Research Proposal

Challenges of Budgeting in S.M.E.s in the Construction Sector

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 Contents
Introduction……………………………………………………………………………………..3

Critical Review of Literature…………………………………………………………………..4

Research methodology…………………………………………….............................................7

Research Objective……………………………………………………………………………..7

Research Questions……………………………………………………………………………..8

GantChart……………………………………………………………………………………….8

Analysis and Findings……………………………………………..............................................8

Conclusion and Recommendations……………………………………………………………9

Bibliography………………………………………………………………………………...…10
 Introduction

Construction sector is one of the sectors that contribute a great deal to the economic
growth, nation building and employment. Budgeting is an important component in the
planning, managing, and implementing programs and projects in both the public and private
sectors of development (Gross, 1985). It is the financial account that estimates the expenses in
light of the available sources of finance and economy. This is why the budget should be
properly prepared through wise thinking, proper analysis, and profound research. This generally
holds for all the developmental entities in the public and private sectors. Nevertheless, there
are often key challenges encountered by a wide range of organizations, firms, entitles,
corporations and companies. Small Medium Enterprises (S.M.E.s) are no exception (Pee. and
Bridge, 1998).

The challenges that grip the construction sector leave an ominous impact upon the
impact, efficiency, proficiency, and outcomes of the programs and projects in place (Danielson
and Scott, 2006). Often, a wrong man occupies the right place that then is unable to calculate,
predict, allocate and analyze the budgeting processes that, in the end, yield in failure properly.
The third challenge is the precarious situation broth about by artificial and natural calamities
such as terrorism, climate change, and the novel coronavirus that has taken the entire world in
grip and has placed a lid on the developmental activities worldwide, including the S.M.E.s in the
construction sector(Cunanan et al., 2022). The fourth challenge is the lack of affordability o the
part of S.M.E.s. Due to their demanding salaries, perks, and privileges, they lack resources as
comparatively small entities that cannot afford the best human capital, such as financial
analysts, managers, and top-class accountants and auditors (Matovu, 2007). These are some of
the challenges on a general note, and evidence-based budgeting of S.M.E.s in the construction
sector will be found out through the basis of evidence and research. More importantly, S.M.E.s
in the construction sector plays a pivotal role in the drive towards infrastructural development,
but researchers and development experts, including academia, have ignored their role and the
main challenges concerning budgeting. The present research work is a noble attempt to reveal
the key challenges faced by the S.M.E.s in the construction sector. The chapters of the research
are divided into Literature Review, Research Methodology, Expected Outcomes and Findings,
Conclusion, and recommendations are followed in the following research:

Critical Review of Literature

Small and medium-sized enterprises (SMEs) are small and medium size business entities
that tackle projects and programs on small scale. SMEs in the construction sector include small
builders of roads and bridges, suppliers of concrete, pipes, bricks, blocks and sanitary materials.
SMEs in the construction sector play an indispensable role in the economy, national growth and
uplift of the people and rural areas. Small and medium-sized enterprises (S.M.E.s) in the
construction sector are recognized as the primary driving force in the developmental processes
of any country. This especially holds for a developing country's infrastructural development sine
mega projects are hardly found in the respective countries, and heavy reliance is made on
S.M.E.s. However, these small construction entities are often fanging several budgeting
challenges and difficulties of various degrees, forms, and manifestations in the peculiar
environment they operate in (Alles et al., 2021). It is found out that 90 % of SMEs are facing the
resource scarcity challenge. This means that 900 out 1000 SMEs in the construction sector are
facing this challenge (Đulić, 2015). There are many facets of borrowing as they need t do t
finance and cover up the requisite resources in formulating their budgets. The severity of such
kinds of challenges they face in the construction sector depends greatly on the firm-specific
factors, including the kind of S.M.E. type of set-up, size of operation, years in operation, and the
kind of industry (Đulić,2015). One of the reasons that SMEs cannot have economic resources
from the financial institutions is the fact that they do not provide financial statement of tax
payment and liability to government institutions, whereas such information is demanded by the
public institutions. Moreover, another research unveils its findings that in the event the S.M.E.s
in the construction sector access the financial institutions to finance their infrastructural
projects, there are problems of lack of collateral, the lack of proven track records, the lack of
proper business plans, and the need to show good performance (Vaaland and Heide, 2007).

The construction sector and its activities are considered to be one of the primary
resources of financial boom, improvement, and economic activities. The construction and
engineering services industry plays an important function in any country's financial uplift and
improvement. However, regarding the challenges of budgeting, renowned economist Mr. Levy
urges that there are four main challenges the S.M.E.s face: access to finance, access to non-
financial inputs, and high cost and high taxation on their activities t finance. This, according to
him, impedes the growth and expansion of work. Staff retention is another challenge as regards
budgeting (Peel and 1998). The S.M.E.s cannot support capacity building and training programs,
and competent staff required for proper budgeting to hammer out is missing in these small
development entities (Downes et al., 2017).

Cash flow is another challenge they face. Almost every small business entity faces this
problem of cash flow. This problem is more compounded in the construction sector due to a
lack of steady progress and predictability. Lack of information that compounds the cash flow
problem is not fully and professionally worked out, and hence the cash flow problem persists in
the construction sector. Reigning in spending and scaling back plans is then hard to work out
properly. Late payment similarly can place even greater strain on the cash flow. As an S.M.E., it
has got a long way fewer assets to chase up payments from clients than large agencies can
boast. As such, you may find yourself behind scheduled payments. This is also due to the lack of
a consistent system to deal with late payments. Rising costs are yet another problem S.M.E.s
in the construction sector concerning budgeting. Ever since the economic recession of 2008 and
more after the Covid 19 pandemic, the costs of the materials have risen a great deal. The
S.M.E.s can hardly absorb extra costs in the construction sector due to their weak and
susceptible nature. Many of those prices tend to be out of your direct control, so offsetting
them via savings and efficiencies someplace else is normally the safest course to take. Part of
the problem can be addressed if there is an excellent relationship and coordination with
suppliers, builders, storage enterprises, distributors and transportation companies.
Nevertheless, the structures, operational capacity and planning of these enterprises are often
weak and precarious.
 Moreover, it becomes difficult to manage what was allocated in the budget and what
exceeding expenses are incurred. Experience, initiative, and recommended practices often lack
that compound the budgeting element of the S.M.E.s (Onugu,2005).

The budgeting challenges are universal throughout the world to a major extent,
including Asia, where there is a large number of SMEs such as builders, suppliers, distributors,
transporters and repairers in the construction sector. Small and medium-sized enterprises
(S.M.E.s) are the backbone of the Asian economy accounting for 98% of the Continent
businesses providing 2 out of 3 private-sector jobs in India (Yoshino et al., 2016). However, the
prime challenges they face are limited access to finance, lack of databases, low R&D
expenditures, undeveloped sales channels, and low levels of financial inclusion, which are the
reasons behind the slow growth of S.M.E.s. Nevertheless, research findings reveal the four
major reasons behind the budgeting challenge in India, Pakistan and Iran such as insufficient
finance, the unavailability of comprehensive databases R and D, low level of expenditure, lack
of the use of I.T. technology, and mitigation plans in case(Andalib and Halim, 2019). Moreover,
with these reasons these SMEs encounter problems whether they plan budget annually,
quarterly or monthly (Andalib and Halim, 2019).

Researchers and experts try to find certain effective solutions in this whole scenario.
One of the surveys conducted in Spain revealed that S.M.E.s need to improve document
management for large-scale projects (Kurpjuhn 2015). It suggested implementing a web-based
tool tested before organizing and articulating the information, including facts and data
concerning the finances to be adopted by the construction sector S.M.E.s. This system was
evaluated by the key experts, academic experts, researchers, and I.T. and software experts and
found that there is a key requirement of the introduction of the I.T. and Software tools to be
applied ad adopted by the S.M.E.s that are struggling with the challenges of budgeting
(Kurpjuhn 2015).
 Research methodology

Based on secondary research the data collection and review sources will be researched and
reviewed that directly meet the requirements of our research objective and research questions.
Both in-text and bibliographic references will be included in the entire research work for
authenticity and clarity. Proper sources of secondary data will be revisited to help us in thematic
analysis of what the stated SMEs face budgeting challenges, how they tackle these challenges and
what measures can mitigate the challenges. Based upon secondary research I will aim at having
while secondary research is being carried out to lead us towards critical findings in a transparent
manner that can positively contribute to the research efforts and provide for the key glimpses
towards challenges of budgeting of SMEs in the construction sector. As a secondary source of data
and literature, the critical literature review is conducted in light of valid and standard sources
extracted from Google Scholar, Z-Library, databases, archives, and libraries, and peer reviewed
sources are approached systematically and critically to know the research work conducted on the
subject matter and how in what ways and why these sources have contributed to this research
before. Research ethics are also followed and form part and parcel of this research work.
The following research ethics are: proper permission is taken from the research Supervisor. The
form of research ethics will be filled. Secondly, the professional integrity of the research sources
accessed, analyzed, and interpreted is maintained. Proper permission for data use and access will
be sought so that there are no infringements and copyrights issues.
To recapitulate, our main tool of the proposed research will be the secondary sources of
data as our selected mode of research methodology is qualitative analysis to have qualitative and
thematic research to lead us to the key findings, conclusion, and suggestions that can be
effectively incorporated into the policies, practices and operational programs of SMEs in the
construction sector that are desperately facing the various issues in the budgeting processes both
internally and externally.

Research Objective
The prime objective of the research is to find out the key challenges of budgeting in
S.M.E.s in the Construction sector, research the key reasons behind these challenges and find a
way out.
 Research Questions

1. What are the key challenges of budgeting are faced in Pakistan by SMEs including
suppliers, builders, warehouses, transportation and distribution in the Construction
sector

2. What are the reasons behind the key challenges of budgeting in S.M.E.s in the
Construction sector?

3. What are the solutions that mitigate these challenges and help grow S.M.E.s?

Gantt chart:

Objective Feb March April May

1 Proposal Approval

2 Proposal Submission

3 Conduct off Thesis

4 Review and
Defense

Analysis and Findings

There are compounding challenges of budgeting in the S.M.E.s in the construction sector.
Budgeting is a precarious and serious segment of the planning, operation, and implementation
phases of programs and projects to infrastructural development (Jensen, 2003). Resource
scarcity is found t be the main challenge that S.M.E.s face desperately (Tjosvol and Poon, 1998).
They are on the back foot to make the loss for and cover up the lacunae between the needs and
expenditure, and thus allocation owing to resource scarcity is a formidable challenge in the
construction sector that S.M.E.s face. There is another challenge of the standard operating
procedures (S.O.P.s) to prepare the budgeting process (Bandiyono, pp.201-221). The reason is
that S.O.P.s are proving ideal for S.M.E.s already suffering from fragility, capacity, and lack of
enough financial portfolios, particularly in the days of natural and artificial disasters such as
climate change and global warming, terrorism, war, and Covid 19 pandemic. In such a situation,
these challenges assume t be survival phenomena of such S.M.E.s (Lindskog, 2014). Cash flow
problems, lack of standards in the accounting, record keeping, and internal and external audit
mechanism all provide them fragile grounds to have quality budgeting, and thus they suffer in
the long run in operation and implementation phases (DonVito, 1969). The lack of financial
empowerment to build the capacity and arrange for the latest training for the economic
managers is yet another challenge they face. It is found that tough tax regimes exist for the
S.M.E.s in the construction sector that highly strains their operational and management
capacities.

Conclusion and Recommendations

The research at hand would provide many insights and glimpses from the literature
review and in light of the key findings. Some of the conclusions and key findings are in the
following figure: S.M.E.s in the constructions sector is weak in planning and implementing the
budget programs and projects due to lack of resources, state stern taxation and undue
interruption on the part of officials. Lack of key information is a necessity, and S.M.E.s lacks such
information to base the budgeting and planning upon such evidence-based information from the
field and the market dynamics. It is concluded that they cannot compete against the big
businesses, so they cannot exercise their clout to have resources from the very institutions. Thus
they need to work in unison to press their legitimate demands as the capacity building of the
small organizations and their staff responsible for budgeting is a problem, so their capacity
should be increased through training programs. Geographically they must be accusable and
should be at the right location as it is seen that they often work in remote areas, and hence they
face challenges of outreach nature. It is found that S.M.E.s in the construction sector work on a
momentous level, and their policies and practices are not permanent, so they need to put in
place the planning and implementation permanently so that they can grow and expand. Standing
firm in the market is the key to success.

Moreover, all the S.M.E.s in the construction sector ought to work in an integrated way,
so they learn from the experiences and avail joint opportunities to mitigate many budgeting
challenges. It and new budgeting software can be utilized that increase their performance,
decrease the level of challenges, and prove economical. So there should be a shift towards soft
skills development and the introduction and utilization of technologies.

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