Budgeting and cost control challenges in small and medium enterprises construction projects in Cape Town

Abstract

Small enterprises are critical entities in many economies worldwide. This study was based on small enterprises in the construction sector, which significantly contribute to employment in South Africa. However, despite their critical role in the economy, small businesses have suffered from a high failure rate characterised by weaknesses in their financial management systems. Therefore, this study was formulated to explore budgeting and cost control challenges of small enterprises. Specifically, the objectives of the study were: (1) to investigate budgeting and cost-control approaches for effective construction project management, (2) to determine how better budget planning and cost control might help SMEs in the construction sector enhance their performance, (3) to explore how to improve the accuracy of budgeting and expense controls. A mixed research design was adopted, and qualitative and quantitative data were collected. Participants of the study were from selected small enterprises in the construction sector, most of whom were enterprise owners. The latter were most familiar with their budgeting and costing functions. Findings from the study provided evidence that inappropriate budgeting and costing affected the viability and sustainability of SMEs. The data collected also pointed out that construction SMEs lack the requisite business competencies, such as budgeting and cost control, that are needed for competitiveness. It was clear from the responses that there is a lack of financial, budgeting, and costing skills among construction SMEs. The study also concluded that budgeting and costing are essential skills for the viability of construction SMEs. However, SMEs lack the appropriate skills required for effective budgeting and costing. These findings are in line with some studies done by other researchers, which pointed to the essence of budgeting and costing in SME management. However, future research may need to investigate the underlying factors influencing budgeting and costing, such as cultural and individual socio-psychological characteristics.