AN EMPIRICAL ASSESSMENT OF BUDGETING TECHNIQUES AND THEIR INFLUENCE ON THE FINANCIAL SUSTAINABILITY AND PERFORMANCE OF SMALL AND MEDIUM-SIZED ENTERPRISES

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TOPIC: AN EMPIRICAL ASSESSMENT OF BUDGETING TECHNIQUES AND THEIR INFLUENCE ON THE FINANCIAL SUSTAINABILITY AND PERFORMANCE OF SMALL AND MEDIUM-SIZED ENTERPRISES

TABLE OF CONTENT
Abstract
CHAPTER ONE: INTRODUCTION
1.1 Background of the Study
1.2 Statement of the Problem
1.3 Research Questions
1.4 Objectives of the Study 
1.5 Hypotheses
1.6 Justification of the Study
1.7 Scope of the Study
CHAPTER TWO: LITERATURE REVIEW
2.0 Preamble
2.1 Concepual Review
2.2 Theoretical Review
2.3 Empirical Review
2.4 Theoretical Framework
CHAPTER THREE: RESEARCH METHODOLOGY
3.1 Introduction
3.2 Research Design
3.3 Population of the Study
3.4 Sampling Technique and Sample Size
3.5 Description of Research Instrument
3.6 Validity of Data Gathering Instrument
3.7 Method of Data Collection
3.8 Method of Data Analysis
CHAPTER FOUR: DATA PRESENTATION AND ANALYSIS
4.0 Introduction
4.1 Data Presentation    
4.2 Demographic Analysis 
4.3 Analysis of Incremental Budgeting And Financial Performance/Sustainability
4.4 Analysis of Capital Budgeting And Financial Performance/Sustainability
CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATION
5.1 Introduction
5.2 Summary
5.3 Conclusion
5.4 Limitations of the Study
5.5 Recommendations
5.6 Suggestions for Further Studies
References
Appendix

ABSTRACT
This study was carried out to examine the influence of budgeting techniques on the financial sustainability and performance of small and medium-sized enterprises in Ikeja, Lagos State. The study was specifically carried out to examine the effect of incremental budgeting on the financial performance and sustainability of small and medium-sized enterprises, assess the influence of capital budgeting on the financial performance and sustainability of small and medium-sized enterprises, evaluate the impact of participatory budgeting on the financial performance and sustainability of small and medium-sized enterprises and determine the effect of cash budgeting on the financial performance and sustainability of small and medium-sized enterprises. The study employed the survey descriptive research design. Hence, the questionnaire was used for data collection, while the data collected were analyzed using frequency tables, mean scores and standard deviation. The hypotheses test was conducted using Multiple Regression statistical tool, SPSS v.23. A total population of 20,000 CEOs and CFOs of SMEs in Ikeja, Lagos State was used for the study, while 392 respondents were selected as sample size using stratified and purposive sampling techniques. The validated sample size for the study was 377 respondents. The participants consisted of Chief Executive Officers and Chief Financial Officers of SMEs in Ikeja, Lagos State. From the responses obtained and analyzed, the findings revealed that incremental budgeting has significant effect on financial performance and sustainability of SMEs at β = 0.294, R2 = 0.674, P = .000. The study also showed that capital budgeting has significant influence on financial performance and sustainability of SMEs at β = 0.261, R2 = 0.674, P = .000. Likewise, the study further revealed that participatory budgeting has significant impact on financial performance and sustainability of SMEs at β = 0.214, R2 = 0.674, P = .001, while cash budgeting has significant effect on financial performance and sustainability of SMEs at β = 0.239, R2 = 0.674, P = .000. The study therefore recommends that SMEs should adopt effective budgeting techniques in order to improve financial planning, resource allocation, liquidity management and long-term sustainability.
Keywords: Budgeting Techniques, Financial Sustainability, Financial Performance, Small and Medium-Sized Enterprises, Capital Budgeting.

CHAPTER ONE
INTRODUCTION (Preview)
1.1 Background of the Study
Globally, small and medium-sized enterprises (SMEs) are universally recognised to be important drivers of economic growth, job creation and innovation especially in emerging and developing economies. Contemporary scholarship has come to associate the quality of financial management practises adopted with SME longevity and competitiveness, and budgeting takes a central place in coordination of resources and strategic intent. Ines (2025) explains that effective budgeting provides an organised framework of operational activities which are aligned to financial objectives and this leads to strengthening performance outcomes. Corroborating this view, Sabore (2025) postulates that budgeting practises form a fundamental part of financial management systems to improve accountability, cost control and sustainability in SMEs. Beyond the operational efficiency, however, budgeting has become more deeply embedded in the concept of sustainability, as there is a growing need for companies to find a balance between financial viability and long-term value creation. Oduro (2024) and Gorondutse et al. (2020) goes further to prove that structured financial controls such as budgeting are the backbone of sustainable performance as they enable SMEs to change strategically in line with dynamic business environments. As such, budgeting has emerged as a major mechanism that the SMEs implement financial planning to its sustained performance.
Built on this global view, the debates in the recent past have been focused around the study of certain budgeting techniques and their differential implications in the performance and sustainability of SMEs. Incremental budgeting for example is often seen as a pragmatic approach that is conducive to stability by making necessary adjustments in previous budgets in order to meet current realities hence financial performance in the short run (Ihenyen and Ekpoamumemi, 2024). According to Asikogu et al. (2021), such techniques are applicable particularly in situations where resources are limited and predictability and control are of the utmost importance. In contrast, capital budgeting has come to the fore for its strategic orientation as it is concerned with making decisions with respect to long-term investments that impact future cash flow and competitive positioning. Purnamasari and Adriza (2024) believe that capital budgeting techniques can enhance financial performance in order to make the investment appraisal and the capital allocation more efficient. Groda et al (2025) further add that the systematic capital budgeting is helpful in sustainability as it makes sure that the investment decisions are in line with the long-term goals of the organisation. Collectively these perspectives highlight the changing view that varying techniques of budgeting have various contributions to the financial outcome of SMEs.
As the discourse is further developed, participatory budgeting has attracted scholarly interest and research on the governance and behavioural implications in the context of SMEs. Participatory approaches focus on the participation of managers and employees in budget formulation this leads to ownership, transparency and better decision-making. Olawale and Balogun (2025) postulate that participatory budgeting enhance internal control system and improvement in performance by means of better coordination and motivation. Similarly, Kasongo and Kabubi (2025), has explained that the financial practises are inclusive and this helps to promote managerial commitment and also help in the execution of financial plans. These arguments are in line with the resource based view taken by Hamzah (2025) who argues internal capabilities such as managerial involvement and financial competence are crucial to sustaining SME performance. Moreover, participatory budgeting also complements wider frameworks of financial literacy and competence as highlighted by Babajide et al. (2021) and Nyaga and Kariuki (2025) and who link inclusive financial practises to better growth and sustainability outcomes. As a result, participatory budgeting has also been increasingly considered as a force to bring human capital and financial goals together.
Closely related to these approaches to budgeting is cash budgeting, which is concerned with managing liquidity and assuring the availability of funds to meet the obligations of the operation. Cash budgeting is known to be basic to financial stability mainly to SMEs who engage in volatile markets. Folajinmi and Peter (2020) explain that the cash budgeting is effective for performance as it reduces liquidity mismatch and make informed short-term decisions. In regard to this argument, Ikpor and Lishilinimye (2025) state that the cash flow management is a major component in the sustainability of SMEs since it is the basis for the resilience and continuity. The growing integration of the budgeting with the digital and control systems too reaffirms the importance of cash budgeting in SME management nowadays. Ebhota et al. (2024) shows that budgeting and budgetary control when combined with the digital transformation has significant influence on financial performance of SMEs. Similarly, Hasu et al. (2025) indicate management control systems contribution in linking financial planning processes and sustainable performance outcomes. These insights all together make cash budgeting a critical add-on to other budgeting frameworks.
Against this inter-related background, the dispensation of budgeting techniques assumes particular prominence in the context of developing urban economies such as Lagos State Nigeria where the SMEs are operating in a complex environment of competitiveness. Nigerian research has always identified budgeting as a key element in good financial management and sustainability in small and medium scale enterprises. Chituru L, Alagbande D, Uddt A, et al Budgeting Role in Promoting SME Sustainability in Lagos State: The Importance of Budgeting in Performance Monitoring and Strategic Alignment. Similarly, Festus and Oyindamola (2020) relate structured financial re-engineering such as budgeting practises with improved SME growth and performance in Nigeria. Narrowing down to Ikeja, Lagos State commercial centre SME is referred to as diversity in sectors, dynamic markets and demand for financial discipline. Ibrahim (2025) and Ihenyen and Ekpoamumemi (2024) suggest that budgeting techniques and financial sustainability relationship is context-specific, and affected by managerial capacity and institutional conditions. Consequently, the analysis of the three budgeting models namely incremental, capital, participatory and cash budgeting in the context of SMEs in Ikeja provides the empirical relevant context for the understanding of the role of budgeting techniques in financial performance and sustainability.

1.2 Statement of the Problem
Small and medium sized enterprises are increasingly expected to have good financial performance and long term financial sustainability in an environment of increased competition, cost pressures and changing expectations of stakeholders. The ideal situation is one where SMEs systematically use applicable budgeting techniques to help them allocate their resources, improve their financial control and contribute towards achieving sustainable growth trajectories. Previous researches assert that well structured budgeting and money management practises are positively related to better performance and sustainability results (Sabore, 2025; Ikpor & Lishilinimye, 2025). Similarly, Ines (2025) and Hamzah (2025) emphasise that budgeting, being one of the internal financial capabilities, should be a process of translating strategic intentions into concrete financial achievements. However, the current situation in different SMEs indicates the disproportionate implementation and use of budgeting techniques depending on the implications for performance and sustainability. Existing empirical evidence suggests that even though budgeting is recognised as important, there is no uniformity and complete understanding regarding the influence of budgeting in various budgeting approaches and SME contexts (Ihenyen and Ekpoamumemi, 2024; Ebhota et al., 2024).
More specifically, the literature in existence shows incomplete knowledge on the (individual and combined effects) influence of different budgeting techniques, such as incremental, capital, participatory and cash budgeting on the financial performance and sustainability of SMEs. While some studies are focused on capital budgeting, such as Purnamasari and Adriza (2024), using performance comparison other studies are focused on financial management practises in genral without focusing on an specific budgeting method (Folajinmi & Peter, 2020; Sabore, 2025). Moreover, the studies focused on the Nigerian context are often on budgeting in aggregate or in different geographical contexts, and this makes the studies less contextual specific (Chituru et al., 2023a; Festus & Oyindamola, 2020b). This leaves a gap in knowledge about the relative impact of some of the budgeting techniques in the financial outcome of SME in Ikeja, Lagos State. As a result, the intention of this study is to bridge this gap by empirically analysing the effect of incremental, capital, participatory, and cash budgeting financial performance and sustainability of SMEs in Ikeja to provide evidence that is context specific in order to improve theory and practise.
1.3 Research Questions
This study seeks to provide answers to the following research questions: 
i.What are the effect of incremental budgeting on the financial performance and sustainability of small and medium-sized enterprises?
ii.What are the influence of capital budgeting on the financial performance and sustainability of small and medium-sized enterprises? 
iii.What are the impact of participatory budgeting on the financial performance and sustainability of small and medium-sized enterprises?
iv.What are the effects of cash budgeting on the financial performance and sustainability of small and medium-sized enterprises?
OTHER PARTS OF CHAPTER ONE INCLUDE:
1.4Objectives of the Study
1.5 Research Hypotheses
1.6 Research Gap
1.7 Justification of the Study
1.8 Scope of the Study

CHAPTER TWO
REVIEW OF LITERATURE (Preview)
This chapter critically examines relevant literature that would assist in explaining the research problem and, furthermore, recognizes the efforts of scholars who had previously contributed immensely to similar research. The chapter intends to deepen the understanding of the study and close the perceived gaps. This chapter, therefore, focuses on the concept of budgeting, the concept of budgeting techniques, types of budgeting techniques, financial sustainability of small and medium-sized enterprises, business performance, and the influence of budgeting techniques on the financial sustainability and performance of small and medium-sized enterprises. The chapter covers the following subheadings:
2.1 Conceptual Framework
2.2 Theoretical Framework
2.3 Empirical Review
2.4 Summary of Literature Review

CHAPTER THREE
RESEARCH METHODOLOGY (Preview)
Research Design: The study adopted a descriptive survey research design.
Population of the Study: The population of the study comprises CFOs of small and medium-sized enterprises in Ikeja, Lagos State, Nigeria.
Sample Size Determination: The study adopted the Taro Yamane formula to determine a sample size of 392 participants.
Sampling Technique: The study employed stratified and purposive sampling techniques to select the individual respondents.
Research Instrument: The study utilized a structured questionnaire titled “Budgeting Techniques and Their Influence on the Financial Sustainability and Performance of Small and Medium-Sized Enterprises” as the instrument for data collection.
Methods of Data Analysis: The collected data were analyzed using frequencies, percentages, means, and standard deviations to summarize and present the demographic characteristics of the respondents and their responses. Inferential statistics, such as multiple regression analysis, were used to test the hypotheses.

CHAPTER FOUR; DATA PRESENTATION AND ANALYSIS
MAJOR FINDINGS (Preview)
The analysis results were presented in tables. Based on the results obtained from the analysis, the following findings are made:

i. The study found that incremental budgeting positively influences the financial performance and sustainability of small and medium-sized enterprises in Ikeja, Lagos State, as evidenced by mean scores ranging from 3.46 to 3.50, which are above the acceptance benchmark of 3.00. The corresponding hypothesis test further showed a beta coefficient (β) of 0.294, t-value of 5.404, and p-value of 0.000 (p < 0.05), leading to the rejection of the null hypothesis.

ii. The study found that capital budgeting positively influences the financial performance and sustainability of small and medium-sized enterprises in Ikeja, Lagos State, as evidenced by mean scores ranging from 3.48 to 3.55, which are above the acceptance benchmark of 3.00. The corresponding hypothesis test further showed a beta coefficient (β) of 0.261, t-value of 5.041, and p-value of 0.000 (p < 0.05), leading to the rejection of the null hypothesis.

iii. The study found that participatory budgeting positively influences the financial performance and sustainability of small and medium-sized enterprises in Ikeja, Lagos State, as evidenced by mean scores ranging from 3.48 to 3.53, which are above the acceptance benchmark of 3.00. The corresponding hypothesis test further showed a beta coefficient (β) of 0.214, t-value of 4.304, and p-value of 0.001 (p < 0.05), leading to the rejection of the null hypothesis.

iv. The study found that cash budgeting positively influences the financial performance and sustainability of small and medium-sized enterprises in Ikeja, Lagos State, as evidenced by mean scores ranging from 3.47 to 3.55, which are above the acceptance benchmark of 3.00. The corresponding hypothesis test further showed a beta coefficient (β) of 0.239, t-value of 4.569, and p-value of 0.000 (p < 0.05), leading to the rejection of the null hypothesis.

CHAPTER FIVE: SUMMARY, CONCLUSIONS AND RECOMMENDATIONS
This chapter covers the following outline:
5.1 Introduction
5.2 Summary 
5.3 Conclusion
5.4 Limitations of the Study
5.5 Recommendations
5.6 Suggestions for Further Studies

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