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Micro-enterprises are the least likely to plan their budgets

BUSINESSMicro-enterprises are the least likely to plan their budgets

Only 24 percent of small and medium enterprises (SMEs) have a budget plan, which is a statement of forecast revenues and expenditures, for the whole year. With every fourth enterprise not planning a budget at all, decisions are made day by day. In terms of costs, only major investments are planned 12 months ahead,while business purchases are usually planned semi-annually by most business owners. These findings are a part of the Kaczmarski Group’s survey “The year 2024 from the perspective of micro, small and medium enterprises”.

Both macroeconomic and microeconomic factors influence the financial stability of each organization, as well as the internal budget policy of a company. While control of the former factors is beyond the control of entrepreneurs, the budget is an essential tool for effectively running a business. A well-structured budget will help establish commercial goals, determine a projected profit, and plan expenditures to optimize costs. Despite the seeming intuitiveness of these principles, they are not universally adopted by all owners of micro, small, or medium-sized enterprises. A survey conducted in December 2023 with a sample of 620 SME-sector firms by IMAS International on behalf of the Kaczmarski Group shows substantial variation in revenue and expenditure planning among entrepreneurs. Moreover, many of them prefer to improvise rather than plan.

Medium-sized companies have a plan

28 percent of companies have a budget plan for half a year. Only 24 percent have planned the entire year, and every fourth company does not engage in budget planning at all, but makes decisions day by day. “Forecasting revenues and costs determines the financial security of a company. Without such a comparison, it’s almost impossible to make key business decisions. It’s even harder to set goals and directions for development. It’s like drifting across the ocean without a map,” observes Adam Łącki, President of the Management Board at the National Debt Register Office.

Long-term planning is predominantly favored by construction and production companies, and more so by companies than by single-entrepreneur entities. In terms of size, among the companies that have already planned the entire year in terms of revenue and expenditure, medium-sized companies employing between 50 and 249 employees stand out, with nearly 30 percent having such a plan. However, the smaller the SME, the lesser the planning. As much as 45 percent of micro-enterprises (employing up to 9 people) admit that they do not plan their budget in the long term and make decisions day by day. However, only 5 percent of medium-sized enterprises share this attitude.

30 percent of micro-enterprises wait for a better moment to make purchases

When asked how far in advance business purchases for 2024 are planned, most entrepreneurs, 24 percent, said they only plan for the first half of the year. Slightly fewer, 23 percent, plan for the whole year, and 22 percent plan quarter by quarter. Only 16 percent of entrepreneurs plan to make current purchases of goods and services necessary for running their business, such as products, semi-finished goods, licenses, software, on-the-spot in 2024.

“Service companies show the highest level of spontaneity, at 24 percent. But unlike industrial companies, they are not dependent on the components or raw materials necessary for the production of specific types of materials that would affect their operations. In manufacturing companies, only 6 percent allow such spontaneity, as negotiating prices often lasts a long time and finding trusted suppliers sometimes takes many months. When it comes to minor business purchases, entrepreneurs often prefer to look for ad hoc opportunities to buy something at competitive prices and at the same time not unnecessarily fill their warehouses. Many also hope for a gradual fall in prices in 2024, so they prefer to wait for a more favorable moment,” explains Emanuel Nowak, an expert from the factoring company NFG.

Among the “waiters”, micro-entrepreneurs are the champions. As much as 30 percent of them declare that they do not plan in the long run. On the other hand, every third medium-sized company and 31 percent of trading companies have already planned business purchases for the whole year.

Large investments should be planned in advance

The situation with larger expenses related to operations, such as buying machinery or equipment, renting or buying premises or a car, looks slightly different. Here, most companies, 30 percent, plan for the whole year immediately, and only 15 percent do not plan such investments in advance at all. The promoters of planning large expenses are entrepreneurs from the production sector – 38 percent, and medium-sized companies – 37 percent. Also, in this case, micro-enterprises, in the largest part (18 percent), intend to make this type of decision from day to day.

“Managing a budget and determining potential expenditures that the company will have to incur in the near future allows it to secure its finances. This knowledge is essential for cost optimization and liquidity protection. The Kaczmarski Group survey, however, shows that this is not the rule in the SME segment and there are clear differences in financial management in companies. The size of the company, the industry, and the profile of the activity have a huge impact on the way the budget and expenses are planned,” summarizes Adam Łącki, President of the Management Board at the National Debt Register.

The nationwide survey “The year 2024 from the perspective of micro, small and medium enterprises” was conducted in December 2023 in a group of 620 SME sector companies by IMAS International on behalf of the Kaczmarski Group.

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