to which there is not a significant

impact of budgeting techniques on the profitability of SMEs in Tacurong City in

terms of budget coordination, is accepted. The findings are in contrast to the

study by Susuawu (2020), which found that performance is slightly improved by

firms that implement budgetary management into their operations and plan,

coordinate, and monitor their spending.

Budget communication domain, t= 2.653, p=.009 which is less than 0.05.

This shows that there is significant impact of budgeting practices on profitability

of SMEs in Tacurong City in terms of budget communication. Moreover, it also

supports the study of Matsoso, Nyathi, and Nakpodia (2021) which reinforces the
communication power of budgeting and budgetary controls by incentivizing SMEs

and economic agents to assist in the achievement of corporate objectives.

Budgetary evaluation process domain has a t=.557, p=.578 which is

higher than 0.05 which shows that null hypothesis is accepted. It means that

there is no significant impact of budgeting practices on profitability of SMEs in

Tacurong City in terms of the budgetary evaluation process. According to the

survey, the majority of participants believed that periodic evaluations of budget

preparation were suitable given the current situation and helped to avoid financial

mismanagement, which is why the results are in contrary to the study of Mkanjala

(2017).
 Chapter V

SUMMARY, CONCLUSION AND RECOMMENDATIONS

  This chapter shows the summary, conclusion and recommendations of the

study. The study objective was to determine the impact of budgeting practices on

the profitability of small and medium - sized enterprises in Tacurong City. The

chapter also show the recommendations for policy and practice as well as

suggestions for further research.

Summary

  The study sought to determine how the budgeting practices impacts the

profitability of small and medium - sized enterprises in Tacurong City.  The

respondents are the 148 small and medium enterprises who answered the

survey questionnaires prepared by the researchers. The researchers distributed

survey questionnaires to the respondents as the main data gathering instrument.

The data was statistically tabulated and analyzed based on the study’s

descriptive level and interpretation. 

The following are the findings of the study: 

The budgeting practices with its indicators yielded an overall mean of 4.05

described as a high extent. This means that the SME’s in Tacurong City have

budgeting practices. Furthermore, budget planning was observed to have the

highest mean score which indicates a very high extent compared to other

indicators.

Level of profitability showed a grand mean of 3.95 and was interpreted as

high. The results indicate that SMEs are gaining profit. Moreover, Return on

Investment (ROI) was observed to have the highest mean among other

indicators.

Furthermore, the data revealed that not all domains of budgeting practices

influence profitability of SME’s. T The analysis found that the sole area that

affects profitability is budget communication. However, Table 6's substantial

value of.000, which is less than 0.05, illustrates how budgeting procedures

generally have significant effects on SME profitability. Thus, the null hypothesis is

rejected.

Conclusion

Regarding the impact of budget planning on the profitability of the SMEs in

Tacurong City, the researcher concludes that budget planning has no significant

impact on the profitability of the SMEs in Tacurong City. Concerning the impact

of budget control on the profitability of the SMEs in Tacurong City, the researcher

established that budget control has no significant impact on the profitability of the

SMEs in Tacurong City.

On how budget coordination influences the profitability of the SMEs in

Tacurong City, the study found out that budget coordination has no significant

impact on the profitability of the SMEs in Tacurong City. On how budget

communication influences profitability of the SMEs in Tacurong City, the study

found out that budget communication has a positive impact which is statistically

significant to the profitability of the SMEs in Tacurong City.

Regarding the impact of the budgetary evaluation process on the

profitability of the SMEs in Tacurong City, the study found out that budgetary

evaluation has no significant impact on the profitability of the SMEs in Tacurong

City. The researcher concluded that there is a weak association between the

profitability and budgeting practices of SMEs in Tacurong City. Thus, accept null

hypothesis.

Recommendations

The result of the study reveals that the respondents of the study, which

are the small and medium enterprises in Tacurong City, always perform

budgeting practices and their profitability is good. In addition, there is a

significant impact between budgeting practices and profitability, therefore, the

researchers recommend that SMEs should continue to perform budgeting

practices.

The researchers recommend Tacurong City's local government unit to

hold seminars and programs to support and maintain the application of budgeting

methods and to highlight their significance, particularly in terms of making

money.
 The researcher recommends future researchers to use this study as a

reference and reconduct the study to evaluate and verify the result. Also, the

researcher recommends looking for different set of variables.