The effectiveness of a management planning and control model for Australian small businesses
Creators: name: Saunders, Susan
Publisher: name: RMIT University
Year: 2024

description: This research focuses on the management control function in Australian small businesses. A small business is defined as having less than 20 full time equivalent employees. These organisations have particular characteristics that make it difficult to apply the elements of large company Management Control Systems (MCSs) to realise desired business outcomes for the owners. Traditionally MCSs include strategic planning, budgeting, resource allocation, forecasting, performance measurement and evaluation and the core management accounting system.<br>Research in this area is important because small businesses form a large part of most economies. In 2009 the Australian Bureau of Statistics reported that of the 820,803 employing businesses 89.1% have less than 20 employees. 94% of all Australian businesses have an annual turnover of less than $A2m. <br>Clearly, if all of these small businesses improved their performance by adopting improved MCSs, economies would benefit as a whole, as would the stakeholders of each individual business and their employees. <br>The research programme was conducted with five Australian case studies. As a preliminary step, a software based MCS was designed to meet the perceived needs of small businesses. The software, known as the Intelligent Planning and Control Model or IPC Model, was built to address a gap in the availability of a suitable, time efficient tool that is tied into, but is adjunct to, the accounting system. The IPC Model has three primary functions that are to act as:<br>• A template guiding the owner-manager in a predetermined monthly business control process;<br>• A catalyst for motivating management improvement; and<br>• A learning tool through a performance measurement feedback mechanism.<br>The results of the research showed that, consistent with other empirical research, there was a real problem with the way these particular small businesses were run. The case studies revealed rich data on the owner’s attitudes to planning, their business focus, personality and capability characteristics and a wide variety of behaviours that were different to those found in larger organisations.<br>Following analysis of the data, a theory was developed that enhanced the understanding of the efficacy of the software through the user’s perceptions, its impacts on the owner’s management control mindset and four key factors affecting adoption of the software. <br>A significant impact of the software tool intervention was to expose the deficiencies that existed in the case study accounting systems. Changes observed in the adopting owner’s mindset involved a forward-looking approach, thinking strategically and exercising adaptive control in the business. The software introduction acted as a catalyst for accounting system improvements. These factors resulted in improved business outcomes.<br>Two out of the five cases adopted the prototype software and one case was keen to adopt in the near future pending the strengthening of its information technology infrastructure. <br>The outlook for future work involves the possible commercialisation of the software and the extension of this research to a larger number of cases both in Australia and other countries.<br>