A structural equation model linking forecasting, planning and controlling with SME performance

The importance and influence of forecasting, planning and controlling on SME performance are analyzed in this paper. A structural equation model is formed and is tested with a questionnaire survey data, administered among the selected SMEs in India. Forecasting is found the most influencing variable followed by planning and then controlling. The compensating role of planning and controlling on Arm performance, when the forecasting is inactive is also revealed. The cross validation explains the distinct pattern of use of forecasting, planning and controlling among the SMEs managed by the professional managers and the conventional owners. The case study discussed in this paper confirms the model based study. The paper suggests the ways for improving the use of forecasting, planning, controlling and firm performance. This model is useful to the researchers for improving the existing models.