THE FINANCIAL MANAGEMENT PRACTICES OF SMALL AND MICRO

ENTERPRISES
 CHAPTER I
Introduction

Background of the Study

A business is a practice of making money through producing, selling, and buying

products. A business must include a proper financial management. Financial management

involves a wide spectrum of a company’s financial decisions, and it is absolutely necessary

of any business. Financial management can help business on budgeting, maximize profits,

and minimize cost. Financial management is important to an organization, because it helps

determine how to acquire and distribute funds, make important financial decision, improve

profits, increase the value of the business, and keep the business financially stable.

Additionally, having proper financial management in small and micro enterprises will be

helpful for it to grow and expand. Micro enterprises are businesses that can employ up to 10

employees including the canteens, sari-sari store, street vendors (ukay-ukay vendors), market

vendors (fruits and vegetable vendors, fish vendors), and the small enterprises are businesses

that can employ fewer than 50 employees such as the café, restaurant, buy and sell business

etc.

Anoop Sajjan (2022), stated that financial management is one of the most important

aspects for individuals and organizations. Financial management is no longer about saving

money; it is about managing and growing money. According to Gawali, R. (2017), that a

financial management practices must include consistent savings, reconciling accounts,

monitoring account balance, developing a written monthly budget, and routine checking of
credit scores. Marcos (2021) state that financial management practices such as fixed asset

management, capital structure management, financial planning, and accounting information

system, according to the study, those are mainly responsible for the success and failure of

SME’s.

In the context of business entities, accounting information is important as it can help

the firms manage their short-term financial problems in critical areas like costing,

expenditure and controlling. At all levels of information, budget are getting tighter and there

is an increased need for financial management initiatives to directly contribute to providing

timely, accurate, reliable financial information to support management decision ( Nandan,

2010). As explained by Maseko and Mayani (2011) that accounting systems provide a source

of information to businesses operating in any industry for use in the measurement of

financial performances it is crucial therefore, the accounting practices of insurance

companies supply complete and relevant financial information needed to improve economic

decisions made by entrepreneurs.

However, poor financial management leads to bad debts and the inability to receive

financing from a bank. This can hamper growth by not taking advantage of business

opportunities when they arise, like making capital expenditures for new equipment that could

lead to increased. Poor financial management on the other hand, can lead to financial

problems, such as bankruptcy. It has been observed that some small and micro enterprises in

the local community have lack of proper financial management practices such as sari-sari

store, café, barbershop etc. . It was also noticed that there are a lot of micro enterprises exist

and operated
even in a small community such as the sari-sari store, street vendor and it was also noticed

that they have lack of knowledge about financial management and most of them did not

sustaining their business and was just focused on their sales. In addition, it has been observed

that there are a lot of micro enterprises did not really used proper financial management,

most of them is the sari-sari store and the street vendors. Their business funds and personal

funds are combined in the course of business, which is referred to as commingling. It is a

prevalent issue among micro businesses.

The aim of this study is to determine the financial management practices of the small

and micro enterprises. Furthermore, the researcher would like to propose a financial

management practices program to the small and micro enterprises in the local community.

Statement of the Problem

The study attempts to determine the financial management practices being used in the

local businesses such as small and micro enterprises of Tangub City, Misamis Occidental

Specifically, it seeks answer to the following questions:

1) What financial management practices has been applied of the small and micro

enterprises?

2) Which among the financial management practices employed is the most essential?

3) What are the effects of proper financial management practices in the business?
Schematic Diagram

Small and Micro Enterprises

Financial Management Practices:

-Accounting Information System

-Include Consistent Savings
-Reconciling Accounts
-Monitoring Account Balance
-Developing a Written Monthly Budget
-Routine Checking of Credit Scores
-Fixed Asset Management
-Capital structure Management
-Financial Planning

Action Plan
Scope and Delimitation

Determining the financial management practices of small and micro enterprises

was the focus of this research. The participants of this study are the owner/manager of the

small and micro businesses in the local community of Tangub City, Misamis Occidental. The

study will be conducted which is located at the city of Tangub, Misamis Occidental. The

collection of data will be happened on the second semester of S.Y. 2022-2023. The data will

be collected through survey questionnaire and interview guide with appointment letter from

the business owner/manager.

Significant of the Study

Community. The result of this study will help to improve the business industry in the local

community.

Business Owners. The result of this study will guide them to improve their financial

management in the business.

Business Workers. The result of this study is to give knowledge to them about financial

management of the business.

Consumer. The result of this study can assists them in acquiring and managing funds.

Future Researcher. The result of this study can serve as basis for further study on

financial management of SME’s.

Definition of Terms

For better classification and understanding of the terms related to this study , the
following terms are defined conceptually and operationally.

Financial Management. Refers to the business function concerned with profitability,

expenses, cash and credit. (Wikipedia, n.d.)

Practices. Refers to the actual application or use of an idea, belief, or method. (Oxford
Languages, n.d.)

Small Enterprises. Refers to enterprises with fewer than 50 employees. (Investopedia,

2021)

Micro Enterprises. Refers to enterprises which employ up to 10 employees.

(Investopedia, 2021)
 Research Methodology

This chapter discusses the research method and design utilize by the researchers of the

study as well as the population and sampling procedure. It includes the research locale,

research instruments and tools, data gathering procedures.

Research Design

The researcher will choose to conduct a quantitative research with the descriptive

method in gathering data about the status quo. The descriptive method aiming to provide

detail analysis to determine the financial management practices of small and micro

businesses. Best (1993), stated that a descriptive type of research involves the collection of

data to answer questions concerning the current status of the subject of the study

Research Setting

This study will be conducted at the city proper of Tangub City, Misamis Occidental or

known as the “Christmas Symbol Capital of Mindanao” as many visitor visit the town during

Christmas. The businesses have rises because of the incoming project that will soon to be

rise. The Panguil Bay Bridge located in barangay Silanga, Tangub City which will connect

Tangub City, Misamis Occidental and Tubod, Lanao del Norte. It will give opportunities to

the small and micro businesses in the local community and will boost economic growth in

the town.
Respondents of the Study

The respondents will be chosen using random sampling. Small and micro enterprises

including sari-sari store, bakeshop, street vendors (balut vendor, fishball and isaw vendor),

market vendor (fish and meat vendor, vegetables and fruits vendor), and ukay-ukay vendor

in the local community of Tangub City will participating in the study. The researcher will

request appointment for the interview and will be given a survey questionnaire to determine

the financial management practices of the business.

Research Instrument

To gather the necessary data needed for this study the following research instrument

will be utilized. Survey questionnaire will be used to answer question number one and two.

Interview guide will also be used to validate the consistency of the data. The survey

questionnaire is the main data-gathering instrument that the researcher will utilize to

determine the financial management practices and its effects to improve the business.
Data Gathering Procedure

The step to be use is to ask permission from the school principal to allow the

researcher to gather information outside the school campus. Next, the researcher will

compose a letter asking consent to the respondents to conduct the survey and interview, then

the researcher personally administered the questionnaire distribution will be done on their set

of time given. Personal interview will be conducted for clarity of the answers from the

questions. After the administering of the questionnaire the researcher will immediately

collecting data. Afterwards, the data will be analyzed and interpret.

Ethical Consideration

Ethics on research aims for the safely of respondents and informed consent was given

its confidentiality. For that reason, permission from the owner/manager of the small and

micro enterprises was obtained. Before the employment of the questionnaire, a letter of

approval will be given to the participants asking permission to get the data needed. An

assurance will be provided to the participants for the confidentiality of the data.

Statistical Tool

In analysing and interpreting the gathered data, the research will use sample size

determination. Sample size determination allows to choose the right number of observations

or people from a larger group (micro and small enterprises) to use in a sample.
 To determine the sample size of the larger group (micro and small enterprises) the

following formula will be use: where α is the selected level of significance and Z 1-α /2 is the

value from the standard normal distribution holding 1- α/2 below it.

References

Anoop, S. (2022). Introduction to Financial Management. Retrieved, June 13, 2023 from,

www.mygreatlearning.com

Barbosa, R. (2021). Financial Management Practices of Micro and Small Enterprises in

Tanauan, Leyte, Philippines, Retrieved May 21, 2023 from,

https://journal.evsu.edu.ph/index.php/tjertm/article/view/261

Gawali, R. (2017). Financial Management Practices in Micro, Small and Medium Businesses.

Retrieved May 23, 2023 from, https://eprajournals.com/IJHS/article/4698

Maseko and Mayani (2011). Accounting Practices of SMEs in Zimbabwe: An Assessment.

Retrieved May 21, 2023 from, www.researchgate.net

Marcos, S. (2021). Financial Management Practices and Profitability of Micro and Small

Medium Enterprises In The New Normal In The National Capital Region,

Philippines. Retrieved May 24, 2023 from,

https://ojs.aaresearchindex.com/index.php/aajmrcp/article/view/542

Velita, L. (2020). Financial Management of Micro, Small and Medium Enterprises in Cebu,

Philippines. Retrieved May 24, 2023 from, https://www.eajournals.org

 (Survey Questionnaire)

Financial Management Practices of Small and Micro Enterprises

The following questions are intended to assess whether your company benefits from strong

financial management practices. The questions also are intended to provoke thought and

discussion.

Table 1 Instruction: Put a check in the box whether you practice the following situation:

YES NO

1) Does your business have monthly or quarterly budget?

2) Does your business prepare profit and loss forecast each

quarter?

3) Are your business financial statement complete shortly after

the end of the month?

4) Do you have clear measured cost of each unit which your

business receives revenue?

5) Does your business have departmental expense and capital

budget?

6) Do you record your sales at the end of the day?

Table 2

Directions: For each statement in the survey, please indicate how much you practiced with

the statement by putting a check in the box on the right side of each statement. There are no

right or wrong answers .Your answers will be kept strictly confidential and you will not be

identified.

0- Never practiced

1- Less practiced

2- Moderately practiced

3- Always practiced

3 2 1 0

1 I record all the new stock purchase in the book.

2
I use/apply technology in recording the ins and outs

of my stocks like Point of Sales System (POS), etc.

3 I conduct inventory or physical counting of stocks

regularly.

4 I practice the first-in and last-out inventory

management system.

5 I project the required level of inventory of stocks

needed on a regularly specified time.

.

Directions: For each statement in the survey, please indicate how much you practiced with

statement by putting a check in the box on the right side of each statement. There are no

right or wrong answer. Your answers will be kept strictly confidential and you will not be

identified.

0- Never practiced

1- Less practiced

2- Moderately practiced

3- Always practiced

3 2 1 0

1 I keep track and record my daily sales every day.

2 I record all my inventory/or stock purchases in the

ledger.

3 I record all my expenses incurred in the operation of

the business.

4 I record all taxes, registration charges, fees, and

other payables in the book.

5 I keep track of all my collectibles/receivables in the

book of accounts.