Financial Management Strategies for Small and Medium Enterprises (SMEs)

Abstract

Despite the substantial contribution of small and medium companies (SMEs) to socioeconomic and political growth in several sectors, a majority of these firms cease operations before reaching their fifth anniversary. A significant number of business owners exhibit a deficiency in their understanding of the financial strategies necessary to ensure the sustained operation and expansion of their organization. The objective of this qualitative multiple-case research was to get a comprehensive comprehension of the financial methods that small and medium-sized enterprise (SME) owner-managers might use in order to improve the sustainability of their company operations in the organizations. The present analysis was based on the theoretical framework of entrepreneurship and Porter's model of competitive strategy. Data of a qualitative nature were gathered from several sources, including semi-structured interviews, academic literature, and observational field notes. The study included a sample of six small and medium-sized enterprise (SME) owner-managers operating in the education and accounting/consulting service sectors, with a workforce size of less than 100 workers. The analysis of the data yielded five themes that elucidated the financial strategy practices employed by owner-managers of small and medium-sized enterprises (SMEs). These themes encompassed the following aspects: adherence to strategic financial practices, the acquisition of fundamental financial and business knowledge, the establishment of a robust financial reporting system, the articulation of challenges faced by SMEs, and the embracement of entrepreneurial resilience. The results of the study indicated that small and medium-sized enterprise (SME) owner-managers should use a dynamic approach in their financial strategy practices. Through this approach, small and medium-sized enterprise (SME) owner-managers have the potential to ensure the longevity of their firms. This, in turn, may contribute to the advancement of societal well-being by fostering employment opportunities, equitable distribution of wealth, technical advancements, grassroots development, and overall improvement of the gross domestic product.