Original Research

Financial management practices in successful Small and Medium Enterprises (SMEs)

Hendrik Petrus Wolmarans, Quentin Meintjes
The Southern African Journal of Entrepreneurship and Small Business Management | Vol 7, No 1 | a8 | DOI: https://doi.org/10.4102/sajesbm.v7i1.8 | © 2015 The Southern African Journal of Entrepreneurship and Small Business Management
Submitted: 01 July 2015 | Published: 01 July 2015

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Hendrik Petrus Wolmarans, University of Pretoria, South Africa
Quentin Meintjes, University of Pretoria

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Abstract

Although the success of small, medium and micro enterprises (SMEs) is extremely important for the South African economy, their failure rate is amongst the highest in the world; some researchers estimate as high as 90 percent. Research has shown that the lack of financial management skills and application of financial management practices are some of the biggest factors contributing to SME failure. However, it is not clear from the literature which of these skills and practices are more important than others. This study aims to fill this gap by determining which financial management skills are relevant for successful SMEs. A survey was done on a sample of owner-managers of successful SMEs who had been asked, firstly, whether they performed different financial management practices and, secondly, how frequently they performed these in their companies. The study concludes that practices regarding working capital as well as profitability are much more relevant than those regarding a balance sheet or strategic finance. Similarly, financial practices related to cash flow and decision making are more relevant than those related to planning or analysing. It may be true, due to the high risk and volatile environment of SMEs, as well as the challenges that are often underestimated, that financial practices which academics regard as important are not always implemented by these companies.  This study contributes to the existing body of knowledge as it determines the relative relevance and frequency of use of financial management practices by successful SMEs.

KEY WORDS

Small and medium enterprises, Financial management practices, Successful SMEs, Entrepreneurship education


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Crossref Citations

1. The role of financial management training in developing skills and financial self-efficacy
Corrinna L. Kirsten
The Southern African Journal of Entrepreneurship and Small Business Management  vol: 10  issue: 1  year: 2018  
doi: 10.4102/sajesbm.v10i1.211