Home   >   CSC-OpenAccess Library   >    Manuscript Information
The Theoretical Link Between Cash Flow Statement Usage and Decision Making In South African Small, Medium and Micro Enterprises
Juan-Pierré Bruwer, Lindiwe Mabesele, Vincentia Benting, Joël Cloete, Chante Jacobs, Jade Marais, Kgosi-e-tsile Rabolao, Marianne Spangenberg
Pages - 191 - 204     |    Revised - 30-06-2021     |    Published - 01-08-2021
Volume - 12   Issue - 4    |    Publication Date - August 2021  Table of Contents
SMMEs, South Africa, Business Decision Making, Cash Flow Statement, Cash Flow.
South African Small, Medium and Micro Enterprises (SMMEs) are of great importance to the national economy due to their socio-economic value-adding abilities. Despite being responsible for contributing generously to the national Gross Domestic Product (GDP) and providing employment opportunities to more than half of the national workforce, research shows that up to 80% of these business entities fail after being in operation for three years. The latter dispensation is often blamed on unmanaged economic factors and subsequent risks; including that of poor cash flow management. To assess the cash flow situation of a business entity, a cash flow statement is generally used. According to academic literature, South African SMMEs do not make adequate use of cash flow statements which, in turn, may have negative repercussions on business decision making within South African SMMEs. The inadequate use of cash flow statements can be attributable to the isomorphic changes which these business entities undergo, particularly mimetic isomorphism. Therefore, the primary research objective of this study was to determine whether South African SMMEs’ limited utilisation of cash flow statements, as brought about by mimetic isomorphism, has an adverse influence on their business decision making in a theoretical dispensation. This study was non-empirical and qualitative and made use of an online desktop review approach by scrutinising secondary data to, in turn, develop propositions for further empirical testing. From the research conducted it appears that South African SMMEs’ limited utilisation of cash flow statements may adversely influence business decision making within these business entities, at least in a theoretical sense.
1 EconPapers 
2 Academia 
3 refSeek 
4 BibSonomy 
6 J-Gate 
7 Google Scholar 
8 Scribd 
A. Badewi, and E. Shehab. “The impact of organizational project benefits management governance on ERP project success: Neo-institutional theory perspective”. International Journal of Project Management, vol. 34, pp. 412 - 428, 2016.
A. Beattie. “The 3 Pillars of Corporate Sustainability”. Internet: https://www.investopedia.com/articles/investing/100515/three-pillars-corporate- sustainability.asp , Nov. 11, 2019 [2019].
A. Belobo, and F. Pelser. “Cash flow management: Assessing if impact of the operational performance of small and medium size enterprises at Mafikeng Local Municipality in South Africa to the global financial crisis”, Mediterranean Journal of Social Science, vol. 5, pp. 226 – 234, 2014.
A. Berry, M. Blottnitz, R. Cassim, A. Kesper, B. Rajaratnam and D.E Seventer. “The Economics of SMMEs in South Africa”. Internet: http://www.tips.org.za/506.pdf, Mar. 16, 2019 [2002].
A. Kemp, A. Bowman, B. Blom, C. Visser, D. Bergoer, D. Fullard, G. Moses, S-L. Brown, J. Bornman, and J-P. Bruwer. "The usefulness of cash budgets in micro, very small and small retail enterprises operating in the Cape Metropolis." Expert Journal of Business and Management, vol 3, pp. 1 – 12, 2015.
A. Kemp, A. Bowman, B. Blom., C. Visser, D. Bergoer, D. Fullard, G. Moses, S-L. Brown, J. Bornman, and J-P. Bruwer. “The usefulness of cash budgets in micro, very small and small retail enterprises operating in the Cape Metropolis”, Expert Journal of Business and Management, vol. 3, pp. 1 – 12, 2015.
A. Petersen, and J-P. Bruwer. “How document usage can positively influence South African Small. Medium and Micro Enterprise sustainability, in theory”. International Conference of Business and Management Dynamics, 2 – 4 September, Swakopmund, Namibia, 2019
A. Petersen, J-P. Bruwer, and R. Mason. “Source Document Usage and the Financial Sustainability of South African Small, Medium and Micro Retailers”. Expert Journal of Business and Management, vol. 8, pp. 110 – 119, 2020.
A. Petersen. “The effectiveness of internal control activities to combat occupational fraud risk in fast-moving consumer goods Small, Medium and Micro Enterprises (SMMEs) in the Cape Metropole”, Master’s thesis. Cape Peninsula University of Technology, Cape Town, 2018.
A. Roberts. “Disgruntled Entrepreneurs”. Internet: http://secure.financialmail.co.za/99/0917/trends/dtrend.htm, Jun. 24, 2019 [1999].
A. Spiliakos. “What does “Sustainability” means in Business?”. Internet: https://online.hbs.edu/blog/post/what-is-sustainability-in-business, Nov. 15, 2019 [2019].
A.C. Edmondson, and S.E. McManus. “Methodological fit in management field research”, Academy of Management Review, vol. 32, pp. 1246-1264, 2007.
A.G. Churchill, “Marketing research methodological foundations”, New York: The Dryden Press, 1995.
B. Ismaila. “Financial performance measurement of manufacturing small and medium enterprises in Pretoria: a multiple exploratory case study”. Master’s thesis. University of South Africa, Pretoria, 2011.
B. Jooste. “SMEs are feeling the pinch”. Internet: www.iol.co.za/index.php?set_id=13&art_id=vn 20081013054601261C397975. Jun., 13, 2019 [2008].
B. Masama, and J-P. Bruwer. “Revisiting the economic factors which influence fast food South African small, medium and micro enterprise sustainability”, Expert Journal of Business Management, vol. 6, pp.19–28, 2018.
B. Masama, and J-P. Bruwer. “The alignment of risk management initiatives, as used by fast food South African SMMEs, to the COSO ERM”. Southern African Accounting Association, Johannesburg, 26 – 28 June, South Africa, 2019.
B.T. Masama. “The Utilisation of Enterprise Risk Management in Fast-Food Small, Medium and Micro Enterprises Operating in the Cape Peninsula”, Master’s thesis. Cape Peninsula University of Technology, Cape Town, 2017.
C. Correia, D. Flynn, E. Uliana, M. Wormald, and J. Dillon. “Financial management. 8th Edition”. Cape Town: Juta, 2015.
C. Joubert, N. Schoeman, and J. Blignaut. “Small, Medium and Micro-Sized Enterprises (SMMEs) and the Housing Construction Industry: A Possible Solution to South Africa's Socio-Economic Problems”, South African Journal of Economic and Management Sciences, vol. 2, pp. 21 - 33, 1999.
C. Maduekwe, and P. Kamala. “Performance measurement by small and medium enterprises in cape metropolis, South Africa”, vol. 14, pp. 46 - 55, 2016.
C. Maduekwe. “The usage of management accounting tools by small and medium enterprises in Cape Metropole, South Africa”. Master’s thesis. Cape Peninsula University of Technology, Cape Town, 2015.
C. Murphy. “Understanding the cash flow statement”. Internet: www.investopedia.com/investing/what-is-a-cash-flow-statement/, Nov. 22, 2019.[2019]
C. Ngary, Y. Smit, W. Ukpere, and J-P Bruwer. “Financial Performance Measures and Business Objectives Attainment in Fast Food SMMEs in the Cape Metropolis: A preliminary Liability and Suitability analysis”. Mediterranean Journal of Social Sciences, vol. 5, pp. 909 - 921, 2014.
C. Sowden-Service. “Gripping GAAP: Your Guide to International Financial Reporting Standards”. Durban: LexisNexis, 2020.
C. Sowden-Service. “Gripping GAAP”. Durban: CSS Publishers, 2006
CIMA. Management Accounting Official Technology. The Charted Institute of Management Accountants, 2005.
D. Ansara, R. Endres, and B. Mothibatsela. “Opinion: Open for business? How SMMEs in South Africa can thrive”, Internet: https://www.fin24.com/Opinion/opinion-how-smmes-in- south-africa-can-thrive-20191118, Nov. 22, 2019 [2019].
D. Coetsee. “The underlying concepts of the definition of a liability in financial reporting: A doctrinal research perspective”. South African Journal of Accounting Research, vol. 2020, pp. 1-22, 2020.
D. Morin, and J.L. Maux. “Black and white and red all over: Lehman Brothers’ inevitable bankruptcy splashed across its financial statements”. International Journal of Business and Social Science, vol. 2, pp. 39-65, 2011.
D. Venter, S. Van Eeden, and S. Viviers. “A Comparative Study of Selecting Problems Encountered by Small Businesses in the Nelson Mandela, Cape Town and Egoli Metropoles”. Journal of South African institute for management statistics, vol. 12, pp. 13 - 23, 2003.
D.D. Godwin. “Antecedents and consequences of newlyweds' cash flow management”. Financial Counseling and Planning, vol. 5 no. 1. pp. 161-190, 1994.
E. Mbumbo, H. Benedict, and J-P Bruwer. “The influence of management’s accounting skills on the existence of their South Africa small, medium and micro enterprises”. International Journal of Education Economics and Development, vol. 10, pp.323 – 334, 2019.
F. Ngwenya. “The small and medium-sized enterprises as a vehicle for employment creation in South Africa”, Clute Institute International Conference, Bangkok, Thailand, March, 2012.
G. Fisher. “Tom Boardman Lessons Learnt”. Entrepreneur, 34 (January), pp.41-45, 2009.
G. Karyawati, B. Subroto, T. Sutrisno, and E. Saraswati. “Explaining the complexity relationship of CSR and financial performance using neo-institutional theory”. Journal of Asian Business and Economic Studies, vol. 2020, pp. 1 – 10, 2020.
G. Uwonda, N. Okello, and G. Okello. “Cash flow management utilization by Small Medium Enterprises (SMEs) in Northern Uganda”, Merit Research Journal of Accounting, Auditing, Economics and Finance, vol. 1, pp. 67 - 80, 2013.
H. Maduku, and I. Kaseeram. “Mainstreaming Willingness among Black Owned Informal SMMEs in South Africa”. Journal of Emerging Trends in Economics and Management Sciences, vol. 10, pp. 140-147, 2019.
H.A. Haveman. “Follow the leader: Mimetic isomorphism and entry into new markets”, Administrative science quarterly, vol. 38, pp. 593 - 627, 1993.
H.A. Haveman. “Follow the leader: Mimetic isomorphism and entry into new markets”. Administrative science quarterly, vol. 38, pp. 593-627, 1993.
J-P Bruwer, and J. Smith. “The Role of Basic business Skills development and Their Influence on South African Small, Medium and Micro Enterprise Sustainability”, vol. 10, pp. 48 – 62, 2018.
J-P. Bruwer, and D. Holtzhausen. “Accounting for non-accountants (re)”. Cape Town: Oxford University Press Southern Africa, 2019.
J-P. Bruwer, and P. Coetzee. “A literature review of the sustainability, the managerial conduct of management and the internal control systems evident in South Africa small, medium and micro enterprises”, Problems and Perspectives in Management, vol. 14, pp. 201 - 211, 2016.
J-P. Bruwer, and Y. Smit. “Accounting Information Systems – A value – adding phenomenon or a mere trend? The situation in Small and Medium Financial Service Organisations in the Cape Metropolis”, vol. 3, pp. 38 – 52, 2015.
J-P. Bruwer, C. Hattingh, and I. Perold. “Probable Measures to Aid South African Small Medium and Micro Enterprises’ Sustainability, Post-COVID-19: A Literature Review”. Internet: https://papers.ssrn.com/sol3/Papers.cfm?abstract_id=3625552, Nov. 10, 2020 [2020].
J-P. Bruwer. “Sustainability of South African FMCG SMME retail business in the Cape Peninsula”. Master’s thesis, Cape Peninsula University of Technology, Cape Town, 2010.
J-P. Bruwer. “The relationship(s) between the managerial conduct and the internal control activities of South African fast moving consumer goods SMMEs”, Doctoral degree, Cape Peninsula University of Technology, Cape Town, 2016.
J-P. Bruwer. “The sustainability of South African Small Medium and Micro Enterprises (SMMEs) operating in the retail industry amidst the ever-increasing excise taxation on tobacco products, alcohol products and plastic bags: A literature review”. Internet: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3559059, Oct. 27, 2020 [2020].
J. Abor, and P. Quartey. “Issues in SME Development in Ghana and South Africa”. International Research Journal of Finance and Economics, vol. 39, pp. 218-228, 2010.
J. Bebbington, R. Gray, and R. Laughlin. “Financial accounting: practice and principles”. Cengage Learning EMEA, 2001.
J. Benders, R. Batenburg, and H. Van der Blonk. “Sticking to standards; technical and other isomorphic pressures in deploying ERP-systems”. Information & Management, vol. 43, pp. pp.194 – 203, 2006.
J. Heaton. “Secondary data analysis”. The AZ of Social Research, Sage, London, 2003.
J. Mähönen. “Comprehensive approach to relevant and reliable reporting in Europe: A Dream impossible?”, Sustainability, vol. 12, pp. 5277 - 5314, 2020
J. Okpara. “Factors constraining the growth and survival of SMEs in Nigeria Implications for poverty alleviation”. Management Research Review, vol. 34, pp, 156 - 171, 2011.
J.O. Winjum. “The Role of Accounting in the Economic Development of England 1500- 1750”, Centre for International Education and Research, 1972.
J.S. Wiese. “Factors determining the sustainability of selected small and medium-sized enterprises”. Master’s thesis, North-West University, Potchefstroom, South Africa, 2014.
L. Jooste. “An evaluation of the usefulness of cash flow statements to predict financial distress”. Acta Commercii, vol. 7, pp. 1 - 13, 2007.
L. Jooste. “An evaluation of the usefulness of the cash flow statement within South African Companies by means of cash flow ratios”. Doctoral thesis, University of Pretoria, Pretoria, 2005.
L. Van Scheers. “SMEs’ marketing skills challenges in South Africa”. African Journal of Business Management, vol. 5, pp. 5048-5056, 2011.
L.E. Brouthers, E. O'Donnell, and J. Hadjimarcou. "Generic product strategies for emerging market exports into triad nation markets: A mimetic isomorphism approach." Journal of management Studies, vol. 42, pp. 225 – 245, 2005.
M. Abioro. “The impact of cash management on the performance of manufacturing companies in Nigeria”, Uncertain Supply Chain Management, vol. 1, pp. 177-192, 2013.
M. Cant. "Challenges Faced By SME’s In South Africa: Are Marketing Skills Needed?", International Business & Economics Research Journal (IBER), vol. 11, pp. 1107 – 1116, 2012.
M. Cristofaro. “Unfolding irrationality: how do meaningful coincidences influence management decisions?”. International Journal of Organizational Analysis, 2020.
M. Haffar, and C. Searcy. “Target-setting for ecological resilience: Are companies setting environmental sustainability targets in line with planetary thresholds?”. Business Strategy and the Environment, vol. 27, pp. 1079-1092, 2018.
M. Matsoso, and O. Benedict. “Financial Performance Measures of Small Medium Enterprises in the 21st Century”. Journal of Economics, vol. 7, pp. 144 - 160, 2016.
M. Saunders, P. Lewis, and A. Thornhill. “Research Methods for Business Students”. 6th ed. Harlow: FT Prentice Hall, 2012.
M.C. Cant, and A. Ligthelm. Small business problems in the South African context: a proactive entrepreneurial approach. In 7th Asia-Pacific Decisions Science Institute Conference, July, 2002.
M.C. Cant, and J.A. Wiid. “Establishing the challenges affecting South African SMEs”. International Business & Economics Research Journal, vol. 12, pp. 707-716, 2013.
M.E. Gerber. “The E-Myth Revisited: Why Most Small Businesses Don’t Work and What to do About it”, Collins Business, New York, NY, 1995.
M.J. Milne, and R. Gray. “W(h)ither ecology? The triple bottom line, the global reporting initiative, and corporate sustainability reporting”, Journal of Business Ethics, vol. 118, pp. 13- 29, 2013.
M.R. Abdurahman, J. Addinall, E. Chandler, N. Daniels, L. English, J. Green, Z. Shade, and J-P Bruwer. “Utilisation of budgets in clothing small medium and micro enterprises (SMMEs) within the Cape Metropole”, African Journal of Business Management, vol. 6, pp. 7529 – 7532, 2012.
N.E. Daniel. “The effective measurement of SME e-commerce performance in the Western Cape”. Master’s Dissertation, Cape Peninsula University of Technology, South Africa, 2011.
O. Fatoki. "An Investigation into the Financial Management Practices of New Micro- enterprises in South Africa", Journal of Social Science, vol. 33, pp. 179-188. 14, 2012.
O.M. Lehner, and T. Harrer. “Crowdfunding revisited: a neo-institutional field-perspective”. Venture Capital, vol. 21, pp.75 - 96, 2019.
P.J. DiMaggio, and W.V. Powell. “The iron cage revisited: Institutional isomorphism and collective rationality in organizational fields”. American sociological review, vol. 48, pp. 147- 160, 1983.
P.L. Jensen, O. Broberg, and N. Møller. “Ergonomics, engineering, and business: Repairing a tricky divorce”. In 17th World Congress on Ergonomics, International Ergonomics Association, 2009.
P.R. Haunschild, and A.S. Miner. “Modes of interorganizational imitation: the effects of outcome salience and uncertainty”. Administrative Science Quarterly, vol. 42, pp. 472 – 500, 1997.
Q. Hu, P. Hart, and D. Cooke. “The role of external and internal influences on information systems security – a neo-institutional perspective”, Journal of Strategic Information Systems, vol. 16, pp. 153-172, 2007.
R. Kirkham. “Liquidity Analysis Using Cash Flow Ratios and Traditional Ratios: The Telecommunications Sector in Australia”. Journal of New Business Ideas & Trends, vol. 10, pp. 1 – 13, 2012.
R. Suddaby. “Challenges for institutional theory”, Journal of Management Inquiry, vol. 19, pp. 14 - 20, 2010.
S. Adhikary. “Internship report on “factor influencing customers to open account at EXIM Bank Limited”. Bachelor’s degree, Daffodil International University, Bangladesh, 2017.
S. Du Plooy, H. Goodey, W. Lötter, D. Nortjé, and C. Meyer. “X-Kit Undergraduate – Financial Accounting”. Cape Town: Maskew Miller Longman (Pty) Ltd, 2005.
S. Kengne. “Inhibiting Factors in the Strategic Financial Management Decision Making Process: Evidence from South Africa SMMEs”, Mediterranean Journal of Social Sciences, vol. 6 pp. 113-124, 2015.
S. Myeni. “Cash flow management strategies in Small and Medium Sized Occupational Health Enterprises”. Doctoral thesis, Walden University, United States of America, 2018.
S.N. Cory, and B.R. Envick. Teaching sound financial decision making: Can the GAAP cash flow statement mislead?. In Allied Academies International Internet Conference, Vol. 12, pp. 14 - 18, 2010.
S.P. Marivate. “The impact of entrepreneurial skills on the viability and long term survival of small businesses: a case of the City of Tshwane, South Africa”, European Journal of Business, Economics and Accountancy, vol. 2, pp. 53 - 72, 2014.
S.T. Enow, and P. Kamala. “Cash management practices of small, medium and micro enterprises in the Cape Metropolis, South Africa”. Investment Management and Financial Innovations, vol. 13, pp. 230 - 235, 2016.
South Africa. “Small Business Act No 102 of 1996”, Pretoria Government Printer, 1996.
Statistics South Africa. “Quarterly labour force survey”. Internet: http://www.statssa.gov.za/publications/P0211/P02114thQuarter2018.pdf, Nov. 10, 2020 [2019].
T. Beck, J-P. Bruwer, R. Beck, M. Chalmers, J. Maseko, P. Pele, and T. Walker, T. Applied Accounting (re). Cape Town: Oxford University Press Southern Africa, 2019.
T.S. Hatten. “Principles of small business management”. South-Western Cengage Learning, 2012.
The South Africa Institute of Charted Accountants (SAICA). “AC 118: Cash Flow Statements”. Johannesburg: Juta, 1996.
V. Vukmirovic. “Entrepreneurship Education among University Students as a Predictor of Female Entrepreneurial Undertakings”. Journal of Women's Entrepreneurship and Education, vol. 3, pp. 86-102, 2019
Z. Mbandlwa, and N. Dorasamy. “The impact of substance abuse in South Africa: a case of informal settlement communities”. Journal of Critical Reviews; Vol. 7, pp. 1 - 15, 2020.
Dr. Juan-Pierré Bruwer
Business Re-Solution, Wellington, 7655 - South Africa
bruwerjp@cput.ac.za, infobusinessresolution@gmail.com
Mrs. Lindiwe Mabesele
Cape Town, 8000 - South Africa
Miss Vincentia Benting
Cape Town, 8000 - South Africa
Mr. Joël Cloete
Cape Town, 8000 - South Africa
Miss Chante Jacobs
Cape Town, 8000 - South Africa
Miss Jade Marais
Cape Town, 8000 - South Africa
Mr. Kgosi-e-tsile Rabolao
Cape Town, 8000 - South Africa
Miss Marianne Spangenberg
Cape Town, 8000 - South Africa