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Small and Medium-Sized Enterprises’ Budget Planning Essay

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Updated: Aug 19th, 2020

Entering the realm of the global economy is a complicated task, especially for SMEs, as the competition rates make it extremely difficult to design a proper budgeting strategy and, therefore, allocate the existing financial resources in a proper manner. Although the recent innovations in the IT field have opened several new opportunities for companies all over the world, the risks for SMEs to enter global trade are still high, as there is a consistent threat of misallocating the company’s costs and, therefore, failing to come up with an elaborate budget.

When it comes to considering the approach towards accounting for the expenditures made in the course of the company’s operations, a combination of quarterly reports and a quarterly audit can be considered an option. Seeing that the organization in question can be classified as small or medium entrepreneurship, it is essential that every single detail concerning the financial transactions occurring within the organization should be recorded properly.

While the specified precaution measures might seem redundant for an organization of a comparatively small size, where bureaucracy is unlikely to be a problem, a quarterly account of the financial moves made is essential for a proper analysis of the organization’s assets and the definition of the further strategy.

Despite the fact that defining the key costs is not likely to become a major problem, the company will also need to make sure that indirect costs will also be considered when planning the budget. Herein the significance to split the budget for direct (DC) and indirect costs (IC) emerges. Indeed, in the case of mismanagement and misuse of the company’s current assets, IC may become even greater than the DC. As Locker and Kienzler explain, the possible confusions and errors, which the staff may make in the process of implementing the company strategies and supervising the key production processes, may turn out to be “probably even higher” (Locker & Kienzler, 2012, p. 8) than DC.

The same can be said about the principle behind providing an account for the expenditures made by the organization. While including only major costs into the budget may be viewed reasonably, as minor issues are most likely not to register on the radar of the organization, it still is recommendable that even minor issues should be listed in the budget. Thus, the oncoming shortage in the funds for a specific issue will not turn out to be a surprise at the end of the year and can be resolved by using the money that has been saved due to a careful analysis of the financial transactions and the existing means of saving the organization’s financial resources.

As far as the types of income to be included in the budget are concerned, the passive, portfolio, and earned income types should be considered closer. Specifically, the income that comes from using various types of advertisement deserves a proper analysis. Seeing that trading in the global environment presupposes using the latest informational technology advances, it will be desirable to incorporate both traditional and modern advertisement strategies into the company’s approach to sales and promotion. As a result, the pay-per-click advertising strategy must be viewed as an option.

By using the modern media and the recent innovations in the IT sphere, even SMEs are likely to become successful in the global market. By making account of the key financial transactions and conducting regular audits, one will be capable of building a successful company. Moreover, with a consistent success in the specified area, a company previously defined as a small or medium entrepreneurship is likely to evolve and expand with the help of mergers and acquisitions.

Reference List

Locker, K. & Kienzler, D. (2012). Business and administrative communication. London, UK: McGraw-Hill.

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1. IvyPanda. "Small and Medium-Sized Enterprises' Budget Planning." August 19, 2020. https://ivypanda.com/essays/small-and-medium-sized-enterprises-budget-planning/.


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IvyPanda. 2020. "Small and Medium-Sized Enterprises' Budget Planning." August 19, 2020. https://ivypanda.com/essays/small-and-medium-sized-enterprises-budget-planning/.

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IvyPanda. (2020) 'Small and Medium-Sized Enterprises' Budget Planning'. 19 August.

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