Budgeting Analysis on the Financial Performance of Sidoarjo MSMEs

Abstract

This study aims to analyze budgeting practices in Micro, Small, and Medium Enterprises (MSMEs) in Sidoarjo Regency and their impact on financial performance. MSMEs play a significant role in the regional economy, but still face challenges in financial management, particularly related to budgeting. This study employed a qualitative approach with a case study design on one MSME in the craft sector. Data were obtained through semi-structured interviews, observation, and documentation, then analyzed using the Miles, Huberman, and Saldaña model, which includes data reduction, data presentation, and conclusion drawing. The results indicate that budgeting practices in MSMEs are still at a rudimentary stage and are largely undocumented. However, rudimentary budgeting has been shown to have a positive impact in helping control costs, maintain cash flow, and estimate working capital needs. The main obstacles faced by MSMEs are limited accounting knowledge, limited access to training, and limited human resources. This study also confirms a positive relationship between budgeting and financial performance, where MSMEs with more targeted budgets tend to be able to improve cost efficiency and profitability. Therefore, increasing accounting literacy and external support in the form of training and mentoring are essential to improve budgeting practices and strengthen the financial performance of MSMEs in a sustainable manner.