Financial Management and Growth of Small and Medium-Scale Industries: A Study of Selected Small Businesses in Ado-Odo/Ota Local Government Area, Ogun State

Abstract

This study examined the influence of financial management on the growth of small and medium-scale enterprises (SMEs) in Ado-Odo/Ota Local Government Area of Ogun State, Nigeria. Specifically, the study investigated the relationship between budgeting and SMEs’ profitability, as well as the effect of financial planning on business expansion. A descriptive survey research design was adopted for the study. The population is comprised of 300 SME owners and managers across sectors such as trade, manufacturing, agro-processing, and services. Using the Taro Yamane (1967) formula at a 0.05 level of significance, a sample size of 171 respondents was determined. Data were collected through a structured questionnaire using a five-point Likert scale, and the instrument’s reliability was confirmed using Cronbach’s Alpha. The data collected were analyzed using descriptive statistics and Analysis of Variance (ANOVA) with the aid of SPSS. The findings revealed that budgeting practices are highly adopted among SMEs, while financial planning practices are moderately adopted. The results further showed that budgeting has a significant relationship with SMEs’ profitability (p = 0.006 < 0.05), indicating that effective budgeting enhances financial performance. Additionally, financial planning was found to have a significant effect on business expansion (p = 0.028 < 0.05), suggesting that proper financial planning supports business growth. The study concluded that financial management practices, particularly budgeting and financial planning, play a critical role in enhancing the profitability and expansion of SMEs. It was recommended that SME operators should strengthen their budgeting practices and adopt comprehensive financial planning strategies to achieve sustainable growth.