Journal of Commerce and Accounting Research

12 (3) 2023, 01-11 Submitted: 03 January, 2022

http://publishingindia.com/jcar/ Accepted: 18 January, 2023

BUDGETING AND FINANCIAL

TECHNIQUES USED BY SMES DURING
CRISIS
Jacques Hendieh*

Abstract The COVID-19 pandemic topped the financial and economic crisis faced by small and medium-sized enterprises (SMEs)
in Lebanon. The purpose of this article is to explore the budgeting and financial techniques used by the Lebanese SMEs during the crisis,
using an exploratory and qualitative approach to discuss the impact of the crisis on the techniques used. Data collection involved sending
questionnaires to the managers of 133 different SMEs. Results have shown that a low number of financial management techniques are used,
while most SMEs tend to abandon their prior budgeting techniques. The usage of financial techniques is related to financial literacy and
could be explained by the tendency to focus on short-term profitability and liquidity. We found that younger and more educated managers
have a higher tendency to use more techniques. Managers are encouraged to rely on budgeting and financial techniques to increase
their survival chances. Long-term planning can be a powerful tool to avoid reactive strategic behaviour. Managers need to anticipate
environmental constraints using different scenarios or by testing the robustness of strategic initiatives using diverse tools like financial
planning and control.

Keywords: Management Accounting, SMEs, Crisis

INTRODUCTION weakness, the SMEs rely on internal funds and on the cash
from friends and family in order to run their enterprises.
In modern economies around the world and particularly in About 50% of formal SMEs don’t have access to formal
developing countries, small and medium-sized enterprises credit, and if the micro, small and medium-sized enterprises
(SMEs) play a crucial role by generating employment and (MSMEs) are summed into one pool, approximately 70% of
adding value, and contributing to innovation. In emerging all in emerging markets lack access to credit (World Bank,
economies, formal SMEs contribute up to 60% of total 2015). The challenges, particularly in terms of management
employment and up to 40% of national income, that is, gross accounting practices, are important, taking into consideration
domestic product (GDP), while these numbers are much that the usage of management accounting information
higher when the informal SMEs are included. However, has a vital impact on the survival and success of SMEs
these SMEs are more vulnerable to the intense pressures (Mitchell & Reid, 2000). According to the study conducted
caused by a financial crisis, and they often struggle to survive. on Lebanese SMEs by the International Rescue Committee
As a result, an increased number of SMEs risk bankruptcy in 2016, 72% of the SMEs are self-financing, 14.4% take
(OECD, 2017). The recent COVID-19 pandemic, the loans from friends and 7.5% from banks. Because of the lack
financial crisis, and the economic instability were a major of capital, it is important for their survival to improve their
challenge for all types of organisations. The problems capital management and maintain proper control.
in managerial accounting labelled “undeniable” by Van The current study intends to gain a deeper understanding
der Stede in 2016, are discussed while elaborating on the of the budgeting practices and financial techniques used by
shortfalls in terms of culture and structure. A readjustment of Lebanese SMEs. More specifically, we intend to study the
management accounting practices is becoming a necessity management accounting practices and budgeting techniques
(Hopwood, 2009). It is important to know what techniques used during the financial crisis and the current economic
are used by those vulnerable SMEs. instabilities. It is important to study the Lebanese SMEs that
Because of their nature and instability, SMEs have less are operating in a hyperinflationary economy. The country and
access to bank loans than large firms do. To overcome this all of its operating organisations are facing extremely intense

* Assistant Professor of Accounting, Graceland University, United States. Email: jhendie1@graceland.edu

2 Journal of Commerce and Accounting Research Volume 12 Issue 3 July 2023

pressures due to the turbulence surrounding the country and markets because of the civil war, abrupt urbanisation, and
the devaluation of its currency. In Lebanon, SMEs represent others. Services constitute the sector with the highest share
97% of the total number of formal enterprises, employ more of enterprises employing less than five individuals (93.8%),
than 51% of the working population, and are mostly family- followed by agriculture (92.5%). In addition, it appears that
owned. Most Lebanese are fighting a daily battle for survival, services and leisure are the sectors with the highest share
and only a few profiting from the skyrocketing exchange of enterprises employing less than 50 employees (97%)
rates for the US dollar. This “many-sided” crisis has been followed by industry (96%) (Makdissi & Tannous, 2020).
in the making for many years. Even before the spread of the
Since 1996, most of the enterprises in Lebanon engage in
COVID-19 pandemic, Lebanon was in turmoil, as shown by
trading activities, and their numbers are increasing while
the Lebanese revolution on 17th October, 2019. According
those of industrial enterprises are declining. This has
to the Lebanese government and a number of local NGOs,
implications for the types of investments and prospects
the Syrian crisis has led to an influx of more than 1.5 million
for internationalisation for Lebanese SMEs. Trading
refugees into Lebanon, creating severe economic, political
enterprises are very important for job creation but have
and social pressures (ECHO, 2017). Due to the extended
less importance in terms of innovation or the introduction
nature of the crisis, Syrian refugees and local Lebanese
of new technologies, and hence economic development.
communities are already struggling with high unemployment
Since productivity is to a certain extent linked to technology
rates and a weak economy that is making them increasingly
diffusion, the productivity of Lebanese SMEs is likely to be
vulnerable (IRC, 2016). The research question that arises
low (Aoun et al., 2019; Hendieh et al., 2019).
is: what financial techniques are used by SMEs in order to
survive in this turbulent situation? Compared to non-GCC (Gulf Cooperation Council) SMEs,
the Lebanese SMEs are doing average. However, when
This study adds to the international literature by investigating
compared to upper middle income countries with the
and discovering the budgeting and performance measures
(same GNI per capita), the Lebanese SMEs perform the
used during crisis. This understudied area of research
worst. Studies show that there are low incentives for new
requires further analysis, especially the limited research
SME or start-ups (Lebanon performs badly with respect to
related to SMEs. Despite the fact that further research with an
typical SME constraints: finance, close or start business,
international orientation is required before reaching general
export), and the risk is very high to innovate and export. The
conclusions, our study could be considered an expansion of
bankruptcy laws, commercial disputes, and the unfavourable
the research agenda to include the countries that are facing
business climate in general do not encourage risk-taking
financial crisis and are affected by the inflow of refugees. An
and entrepreneurship, and hence SME development. The
in-depth future study to check the link between the usage of
majority of private companies are family businesses.
these metrics and favourable results for the companies once
These businesses are young, emerging, SMEs run by the
the performance figures are available is of great importance.
first or second generation of owners. The family plays a
In this study, we will discuss the theoretical linkage between
leading role, often serving as the primary source of start-
budgeting and performance and examine the budgeting and
up capital. The cost of labour and expertise is low, and the
financial techniques used by Lebanese SMEs during crisis.
family and its network are the central elements powering
In this article, will start by exploring the relevant literature the socio-economic system in the Middle East. To conclude,
related to the issue presented. Afterward, we discuss entrepreneurial-led family firms only have an average life
the relationship between budgeting and performance, span of 24 years (Hoekman et al., 2019).
the methodology and the results and we propose some
explanation. Finally, we conclude and discuss the
limitations, and we draw an agenda for researchers where Definition of SMEs in Lebanon
more information and research are required.
The classification of SME varies by country, but in relative
terms (to GDP), opportunities and challenges are about
LITERATURE REVIEW the same. The classification criteria are number of workers
(often used), fixed assets and turnover (in region, often use
The SMEs Sector in Lebanon number of workers). SMEs definition is a controversial issue
for example, a medium enterprise can have 499 employees,
The Lebanese economy is dominated by trade and services, as is the case in the USA, or 249 employees, as is the case in
which employ the highest percentage of workers (Hendieh, Europe (Hoekman et al., 2019).
2016). This structure is a consequence of several factors, The SMEs dominate the developing and Arab countries: for
mainly historical, in addition to the fragmentation of example, Egypt (98% of firms, 80% of GDP are SMEs < 100
 Budgeting and Financial Techniques Used by SMEs during Crisis 3

workers), Jordan (99% are SMEs < 249 workers), Lebanon The budgeting functions are planning, coordinating,
(~ 95% of firms < 50 workers), Morocco (SMEs are < 250 communicating, control and evaluating. If used wisely,
workers). However, SMEs face numerous challenges and a good budget requires management planning, provides
market failures, which necessitate measures and policies to specific targets that will be used for judging subsequent
ensure their sustainable growth (Ishrakieh et al., 2020). performance, and promotes effective communication and
coordination between the various departments/parts of an
In Lebanon, no formal definition exists so far for SMEs;
various informal definitions have been used so far. In order organisation (Lohr, 2012).
to judge whether the company is an SME or not, most Existing large-scale research discusses budgeting, its functions
studies rely on the scope of activity and the cash turnover and its application to large, publicly listed organisations in
of the company. In the majority of the government statistics, developed countries. Jones and Dugdale in 1994 found that
the breakdown of enterprises is according to the number of high benefits derived from the use of budgeting planning in
employees, with businesses employing between 5 and 49 UK companies. Bonn and Christodoulou (1996) showed that
persons. According to the 1996 census of establishments, 72% of the largest manufacturing companies in Australia use
conducted by the Central Administration for Statistics, the formalised strategic planning systems.
total number of existing enterprises is around 198,000.
In addition, small enterprises employing fewer than 50 In this article, we will study the budgeting of SMEs in a
individuals make up 96% of the total. In Lebanon, enterprises developing country. Joshi et al. (2003) studied the budgeting
with fewer than 50 employees generate many of the functions in a developing country; they conducted a survey
employment opportunities, employing 530,000 employees on 54 medium- and large-sized, listed and non-listed firms
or 51% of the total working population. The definition we in Bahrain. As expected, they found that most of the firms
used is similar to the EU definition, but we did not consider prepare both long-range plans and operating budgets, and
the sector of activities or turnover issues (Hoekman et al., use budget variances to measure a manager’s performance,
2019). The Table 1 below provides a classification of SMEs and for timely recognition of problems and to improve the
in Lebanon in terms of size as expressed by the number of next period’s budget. Additionally, there is some existing
employees. studies that discuss the relationship between strategic
planning and performance of SMEs (Akolo et al., 2018), but
Table 1: Classification of SME in Lebanon researchers have not paid significant attention to the possible
relationship between the budgeting process and performance
Size Employees in SMEs (Shields & Shelleman, 2016). Merchant (1981)
Micro 1-4 mentioned that due to the restrictions of limited size and the
Small 5-49 resources, budgeting process in SMEs is probably different
Medium 50-200 from that of large companies.
Large >200 Most studies focus on two basic roles of budgets, called “dual
Studies show that the Lebanese market is dominated by purpose”, planning and control (Bukh & Svanholt, 2020). In
microenterprises. While small and medium enterprises are the management accounting literature, the budgeting process
a minority in the economy, they contribute substantially to is generally classified into budgeting planning and budgetary
the value added of the economy, employment and income control.
generation. The limited data available indicates a certain
stagnation or decrease in the numbers of SMEs and an Budgetary Planning
increase in the numbers of microenterprises.
Budgetary planning refers to setting quantitative targets
for the organisation and preparing various budgets (Bodie
Budgeting Process in SMEs & Merton, 2000). Business organisations use long-term
budgets to lay out the planned financial goals and actions
Budgets are defined as a detailed and quantitative plan over periods ranging from two to 10 years that guides the
that shows the information about the company’s planned firm towards strategic goals (Gitman et al., 2015). Capital
activities over a specific future time period; it could be budgets, an example of long-term budgets, are defined by
over a long-term period (two- to 10-year) or a short-term Garrison et al. (2015) as an investment decision-making
period (one- to two-years, monthly, weekly or daily based). tool used to describe how managers plan expenses on long-
Budgets require management to forecast the expected sales, term projects. On the other side, short-term budgets are
cash inflows and outflows and costs and provide rational used to guide day-to-day operations. Short-term, also called
and quantitative data that facilitate and support the decision- operating budgeting, identifies the acquisition and use of
making in the organisations (Zor et al., 2019).
4 Journal of Commerce and Accounting Research Volume 12 Issue 3 July 2023

financial and other resources over a short-term period, which monetary terms; they have to be planned and they must
most often covers a 1- to 2-year period. Short-term budgeting be made within a certain period of time (Mohamed &
consists of a number of separate and interdependent budget Ali, 2013). Budgets are vital for financial success. To be
preparations. These budgets, when added together, form the effective; a budget should be accepted and used by all levels
master budget. of management (Weygandt et al., 2019). The studies showed
that the difference between successful and unsuccessful
Budgetary Control SMEs is that businesses that develop and follow budgets
increase their chances of survival and success (Burrow et al.,
When there is a difference between the actual amount realised, 2007). For SMEs, cash management is vital and important to
and the budgeted target, there is a budget variance that can be the success of a company. When a cash shortage occurs, the
divided into favourable and unfavourable variances. Friedlob business will be unable to pay its debts and risks bankruptcy.
and Plewa in 1996 point out that favourable variances are A cash budget should be prepared in order to anticipate any
“generally signs of efficient, effective cost management and cash shortages or excess.
increases in net income”, while unfavourable variances are
the result of “inefficient, ineffective cost management, and Previous research found a moderately positive relationship
reduced net income.” Daumoser et al. (2018) discussed four between strategic budgeting and companies’ performance
reasons for variance’s existence. “Firstly, variance can be when the companies set realistic and attainable targets
the result of inaccurate data. Secondly, an upward change as part of their strategic planning process (Qi, 2010). The
in costs or production conditions (quantity) can result in an clarity of goals strongly affects the performance of small and
unfavourable variance. Thirdly, variance can be the result medium sized enterprises (Peel & Bridge, 1998). Through
of random happenings. Finally, variance can be the result of budget, the company gains a clarity of roles that enhances
especially efficient or inefficient operations.” their performance (Sulthana & Subrahmanyam, 2022; Hall,
2008), especially in turbulent times where organisations
Control is the process of ensuring that a firm’s activities
face strategic change (Abernethy & Brownell, 1999).
are running according to its plan and that its objectives are
Finally, there is strong evidence that links budgetary control
achieved (Drury, 2012). This process is commonly referred
to as “budgetary control.” The mechanism of budgetary to improved financial performance in all types of firms
control can be traced back to the framework of Anthony (Nelima, 2019).
(1965) who stated that “control activities in an organisation
are categorised into three major types, namely strategic Budgeting during Crisis
planning, management control and operational control.
Strategic planning is concerned with setting overall corporate The budgets are defined as a plan for the future (Garrison
strategies and objectives over the long-term. Operational et al., 2015). There is a lack of research on the link between
control is the process of ensuring that specific and short-term budgeting and crisis. In the existing literature, we found
tasks are carried out. Management control is the process that contradictory results. Chendall in 2005 argued that during
links strategic planning and operational control. Emmanuel turbulence and uncertainty, organisations tend to reinforce
et al. (1990) also discussed four conditions that must be their traditional management accounting practices, such as
satisfied before any process can be said “to be controlled.” budgeting. On the other hand, Ekholm and Wallin (2011)
Firstly, objectives for the process being controlled must exist. showed that organisations tend to abandon their traditional
Secondly, the output of the process must be measurable. budgeting when faced with increasing turbulence.
Thirdly, a predictive model of the process is required, and
the proposed corrective actions should be evaluated. Finally, The purpose of our study is to explore this link in a specific
there must be a means for taking action to reduce deviations context, the Lebanese market, which is facing an economic
from targets. and financial crisis during the COVID-19 pandemic.
In this article, we will use two factors the financial budgets
to explore the planning side and the operation budgets to Financial Techniques Used in SMEs
explore the control side—to explore our sample.
After discussing the SMEs definition and the budgeting
process in SMEs, the study will discuss the components
The Relationship between Budgeting of financial management and the techniques used in
and Performance SMEs. We will be discussing the components of financial
management in this section. The literature review identified
Budgets must comprise the quantities of economic resources six components of financial management: financial planning
to be allocated and used; they have to be expressed in and control, financial accounting, financial analysis,
 the return on assets (ROA), the return on equity (ROE) and the debt ratio (Koyuncugil and Ozgulbas,

2006). For the management accounting techniques, we selected the standard costing, just in time,

activity based costing and the balanced scorecard (Ghosh and Chan, 1997). For the working capital

Budgeting and Financial

management, we selected theTechniques Usedreceivable
cash management, account by SMEs during
management, Crisis 5
inventory

management and account payable management (Khoury et al., 1999).

management accounting, capital budgeting, and working We added We addedaa fifth factor,
fifth factor, the practices
the budgeting budgeting practices
used during used
crisis; we selected the during

capital management. There are two techniques for financial crisis; weorselected
reinforcement the abandon ofthe reinforcement
the traditional budgeting. or the abandonment of
planning and control used by SMEs: financial budgets and traditional budgeting.
operating budgets. We could also find six techniques of
Operating budgets
financial analysis that are used by SMEs: current ratio, quick
ratio, operating profit margin, return on asset (ROA), return Financial Financial Budgets
Planning and
on equity (ROE) and debt ratio. As for the management Control Current Ratio
accounting there are four techniques used by SMEs: Quick Ratio

standard costing, just in time (JIT), activity based costing Return on Assets
Return on Equity
(ABC) and balanced scorecard (BSC). Finally, There are Financial Analysis Debt Ratio
four techniques of working capital management used by
SMEs: cash management, accounts receivable management, Financial
Management
Just in Time

inventory management and accounts payable management Management

Activity Based Costing

(Biswas & Bhattacharya, 2020; Chand & Ambardar, 2013; Accounting Balanced Scorecard
Standard Costing
Techniques
Das, 2013; Kumar, 2007; Koyuncugil, 2006; Locke &
Cash
Scrimgeour, 2003).
Account Receivable
Working Capital
Account Payable

METHODOLOGY
Management
Inventory

Reinforcement
Budgeting Practices
This study used a structured questionnaire to obtain data Abandon

and information about financial management tools being

used by SMEs. To answer the research objectives, we built 11

a questionnaire based on the 17 factors, and the targeted Fig. 1: Selected Factors
sample is the SMEs operating in Lebanon. In the present The survey questionnaire used consists of three sections.
study, SMEs are defined based on the criteria provided by The first section contains questions concerning the age,
the Ministry of Economy in Lebanon. According to the gender, and educational level of the respondents. The second
criteria, SMEs can be defined according to the total number section contains the questions used to identify the financial
of full-time employees (between 5 and 200 employees). The management tools currently used by SMEs. And the third
survey was conducted through phone or video conference section is concerning the budgeting practices during crisis.
interviews with the managers between December 2020 and We present the summary data in a cross-tabulated format,
June 2021, in order to collect the data within the shortest as all of our variables are categorical. We also use Excel to
time possible, as we were unable to meet during the multiple calculate chi-squared distribution and significance (Momeni
lockdowns. 133 SMEs accepted the invitation to participate et al., 2017).
and were selected.
The factors used in the questionnaire are similar to those in the RESULTS AND DISCUSSION
existing literature. We identified four relevant components
of financial management: financial planning and control, This study tends to explore the budgeting and financial
financial analysis, management accounting techniques, and techniques used by Lebanese SMEs during the COVID-19
working capital management (Mohd Harif et al., 2010). For pandemic’s recurrent lockdowns in 2020 and 2021, coupled
the financial planning and control, we selected the operating with an economic crisis. Based on the data analysis of this
budgets and the financial budgets (McMahon & Holmes, study, we discovered that during the crisis 11 financial
1991). For the financial analysis, we selected current ratio, management techniques (operating budgets, the current ratio,
the quick ratio, the return on assets (ROA), the return on the quick ratio, the return on assets, the return on equity, the
debt ratio, the standard costing, the cash management, the
equity (ROE) and the debt ratio (Koyuncugil & Ozgulbas,
account receivable management, the inventory management
2006). For the management accounting techniques, we
and account payable management). Surprisingly, none of the
selected the standard costing, just-in-time costing, activity-
133 respondents used the financial budgets, the JIT, the ABC
based costing and the balanced scorecard (Ghosh & Chan, or the BSC. As expected during the crisis, all of the Lebanese
1997). For working capital management, we selected cash SMEs abandoned their current budgeting practices. Our
management, account receivable management, inventory explanation is that companies will focus on the short-term as
management and account payable management (Khoury et the long-term is unexpected and difficult to forecast during
al., 1999). a crisis.
 for these results. We could explain the high usage of the debt and RO

others by the fact that most of our respondents are merchandisers that
6 Journal of Commerce and Accounting Research Volume 12 Issue 3 July 2023
Figure 2. Factors used by Lebanese SMEs
basis. They need good control over debt and equity, especially during the
most of our respondents are merchandisers that deal with
Operating budgets
of them invested their life savings in their businesses.
Financial suppliers on a credit basis. They need good control over debt
Planning and Return on Equity
Control Debt Ratio
and equity, especially during the currency devaluation, as
Quick Ratio
most of them invested
For the their life savingsaccounting
management in their businesses.
techniques, surp
Financial Analysis
Return on Assets
Return on Assets Financial analysis
costing and none of them used the other factors. We argue
Financial Management
Management Accounting Standard Costing
Techniques
a crisis, they tend to focus on the short term and liquidity.
Cash
101 106
Working Capital Account Receivable 81
Management
Account Payable in order to cover the 61
expected expenses and maintain a pro
39
Inventory
Budgeting Practices
CR QR ROA ROE DR
Abandon

Reinforcement For the management accounting techniques, surprisingly all of

Fig. 4: FinancialFig.
Analysis
4: Financial Analysis
Our findings indicate that most of the SMEs during crisis focus on the short-term techniques Management accounting techniques
costing and none of them used the other factors. We argue that SMEs a
related to liquidity. Our explanation is that most businesses are focus on a short term in order to survive For the management accounting techniques, surprisingly all
Fig. 2: Factors Used by Lebanese SMEs of the respondents used standard costing and none of them
and sustain their profitability especially that the local currency is depreciating against the American
a crisis, they tend
133to focus on the short term and liquidity. They are usi
Our
dollarfindings indicate that most SMEs during a crisis focus
on a daily basis.
used the other factors. We argue that SMEs are vulnerable by
on short-term liquidity techniques. Our explanation isofthat nature. During a crisis, they tend to focus on the short term
Most of the respondents focus only on the working capital management techniques. Out the in order to cover the expected expenses
0 and maintain a proper level
0 prices 0 of p
most businesses are focused on the short term in order to and liquidity. They are using standard costing to set in
four components of financial management, only one is used by a high percentage of SMEs in the
survive and sustain their profitability, especially since the order to cover the expected expenses
Standard JIT
and maintain
ABC
a proper BSC
survey, the working capital management, 123 out of 133, 92.48% used the four techniques. This could
local currency is depreciating against the American dollar level of profit simply to survive.
be explained by the fact of the companies tend to focus on the short term and sustainability during
on a daily basis.
Most of the respondents focused only on working capital
Management accounting techniques
management techniques. Out of the four components 13 Fig. 5: Management Accounting Techniques
of financial management, only one is used by a high 133
percentage of SMEs in the survey: the working capital
crisis. The remaining
management. A total 10 companies
of 123 did not
out of 133 use any
SMEs, of theused
92.48% techniques; one of the reasons could
0 be that 0 0
the four techniques. This could be explained by the fact that Concerning financialABCplanning and BSC control, 28 out
these companies are operating on a daily cash basis or it could be due to Standard JIT literacy.
the lack of financial
companies tend to focus on the short term and sustainability
during crisis. The remaining 10 companies did not use any while none used the financial budgets. One of the reaso
of the techniques; one of the reasons could be that these Fig. 5: Management Accounting Techniques
companies are operating on a daily cash basis, or it could be Fig. 5: Management Accounting Techniques
Figure 3. Working capital management
due to a lack of financial literacy. abandoned
Concerning their
financial budgeting
planning practices
and control, 28 at
outthe
of beginning
133, of t
21.05% used the operating budgets, while none used the
Working Capital Management short
financial term. One of the reasons could be that the
budgets.
majorityConcerning
of the SMEs financial planning
abandoned theirand control, practices
budgeting 28 out of 133, 21.0
at the beginning of the crisis and focused on their survival in
123 123 123 123 while none
the short used the financial budgets. One of the reasons could be
term.
Cash AR AP INV abandoned their budgeting practices at the beginning of the crisis and
Financial planning and
short term.
The financial analysis ratios are used 106 out of 133 respondents. control
79.69% used the debt ratio;
Fig. 3: Working Capital Management
101 out
The of 133,analysis
financial 75.94% for the are
ratios ROE; 61 out
used by of 133,
106 out45.86%
of 133for the ROA; 81 out of 133, 60.9% for the
28
respondents. 79.69% used the debt ratio; 101 out of 133,
current ratio
75.94% andROE;
for the only 3961out
out133; 29.32%
of 133, used for
45.86% the the
quick ratio. We notice that the companies who
ROA; Financial planning and
81 out of 133, 60.9% for the current ratio; and only 39 control 0
chose
out ofto133;
use 29.32%
all of thefor
ratios
theemployed full-time
quick ratio. accountants;
We notice that thethe financial literacy could be the reason
companies that chose to use all of the ratios employed full- Operating budgets Financial Budgets
for these
time results. We
accountants; could explain
financial literacythecould
high be
usage
the of the debt
reason for and ROE ratios 28in comparison to the
these results. We could explain the high usage of the debt
others by the fact that most of our respondents are merchandisers that deal with
Fig. 6: supplier
Financialon credit basis. and Control
and ROE ratios in comparison to the others by the fact that Fig. 6: FinancialPlanning
Planning and Control
0
They need a good control over debt and equity, especially during the currency devaluation as most of
Operating budgets Financial Budgets

them invested their life savings in their businesses.

 Wallin (2011); we found that most of our sample, 80.45%, tend to abandon their tradi

when faced with increasing turbulence. One of the reasons could be the daily changes

prices due to the Budgeting

local currency devaluation,
and Financial which
Techniques Used resulted in a lower
by SMEs during Crisis 7purchasin

Finally, concerning budgeting practices, our finding is similar

population. reasons could be the daily changes in the inventory prices
to the results of Ekholm and Wallin (2011); we found that due to the local currency devaluation, which resulted in a
most of our sample, 80.5%, tend to abandon their traditional lower purchasing power for the population.
budgeting when faced with increasing turbulence. One of the

Budgeting Practices

107

26

Reinforce Abandon

Fig. 7: Budgeting Practices

Fig. 7: Budgeting Practices
In the table below (Table 2), we categorised the respondents according to the usage of operating budgets.
Table 2: Classification of SME According to the Operating Budgets

In the table Management

below (Table 2), we categorised the respondents according to the usa

Budgeting
Practices
Financial

Gender

Degree
Working Capital
Planning and Financial Analysis Accounting Age
Management
Control budgets. Techniques
Operating

Reinforce
Financial

Standard

Abandon
R R J A B I
Budgets
budgets

Cash

CR QR O O DR I B S AR AP N
A E T C C V

38.66
14.28%
Males; 35.5

100.00%
92.86%

7.14%

Yes Females;
100%

100%

100%

100%

100%

100%

100%

100%

100%

100%
0%

0%
0%

0%

Females;
21.05% 85.72%
38.21
Males
Overall

49.02
44.76% Fema-
50.48%

16.19%

57.14%

74.29%

74.29%

90.48%

90.48%

90.48%

90.48%

90.48%
No Females; less; 43.81
100%

100%
0%

0%
0%

0%

0%

78.95% 55.24% Males;

Males 45.98
Overall

All of the respondents used only standard costing from In contrast, most of the SME (78.95%) that did not use the
management accounting techniques. operating budgets used all of the working capital techniques
(90.48%). In terms of the financial analysis, they focused
SMEs (21.05%) that used the operating budgets used all
on the ROE and debt ratio (74.29% for both). All of them
of the financial analysis and working capital techniques.
abandoned their budgeting practices. We found a closer
Most of them (92.86%) tend to reinforce their budgeting
distribution in terms of gender: 55.24% of the managers are
practices. We found that 85.72% of the managers are male
males and 44.76% females, while the average age of 48.02 is
and 14.28% female, the average age is 38.21 years (38.66
10 years above that of those who used the operating budgets
for the male and 35.5 for the female) and all of them have a
(43.81 for the male and 45.98 for the female) and most of
post-secondary degree.
them have a post-secondary degree (90.48).
8 Journal of Commerce and Accounting Research Volume 12 Issue 3 July 2023

The results show a strong focus on the liquidity and the short to the first category, they used all of the working capital
term. Young managers are more likely to use most of the management techniques and only the standard costing from
techniques, while an older generation tends to focus mostly the management accounting techniques. 16.95% decided
on liquidity and survival, reaching a significance of (P < to reinforce their budgeting techniques, the remaining
0.0001). abandoned them and 98.31% have a post-secondary degree.
In Table 3, we redistributed the samples according to the age The third category (above 50): none of the managers used
of the managers using three categories: below 40 (32.3% of operating budgets, and only 21.29% used financial analysis
the sample), between 40 and 50 (44.4% of the sample) and techniques. Same as for the first two categories, they used
above 50 (23.3% of the sample). all of the working capital management techniques and only
We noticed clear differences between these categories. the standard costing from the management accounting
techniques. All respondents decided to abandon their
The first category (below 40): 41.86% of the managers used
budgeting practices, and 70.97% have a post-secondary
operating budgets; a high number (93.02% on average) used
degree.
financial analysis techniques. They used all of the working
capital management techniques and only the standard We can argue that both education and age have an important
costing from the management accounting techniques. impact. The younger and more educated the manager, the
37.21% decided to reinforce their budgeting techniques and higher the likelihood that he will be using more techniques,
the remaining to abandon them and all of them have a post- reaching a significance of (P = 0.0116). A remarkable finding
secondary degree. is that the quick ratio is the least used of the ratios chosen in
The second category (40–50): only 16.95% of the managers the financial analysis technique, which could be explained
used operating budgets and around two-thirds (65.42% by its similarity to the current ratio, which is used by the
on average) used financial analysis techniques. Similar majority of the managers.

Table 3: Classification of SME According to the Age of the Manager

Financial
Management Working
Planning Budgeting
Financial Analysis Accounting Capital
and Control Practices
Techniques Management
Sample size

Gender

Degree
Operating budgets

Financial Budgets

Age
Reinforce
Standard

Abandon
I
J I AB BS A A
Cash

CR QR ROA ROE DR N
T C C R P
V 8 Females
35 Males
41.86%

95.35%

69.77%

37.21%

62.79%

below
100%

100%

100%

100%

100%
100%
100%
100%
0%

0%

0%

0%

43 100%
40
25 Females
34 Males
16.95%

61.02%

25.42%

67.80%

86.44%

86.44%

16.95%

83.05%
100%

100%
100%
100%
100%
0%

0%

0%

0%

59 40-50 98.31%
13 Males
18 Females
12.90%

16.13%

38.71%

38.71%

50 and
100%

100%
100%
100%
100%

100%
0%

0%

0%

0%

0%

0%

0%

31 70.97%
above

In Table 4, we re-allocated the respondents according to

their gender.
 Budgeting and Financial Techniques Used by SMEs during Crisis 9

Table 4: Classification of SME According to the Gender of the Manager

Financial Planning
and Control

Working Capital Budgeting

Financial Analysis
Management Practices
Sample Size

Gender

Degree
Age
Operating

Reinforce

Abandon
budgets

R RO I N

Cash
CR QR DR AR AP
OA E V
31.37%

35.29%

56.86%

56.86%

86.27%

84.31%

84.31%

84.31%

96.08%

86.27%
7.84%

9.80%

3.92%

47.63
51 F
29.27%

80.49%

48.78%

85.37%

93.90%

93.90%

97.56%

97.56%

97.56%

97.56%

29.27%

70.73%

97.56%
42.30
82 M

Our sample is composed of 39.3% females and 61.7% males. times of crisis. The focus on the short run and sustainability
Both categories did not use the financial budgets, JIT, ABC is clear in our sample; all SMEs in our sample focused on
or BSC, while they all use standard costing. working capital management techniques. For the four chosen
components, the working capital management tools account
The results show that a lower number of females use
for the highest percentage followed by the financial analysis
operating budgets (7.84% versus 29.27%). There is a big
in our sample. Future research is needed to search for the
gap in the usage of the financial analysis, 80.5% of males
reasons for this variance in ratio usage.
versus 38% of females use the ratios. A high percentage of
firms in both categories used working capital management Standard costing was the only management accounting
techniques (97.56% of male and 84.8% of female). Nearly technique used by SMEs. This is mainly due to the daily
39.27% of male decided to reinforce their budgeting currency devaluation, where most companies focus on
practices against 3.92% of female. And 96.27% of female maintaining a good level of return and liquidity in order to
have a post-secondary degree against 97.56% of male. survive.
These differences are related to the results found in Table Financial planning and control were the least used by the
3. We notice that on average the female respondents in our SMEs. Only 19.54% of the SME companies in our samples
samples are five years older than males, while 13.73% of reinforced their budgeting practices. SMEs solely focused
the female managers versus 2.44% of the male managers on the management of the working capital and ignored
did not complete a post-secondary degree. We can argue that the importance of long-term planning and innovation; the
the younger and more educated the manager, the higher the reasons for this are to be studied in future research.
likelihood that he will be using more techniques, reaching a
When we re-allocated our sample according to the age of
significance of (P = 0.007).
the respondents, we found that younger and more educated
managers tend to use more techniques. A third allocation of
CONCLUSION, LIMITATIONS, AND our sample according to gender provided the same results. A
FUTURE RESEARCH future study that links the age and gender of managers to the
performance of SMEs will provide additional insights.
The aim of our research was to provide some insight and This low usage of the techniques will have an impact on the
evidence regarding the financial management tools used performance and survival of the SMEs, especially when the
by SMEs in Lebanon during crisis. Our findings suggest prices are changing on a daily basis due to the devaluation
that the usage of financial techniques by SMEs is low, with of the local currency. Due to the uncertainties surrounding
the exception of working capital techniques, and that most their businesses, the managers of SMEs should prioritise and
SMEs tend to abandon the traditional budgeting during use all of the financial management techniques to improve
10 Journal of Commerce and Accounting Research Volume 12 Issue 3 July 2023

their overall management and increase their chance of Biswas, S., & Bhattacharya, M. (2020). Financial perfor-
survival in the short and long term. Building awareness and mance analysis of new generation private sector banks:
financial literacy among managers about the importance of A CAMEL model approach in Indian context. Journal of
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