Accounting Question

Summer Riddle

Mar 15, 2024, 3:06 PM

Unread

Dr. Duren and Classmates,

What restricts SMEs from adopting sophisticated capital budgeting practices?

https://doi-org.lopes.idm.oclc.org/10.1007/s11187-022-00648-z

Summary

This article reviewed the challenges of small and medium enterprises (SMEs) in regards to using the sophisticated method of capital budgeting (CB). The article was a study with collaboration from India, Malaysia, USA, and France. The most weighted barriers to CB were knowledge barrier of the decision makers and its techniques. Other barriers included time consumption, high complexity of the methods, and lack of financial education and training as well as computation technology. This study according to the author’s knowledge is the first of its kind and will help with managers/practitioners of SMEs knowledge base and ability to create CB techniques in business strategies with a focus on investment and long-term funds. Capital budgeting is a tool used to evaluate investment alternatives, project selection, and long term fund allocation.

The literature has been rising up in regards to SMEs in contrast to the plethora of studies on large corporations and capital budgeting. Special circumstances with the small business include lack of accounting systems, and professional staff. Their is a moat between academics and the putting theory into practice or maybe a lake to the small business owner which does not differentiate across global waters. A commonality among SMEs is the miscalculations regarding expenses, revenues, and under,over investing. The article implemented a literature review, Fuzzy analytical hierarchy process (F-AHP) and fuzzy decision-making trial and evaluation laboratory (F-DEMA-TEL). Calculation difficulty, time consumption, high complexity, high cost, trade-off between risk and returns, financial constraints, non-suitability to business condition, difficulty in understanding output, resistance to learning. There exists a lack of computation technology, required information, financial education, training, concept understanding, and top management support (Sureka et al., 2023).

Response

Well now that we know all the barriers what is the solution to these organizational, inherent, lack of knowledge, and receptive barrier roadblocks for the small business man who makes up 99% of the populaton in many countries worldwide. Cause and effect of why these barriers exist will help identify how to create change and possibly influence policymakers and financial educators to create more workshops to help the little guy. This article was very relevant to me in my journey as a nurse in healthcare. It is difficult to learn these concepts and then with the complexity of the math it takes a great deal of perseverance for anyone with challenges in math, computer technology etc. to obtain an MBA, run a business, or be proficient in your career. The decisions we make effect our cash-flow, our livelihood, and is serious to most. On a personal note In high school I remember spending hours trying to find a few pennies when recording entries in day to day business. Over the course of the last year I have struggled and spent hours and days repeating exercises and trying to learn the concepts. In the beginning Excel formatting took hours and now I can formulate them much quicker and have grown in my computer efficiency. I see the growth. To me it feels like snail pace but when I go into the office at work I can help my colleagues and create more value to the profession of nursing.

Thanks for reading my post.

Summer Riddle

References

Davis C. E., & Davis E. (2020). Managerial Accounting, Enhanced eText (4th ed.). John Wiley & Sons. ISBN-13:

978EEGRP40373

Sureka, R., Kumar, S., Mukherjee, D., & Theodoraki, C. (2023). What restricts SMEs from adopting sophisticated capital budgeting practices?Small Business Economics, 60(1), 265. https://doi-org.lopes.idm.oclc.org/10.1007/s11187-022-00648-z

REPLY