Purpose: The purpose of this paper is to investigate the use of budget targets for performance evaluation in small- and medium-sized enterprises (SMEs) from a contingency perspective. Design/methodology/approach: This paper is based on a survey conducted among small- and medium-sized Danish production companies. It takes a contingency approach and applies structural equation modeling to analyze the data. Findings: The authors find that budget emphasis is related to size, decentralization and interdependence. Furthermore, the authors hypothesize and find that the degree of budget emphasis is positively related to performance. Research limitations/implications: The usual limitations associated with survey-based research should be considered before drawing conclusions from the findings. In that regard, replications of the study could be useful. Practical implications: The practical implication of this paper is that emphasis on the budget target in performance evaluation is of relevance for small- and medium-sized production companies. Originality/value: This paper contributes by providing insights into management accounting in SMEs. More specifically, this paper contributes to the debate in the SME literature regarding the value of planning and budgeting in SMEs as the paper focuses on the use of budgets for performance evaluation.