An Analysis of the Relationship between Financial Planning and MSME Profitability

Abstract

This paper examines how financial planning affects Zambian MSMEs' profitability. The major objectives of the study were to determine how much financial planning affects MSMEs' profitability, how much awareness there is of financial planning among MSMEs, what advantages financial planning offers MSMEs, and how difficult financial planning is for MSMEs. Using a mixed-approaches research design, collection and analysis of data utilised both quantitative and qualitative methodologies. While quantitative data was analysed using descriptive and inferential statistics, qualitative data was analysed using a thematic approach. There were 290 MSMEs in the study's sample. Cash flow statements and budgets, which are used for financial planning, showed to be significant predictors of MSMEs' profitability. However, it is important to note that a number of factors will determine how much these variables impact MSMEs' profitability. A number of challenges that MSMEs face have when it comes to financial planning were highlighted, including the requirement for specialized knowledge and the applicability of financial planning in the current changing business climate, to name a few. Since financial planning has been shown to help achieve seamless operations and aid in important financial decision making, the study advised MSMEs to actively pursue it. The report also recommended that quasi -governmental organizations actively participate in promoting financial planning knowledge.