Review: The Impact of Budgeting Practices on the Level of Profitability of Small Medium Enterprises

in the Municipality of Guagua, Pampanga

CHAPTER 1

The study presented on the impact of budgeting practices on the profitability of Small Medium Enterprises
(SMEs) in Guagua, Pampanga, addresses a crucial aspect of business management that holds significant
implications for economic sustainability and growth. The introduction effectively sets the stage by
highlighting the vital role SMEs play in employment and GDP contributions, reflecting their importance in the
local economy of Pampanga and beyond. The authors underscore the troubling statistic that millions of
SMEs have exited the market due to poor performance, establishing a compelling rationale for the research
focus on budgeting practices.

One of the strengths of this research is its thorough exploration of existing literature, citing various studies
that link effective budgeting to improved financial performance. For instance, the references to works by
Pimpong and Laryea (2016) and Musah et al. (2018) reiterate the positive relationship between budgeting
and firm performance. Their findings help to build a robust theoretical framework that supports the idea that
effective budgeting can enhance resource allocation, decision-making, and ultimately profitability. The paper
also acknowledges contemporary issues affecting SMEs, such as the COVID-19 pandemic, which serve to
enhance the timeliness and relevance of the study.

Moreover, the recognition of barriers faced by SMEs—such as limited financial literacy and inadequate
access to financial resources—adds a layer of complexity to the discourse. By understanding these
challenges, researchers and practitioners can better appreciate the conditions under which budgeting
practices may or may not succeed. The findings from Fortuna (2021), which suggest that structured budgets
correlate with higher returns, further emphasize the need for SMEs to adopt formal budgeting processes,
reinforcing the study's core argument.

The practical contributions of this research are noteworthy. By detailing specific budgeting strategies,
including the notion of flexible budgeting, the study provides actionable insights for SME owners and
managers. This guidance is especially valuable for small enterprises operating under resource constraints,
where efficient financial planning can make a substantial difference in their survival and long-term
profitability. The call for sustainable and efficient financial strategies is a crucial takeaway, as it aligns with
the unique realities faced by SMEs.

On a theoretical level, the integration of goal-setting theory and budgetary control theory is an exciting
contribution. By framing the relationship between budgeting practices and profitability through these lenses,
the research offers a nuanced perspective that enriches academic discourse. This integration could serve as
a foundation for future empirical investigations that further analyze the interplay between these theories in
varying contexts, expanding the scope of understanding on an academic level.

In conclusion, the study addresses a pressing issue relevant to the sustainability and growth of SMEs in
Guagua, Pampanga. With its robust literature review, identification of practical challenges, and
recommendations for effective budgeting practices, it serves as a vital resource for both practitioners and
researchers in the field of business management. As SMEs continue to navigate their critical role in the
economy, understanding and implementing effective budgeting practices will be pivotal for their profitability
and overall success. Moving forward, it will be essential for future research to explore innovative solutions to
the barriers identified in the current study, ultimately helping SMEs thrive in complex economic landscapes.

Review of Chapter 2: Research Methodology

Chapter 2 offers a comprehensive overview of the research methodology employed in the study focusing on
the relationship between budgeting practices and the profitability levels of Small and Medium Enterprises
(SMEs) in Guagua, Pampanga. The methodology section is well-structured and provides clear insights into
various aspects of the study, including the research design, population and sampling strategies, research
instruments, and data gathering procedures.

Research Design

The choice of a Quantitative Methodology is appropriate, given the study's aim to analyze relationships
between numeric variables. The use of correlational research design is particularly suitable here, as it
allows for the examination of the strength and direction of relationships without inferring causation. This
approach provides a structured framework for identifying correlations between budgeting practices (the
independent variable) and profitability levels (the dependent variable), which is a crucial focus of the
research.
The adoption of Descriptive Correlational Design enhances the study's capability to represent complex
relationships and make abstract representations regarding the dynamics of budgeting practices within
SMEs. Citing established sources such as Seeram (2019) and McBurney & White (2009) lends credibility to
the methodological choices and grounds the research within recognized academic discourse.

Locale and Population

Choosing Guagua, Pampanga as the locale for the study is a strategic decision, as the area is characterized
by a diverse range of SMEs. This not only enriches the data pool but also enhances the relevance of the
findings to discussions about regional economic practices. Providing a breakdown of SMEs in different areas
furthers the understanding of the population distribution and allows for a more nuanced analysis of the data.

The decision to implement stratified random sampling is commendable, especially considering the varying
sizes of SMEs across different areas. This method ensures that the sample is representative of the entire
population, increasing the reliability and generalization of the findings. The detailed breakdown of the
sample composition adds transparency and rigor to the research methodology.

Research Instrument

The research instrument—a survey questionnaire adapted from Mbothu, J. W. (2012)—is well-designed to
capture the necessary data on both budgeting practices and profitability levels. The clear delineation
between the sections focused on company background, budgeting practices, and profitability metrics
ensures that the questionnaire covers a holistic view of the respondents’ situations.

Employing a 4-point Likert Scale for responses is a thoughtful choice, permitting nuanced insights
regarding the respondents' perceptions without offering a neutral option which can sometimes lead to
ambiguous results. Additionally, the mention of using Cronbach’s Alpha to test reliability demonstrates a
commitment to methodological rigor.

Data Gathering Procedure

The data gathering procedure is detailed, outlining steps taken to secure permissions and ensure ethical
standards through informed consent. The researchers' focus on confidentiality is essential for building trust
with respondents, highlighting their ethical commitment to conducting the study responsibly.

However, a suggestion for improvement could be the inclusion of specific strategies to enhance response
rates amongst SMEs, as such businesses may have varying levels of willingness or availability to participate
in surveys.

Conclusion

Overall, Chapter 2 provides a robust foundation for the study, effectively outlining a clear methodology that
aligns with the research objectives. The integration of quantitative methods, careful sampling strategies, and
a well-structured research instrument collectively work towards producing valuable insights into the impact of
budgeting practices on profitability levels among SMEs. The methodological rigor and ethical considerations
outlined in this chapter instill confidence in the research's potential validity and reliability, setting the stage
for meaningful outcomes.

Review of the Research Proposal: The Impact of Budgeting Practices on the Profitability of SMEs in
Guagua, Pampanga

This research proposal aims to investigate the impact of budgeting practices on the profitability of Small and
Medium Enterprises (SMEs) in the municipality of Guagua, Pampanga. The introduction effectively
highlights the importance of SMEs to the economy, emphasizing their contribution to GDP and employment
while acknowledging the challenges they face, particularly concerning profitability and survival.
Strengths of the Proposal:

 Relevance: The topic is highly relevant, given the significant role of SMEs in the economy and the
consistent challenges they face in achieving and maintaining profitability.
 Clear Problem Statement: The proposal clearly identifies the research problem: the impact of
budgeting practices on SME profitability, specifically in a particular geographical location.
 Solid Literature Review: The proposal draws upon existing literature to establish a foundation for
the study. It effectively summarizes the existing knowledge on the positive impact of effective
budgeting and highlights challenges SMEs face in implementing these practices.
 Theoretical Framework: The proposal indicates the integration of Goal-Setting Theory and
Budgetary Control Theory, providing a comprehensive theoretical framework for understanding the
relationship between budgeting and profitability. This adds depth and rigor to the research.
 Practical Implications: The proposal clearly articulates the practical implications of the study for
SME owners and managers. It emphasizes that the findings will provide valuable insights into
effective budgeting strategies for enhancing financial decision-making and profitability.
 Contribution to Knowledge: The proposal recognizes the contribution of the research both
theoretically and practically, demonstrating its potential to expand the existing body of knowledge on
SME management and financial practices.

Areas for Improvement:

 Specificity of Research Questions: While the objectives are stated, the proposal could benefit
from the inclusion of more specific research questions that guide the investigation. For example,
questions related to the types of budgeting practices employed, the relationship between different
budgeting practices and profitability, and the specific challenges faced by SMEs in Guagua could be
included.
 Methodology: The proposal mentions the use of quantitative research but lacks detail on the
specific methodology to be employed (e.g., survey design, sampling technique, data analysis
methods). Elaborating on the research design and data collection procedures would strengthen the
proposal.
 Contextualization: While the proposal highlights the importance of SMEs, it could benefit from
further contextualization of the SME landscape in Guagua, Pampanga. Providing insights into the
specific industries, challenges faced by SMEs in the region, and the potential influence of local
factors on budgeting practices would enhance the relevance of the study.
 Limitations: It's essential to acknowledge potential limitations of the study, such as the
generalizability of findings to other regions or industries, or potential biases associated with the
research methods. Addressing these upfront enhances the credibility of the research.

Overall Impression:

The research proposal presents a promising and relevant study on the impact of budgeting practices on
SME profitability. The introduction provides a strong foundation, and the proposal effectively leverages
existing literature. However, further development of the research questions, methodology, and
contextualization would enhance the rigor and clarity of the research. With these improvements, this
research has the potential to make significant contributions to the understanding of SME management and
financial practices in the Philippines.

POSSIBLE PROPOSAL DEFENSE QUESTIONS

1. In what part of your research do you think you will have the most difficulty with?
We will probably have the most difficulty with gaining respondents. In face to face, we could arrange a
meeting with the respondents, like asking the president or representative of their section and asking the
teacher to allow 10 to 15 minutes of their time. Persuading students online is actually a challenge because
you don’t know if they are currently available to do it and you can’t monitor them with your own eyes when
they are answering.

2. What do you think the weakness of your study is?

The weakness of our study will most likely be the respondents. Masyadong malaki Guagua, It covers only a
small demographic and within one institution. As much as the researchers would like to ask other students
from other institutions for help, we have neither the sources nor the connections.
3. Aside from the beneficiaries which you have mentioned earlier, do you think that corporate companies will
also benefit from the results of your research?

We believe so, the findings of our research may help corporate entities identify areas for improving their
budgeting practices. The results could provide insights into how budgeting practices can evolve as
companies grow in size.

4. What is your greatest motivation for choosing this topic?

[Personal Question, Personal Answers]
-is closely related to our course because budgeting is fundamentally about financial data
management, and our study can demonstrate real-world applications of the AIS principles.(it
can help us as an AIS students,the knowledge that we will gain can help us if ever we decide
to establish our own business or we can also use it at work.

5. What limitations of your research do you wish you could have included?
The greatest limitation towards this study is the respondents. We could say that we could be doing the whole
school, however as far as we know, we’re also the first to conduct this kind of study. A small population of
150 respondents will have to do for now from a single institution.

6. If you could add another variable to your study, what would it be?
We’re already fine with the variables that we have. If we add anymore, the research will become a bit more
complicated.

7. What are the main issues or debates in your chosen topic based on your related literature?
The issues we think are that researches we found used pandemic and mental illness as two separate things.
Or Depression would be the consequence of the pandemic. The level of negative emotions when it comes to
our chosen factors of the study (peer pressure, family environment, etc.) is all also separate and not put
within one study.

8. What are your dependent and independent variables? Can you explain how they affect each other?
The relationship between budgeting practices and profitability is dynamic and reciprocal. Strong
budgeting practices can lead to better profitability by using resources wisely, keeping costs down, and
making better financial choices. In return, if a business is making more profit, it might change how it
budgets, often taking more risks or being more open to new ideas.

9. Why did you choose a quantitative research design over a qualitative one?
We believe that quantitative method is well-suited in studying the impact of budgeting practices on
profitability because it allow for clear, measurable, and statistically accurate analysis of how budgeting
influences business performance.

10. What are your personal predictions for the results of your study?
We predict that there will be high negative emotions coming from the respondents, mostly on family
environment and/or peer pressure. The pandemic has caused a lot of Filipinos to be stuck at home with their
families. Or if they are living independently, perhaps cause them to be swayed by their peers to ease
loneliness.

11. What made you choose your sample (adolescents)?

We are surrounded by our peers almost every day, and we hear the shortcomings and difficulties of our
peers when they have no one else to turn to. We want others to know through our research that they are not
alone with what they are experiencing, and that being able to identify their negative emotions, of where it
may come from other than the crisis they are currently experiencing will benefit them in making choices in
making their living environment better.
12. What made you decide to create your own test instrument rather than using an existing, standardized
one?
We wanted our own test instrument because using others would focus on a different idea entirely from ours.
We want to focus on negative emotions, factors towards these negative emotions, and the effect of the
pandemic with these.

13. What was your basis for the creation of your test instrument and how different is it from them?
We have the Self-Esteem Rating Scale by Nugent & Thomas (1993) for self-esteem. As for others, there
were too many to consider for internal emotions since it deals with anxiety and depression. Family
environment had been either focused solely on parents or the physical or mental welfare of their children.
Peer pressure had also been more focused on being related to self-esteem and/or anxiety. We wanted to
make a test solely for our research.

14. What external variables do you think you will encounter during your data collection and how do you think
it will affect your results?
The only external variable we could think of is the pandemic. Which, we need because our research aims to
measure the negative emotions of students and correlate them to their profile, and they have to have been
going through a crisis.

15. What is the reason why your Economic Status is divided to Below Average, Average, Above Average?
To help the respondent identify where they belong within the economic status. Instead of answering through
numbers, we agreed that perhaps knowing whether a person is able to live with their current financial
capability is much more important to note.

1. Why did you choose this topic?

We choose this topic because instead of the common, commercial ink that we use,this study focuses on
making an alternative ink to lessen the usage of chemical components of the leading brand product of
markers and patronize the ecofriendly product.

2. Briefly, explain what your research project is all about?

This study is about producing an alternative marker ink from Alugbati fruit extract and to have a new source
and solve the problem for high value commercial ink.

3. What is the scope of the study The study aimed to test the viability of Alugbati fruit extract as an
ingredient to produce a marker ink.
This study aims to determine the viability of alugbati fruit extract to prove that it can be used to make an
organic marker ink

4. What is the significance of the study?

The results of this study will benefit all by creating alternative inks. These other manufactured inks are quite
expensive these days but the material used in our projects are common and easy to find , so you’ll spend
less money.
>This research study aim to help environmental crisis and prevention of health impediment for the
production of ink out of alugbati fruit extract
5. Did you bridge any gap from your study?

6. What are your research variables?

The alugbati fruit extract which serves as the independent variable and the color intensity as the dependent
variable. The viability of alugbati fruit extract as an alternative marker ink will depend on the color intensity of
the final product of this study.

7. What research methodology did you use?

The study dealt with experimental research methods. The experimental method is a problem-solving
approach that carefully controls and manipulates variables.

8. Why did you use that research methodology?

Experimental studies aim to test hypotheses about the relationship between cause and effect and represent
the most effective approach to solving problems physically and theoretically. This design fits this study
because it seeks to determine the viability of Alugbati as an organic alternative marker ink.

9. Why do you think your research is reliable?

To answer this question, simply tell your audience/panel of assessors that the threats to research reliability
(which are participants error, participant bias, research error, and researcher bias) did not occur during the
research. Or you can simply say that you made sure the threats were reduced to the barest minimum.

10. Why do you think your research is valid?

To answer this question, simply tell your audience/panel of assessors that the findings from your study can
be generalized to other relevant settings, group or case study.

11. In what way(s) does your research project contributes to knowledge?

This question is similar to your significance of the study. You should talk about how your research is aimed
at addressing a problem that was not addressed by previous researchers in your field of study. You should
also briefly state how your project will advance understanding in your research field.

12. What are the limitations encountered

No research project is perfect. It is common for at least one limitation to be identified. To answer this
question, talk about the weaknesses that were out of your control. You can talk about how weaknesses such
as the short time frame for the research, lack of research studies/materials on the topic, lack of available
data, the combination of lectures, exam and project research, limited sample size and selection, e.t.c
impacted the analysis of your research data.

13. Which programming language did you use to write your program?
(for computer science students) State the programming language and database used in the development of
your software/program. If you did not design the program yourself or you were assisted by a friend or
colleague, find out from the person which programming language was used. You might also ask the person
to give you a crash course on the programming language
14. Show us how your software works
(for computer science students) Make sure you are familiar with how the software works. Also, be sure that
there are no errors in the software. Go ahead and show the panel of assessors how the software functions.
You can also show them some records which you entered previously.

15. What source of data was employed for the research?

Here, you simply state the data collection methods that were used in the study. You should state if primary
sources such as questionnaires, interview, observation OR secondary sources such as textbooks, journals,
articles, e.t.c were used. If you combined primary and secondary sources, briefly talk about it.

16. What are your findings?

Show the descriptive results from the study in a convincing and clear style. Make sure your findings refer to
your research objectives/questions.

17. Based on your findings what are your recommendations/suggestions?

This is where you talk about the importance and implications of your findings from three levels namely:
1. Research (various ways other researchers can improve or refine the study)
2. Theory (the new contributions that you are adding to the body of knowledge) and
3. Practice (how the information gotten from your study can make practice better, improve the operational
procedures, solve problems, improve policy making e.t.c). Note: Avoid the temptation to make
recommendations that are not supported by your findings. Do not recommend based on your beliefs.

18. What is the strongest point in your project?

The duration of the defense might just be 10 - 15 minutes, as such the questioners will not have the time to
ask you about every detail. They will want to focus on the major ideas and ask you the most important
aspects of your research. Be ready to answer.

19. If you could change something regarding your study, what would it be?
The answer to this question can be gotten from the limitations of your study. You can give answers such as:
1. Given the constraints (like the short time frame for the research or lack of sufficient funds) I was
working with, this was what I was able to do but if I could do more, this is what I would have done.
2. In doing this I learned a problem with this kind of data collection. Next time, I will do it this way.

20. What questions do you have for us

You can ask them if there any revisions they want you to make in your report. Ask them to summarize the
major revisions, so you can take some notes.

21. Do you have any closing comments

Thank the panel of assessors and let them know that the revisions/corrections that were given (such as
rewriting the conclusion, tables/graphs that are not in the right format, something you said during the
defense and they want you to include it in the report or some other issues they noticed you did not capture)
would be implemented and shown to your supervisor.

In a project defense you are expected to:

- Present yourself as a scholar in the discipline and an authority on your subject.
- Cogently and clearly explain your work.
- Have a conversation with the panel of assessors.
- Defend any idea that might be disagreed upon. (That is why it is called a project defense).

Project Defense tips

1. Be academically, mentally and physically prepared for your presentation.
2. Practice, practice, practice. Rehearse several times with the equipment you will use for your presentation.
3. Have a thorough understanding of the nature of your research problem.
4. Make eye contact with more than one member of the panel of assessors during the course of your
presentation.
5. Don't speak too fast. Talk calmly with confidence.
6. Bring a copy of your project report with you for reference.