Budgeting Practices and Performance in Small Healthcare Businesses

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Management Accounting Research 21 (2010) 40–55

Contents lists available at ScienceDirect

Management Accounting Research
journal homepage: www.elsevier.com/locate/mar

Budgeting practices and performance in small healthcare businesses Robyn King a , Peter M. Clarkson a,b,∗ , Sandra Wallace c
a b c

UQ Business School, The University of Queensland, Brisbane 4072, Australia Faculty of Business Administration, Simon Fraser University, Burnaby, Canada V5A 1S6 Department of Accounting and BIS, The University of Melbourne, Victoria 3010, Australia

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We present evidence linking primary healthcare business characteristics, budgeting practices, and business performance. Based on a sample of 144 responses from a survey of members of the Australian Association of Practice Managers (AAPM), we find that factors identified by contingency-based research are useful for predicting a business’s budgeting practices. Specifically, we find the adoption of written budgets to be related to size and structure, and for businesses using written budgets, the extent of use is related to business structure, strategy and perceived environmental uncertainty. Finally, we find evidence of a relationship between budgeting practice and performance. Here, we initially find a business’s performance to be positively associated with the use of written budgets. More refined tests of the “fit” between business contingency factors and extent of operating budget use then provide evidence of a positive association between the extent of “fit” and performance. Crown Copyright © 2009 Published by Elsevier Ltd. All rights reserved.

Keywords: Budgeting SME Healthcare businesses

1. Introduction This study investigates the relationship between contextual factors identified from contingency-based research, the adoption and extent of use of budgets, and business performance within the Australian primary healthcare setting.1 We focus on budgets because they are considered to be one of the main management control systems

This study is based largely on Robyn King’s Honours thesis completed in the UQ Business School at the University of Queensland. The authors would like to thank the editor and the two anonymous referees, as well as workshop participants at Monash and Swinburne Universities, the 2007 AFAANZ Annual Conference, and especially Aldonio Ferreira, Axel Schultz, Shannon Anderson and Julie Walker for comments on an earlier version of the manuscript. ∗ Corresponding author at: UQ Business School, The University of Queensland, Brisbane 4072, Australia. Tel.: +61 7 3346 8015; fax: +61 7 3365 6788. E-mail address: P.Clarkson@business.uq.edu.au (P.M. Clarkson). 1 Primary healthcare is the initial care of a patient as an outpatient excluding diagnostic testing; tertiary healthcare is that provided in a hospital setting.

(MCS) in organisations, have been found to be the earliest MCS that a business adopts, and continue to receive significant attention in the research literature and in teaching material (e.g., Davila and Foster, 2005, 2007; Sandino, 2007). We select the Australian primary healthcare sector as our experimental setting both because of its importance socially and economically, and because it is likely to be comprised of businesses that vary broadly in their budgeting practices. Contingency-based research proposes that there is no single MCS suitable for all businesses. Instead, the suitability of a particular MCS is argued to be contingent upon characteristics of a business including its size, strategy, structure, and also management’s perceptions of the uncertainty of the environment within which the business operates. We begin by examining the relationship between a business’s budgeting practices and these four contextual factors. In so doing, we view the development of a budgeting practice as consisting of two stages, the initial decision regarding adoption and the subsequent decision regarding extent of...
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