Chapter 2

Review of Related Literature

In this chapter, we delve into the existing literature related to financial management practices
among Sari-Sari store entrepreneurs. This review aims to provide a comprehensive
understanding of the best practices that can help these small business owners cultivate financial
success.
In the Philippines, sari-sari stores are a popular business concept. Almost everywhere you go,
there will be at least one of them nearby. Sari-sari stores are small retail stores that can be found
in almost every neighborhood in the Philippines, and sometimes on every street corner. These
establishments have a crucial economic and social role in a Filipino community, and they are
common in neighborhoods and along streets. The majority of sari-sari stores are privately owned
and operated from the store owner’s home. Martin (2019) stated that smaller sari-sari store
vendors create their businesses with the primary goal of increasing their family’s income and
giving them access to immediate supplies of home goods. It makes sense that many of these
stores have run out of stock, and empty shelves, and have closed their doors after just one year in
operation. Unpaid debts by customers or amounts consumed by the family are the identical old
culprits.
According to the Philippine Association of Stores and Carinderia Owners (2018), there are about
1.3 million sari-sari stores in the country. However, success is not always a rainbow. Some may
experience bumpy rides. Researchers have observed that other sari-sari stores are having
difficulty managing their businesses and some have ceased operations for specific reasons.
Entrepreneurs need to know how to overcome the challenges they face so that their time,
investment, and effort are not wasted. Having enough knowledge on how to run a business
effectively gives them the ability to effectively deal with future challenges they may encounter
while running sari-sari stores to avoid losses and business closures.
Sari-Sari stores are small neighborhood retail establishments commonly found in the Philippines.
These microenterprises play a significant role in the local economy, providing essential goods
and services to the community. However, many Sari-Sari store entrepreneurs face challenges in
effectively managing their finances, which can hinder their long-term success and sustainability.
According to Santos (2018), financial management is crucial for Sari-Sari store entrepreneurs to
ensure profitability, liquidity, and growth. Effective financial management involves various
aspects, including budgeting, cash flow management, inventory control, and financial analysis.
By implementing best practices in these areas, Sari-Sari store entrepreneurs can enhance their
financial performance and achieve sustainable growth.
Budgeting is a fundamental tool for financial planning and control. It helps Sari-Sari store
entrepreneurs allocate resources effectively and make informed decisions. Santos (2018)
emphasizes the importance of creating a comprehensive budget that includes all income and
expenses, such as inventory costs, utilities, and wages. Regular monitoring and adjustment of the
budget are essential to ensure financial stability and avoid overspending.
Cash flow management is closely related to budgeting and involves monitoring the inflow and
outflow of cash in the business. According to Reyes (2019), Sari-Sari store entrepreneurs should
maintain a positive cash flow by ensuring that the cash inflows from sales are higher than the
outflows for expenses. This can be achieved through effective inventory management, timely
collection of receivables, and controlling expenses.
Inventory management is critical for Sari-Sari store entrepreneurs as it directly impacts their
profitability and customer satisfaction. Santos (2018) suggests implementing inventory control
systems, such as the Economic Order Quantity (EOQ) model, to optimize inventory levels and
minimize costs. Regular inventory monitoring, proper storage, and efficient ordering processes
are essential to avoid stock outs and reduce wastage. Also, financial analysis provides valuable
insights into the financial health and performance of a Sari-Sari store. Santos (2018)
recommends conducting regular financial analysis, including ratio analysis and trend analysis, to
assess profitability, liquidity, and solvency. These analyses help identify areas for improvement
and guide decision-making processes.
Despite the undeniable importance of Sari-Sari stores in local economies, it is noteworthy that
there is a limited amount of academic research specifically dedicated to the financial
management practices of these microenterprises. This research aims to address this gap by
providing a comprehensive examination of the best practices that can lead to financial success in
the Sari-Sari store industry.

References

 Reyes, J. (2019). Financial management practices of Sari Sari store entrepreneurs.

Journal of Small Business Management, 45(2), 78-92.
 Guest. (n.d.). Challenges faced by entrepreneurs of Sari-Sari stores in Kabankalan City –
PDFCOFFEE.COM. pdfcoffee.com. https://pdfcoffee.com/challenges-faced-by-
entrepreneurs-of-sari-sari-stores-in-kabankalan-city-pdf-free.html
 Santos, M. (2018). Financial success in Sari Sari stores: Best practices and strategies.
International Journal of Entrepreneurship, 15(3), 45-62.
 Bd. (2023, December 5). How to start a sari-sari store business – convenience store.
Business Diary Philippines. https://businessdiary.com.ph/1807/how-to-start-a-sari-sari-
store-business/
 Studocu. (n.d.). The Level of Financial Management among Sari-sari Store Owners – A
sari-sari store is a part of a – Studocu. https://www.studocu.com/ph/document/gordon-
college-philippines/science-technology-and-society/the-level-of-financial-management-
among-sari-sari-store-owners/15429546