Home⇛Business Research Journal⇛vol. 7 no. 1 (2021)

The Impact of Budgeting on Financial Performance of Retail Businesses in Valenzuela City

Psalm Joy M. Cawaling | Justine Kyla G. Natividad

 

Abstract:

Budgeting is critical for keeping business operations stable in the face of changing economic and market situations. By forecasting events, properly allocating funds and resources, and monitoring progress, a business can take advantage of growth opportunities and eventually attain its planned targets. However, this process is often overlooked by business owners and managers. The objective of this descriptive cross-sectional study was to determine the impact of budgeting on the financial performance of small and medium-sized retail stores in Valenzuela City. The budgeting process in this study was limited to budgetary planning and control, with sales revenue and profit growth as the primary indicators of financial performance. The adapted survey questionnaire was distributed digitally, and 105 responses were obtained. The analysis found that the average annual sales revenue of the retail stores was up to 3,000,000 and that sales revenue and profit had increased by 21% to 30%, and 11% to 20%, respectively, for the past three years. Using Pearson’s chi-square test, the significant difference between budgetary planning and year of operation was noted. The budgetary control and legal status also exhibited a moderate association. Although there was no significant relationship between the budgeting process and financial performance, budgetary control was a significant predictor of financial performance using ordinal logistic regression with a financial growth probability of .860 as control increased. With these findings, the researchers advised business owners and managers to implement a budgeting process with frequent and thorough monitoring since it could be a factor in realizing financial objectives.



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