Budgeting and financial control as a strategic approach to enhancing liquidity in small and medium-sized enterprises

Abstract

Budget management is a fundamental component of strengthening the liquidity and financial sustainability of small and medium-sized enterprises (SMEs). This study aimed to examine budgeting as a strategic tool for reducing liquidity deficits among commercial SMEs in El Carmen Canton, Ecuador. A quantitative study with a descriptive-correlational scope and a non-experimental cross-sectional design was conducted. The study population comprised 929 SMEs, from which an effective sample of 210 active commercial enterprises was obtained. Data were collected using a structured 32-item questionnaire based on a five-point Likert scale. The internal consistency of the instrument was assessed using Cronbach's alpha coefficient, and the relationship between the study variables was analyzed using Pearson's correlation coefficient. The findings revealed low levels of development in both budgeting practices and liquidity management strategies, with mean scores of approximately 2.25 and 2.33, respectively. Moreover, very strong positive correlations were identified between the dimensions of budgeting and financial control, with correlation coefficients ranging from 0.95 to 0.99. These findings indicate that higher levels of budget planning, implementation, and monitoring are associated with more effective liquidity management practices. It is concluded that budgeting is closely associated with enhanced organizational liquidity and that its systematic implementation can optimize resource allocation, improve financial management efficiency, and reduce the risk of liquidity shortages in commercial SMEs.