Understanding financial management as a determining factor for the success of MSMEs: A qualitative study

https://doi.org/10.35912/jomabs.v2i1.2571
Published: Nov 29, 2024

Abstract:

Purpose: This study aims to explore the understanding of financial management among micro, small, and medium enterprises (MSMEs) and how such understanding influences the success and sustainability of their businesses. The primary focus is to identify key financial management factors considered essential by MSME owners and the challenges they face in implementing effective financial practices.

Research Methodology: This research employs a qualitative literature review methodology, analyzing relevant studies, reports, and articles related to MSME financial management. The study synthesizes insights from various sources to provide a comprehensive understanding of the current practices, challenges, and factors that contribute to the financial success of MSMEs.

Results: The findings indicate that a solid understanding of financial management, including cash flow management, transaction recording, and long-term financial planning, plays a crucial role in the success of MSMEs. Despite the recognition of its importance, many MSME owners face barriers such as lack of financial knowledge, limited access to financial resources, and reliance on manual accounting methods. Moreover, many fail in long-term financial planning, which impedes their ability to manage risks and plan for business expansion effectively.

Limitations: This study is limited to a qualitative literature review, which may not capture the full range of experiences from MSME owners across different sectors or regions.

Contribution: This research contributes valuable insights for MSME owners, financial institutions, and policymakers in understanding the critical role of financial literacy and providing better support for MSMEs.

Keywords:
1. Business Success
2. Financial Management
3. Financial Planning
4. MSMEs
Authors:
Meileginta Kaban
Universitas Sriwijaya, Indonesia
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How to Cite
Kaban, M. (2024). Understanding financial management as a determining factor for the success of MSMEs: A qualitative study. Journal of Multidisciplinary Academic Business Studies, 2(1), 241–250. https://doi.org/10.35912/jomabs.v2i1.2571
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Issue & Section
Vol. 2 No. 1 (2024): November
Articles
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References

    Al-Hashimy, H. H., Alabdullah, T. T. Y., Ries, E., Ahmed, M. A., Nor, M. I., & Jamal, K. A. M. (2022). The Impact of Financial Management Elements and Behavioral Intention on the Financial Performance. International Journal of Scientific and Management Research, 5(12), 117-149.

    Alalawi, M. A., Thottoli, M. M., Al-Shukaili, A. H., & Al-Amri, F. K. (2023). Unveiling the secrets: decoding the factors influencing MSMEs' accounting process and strategic debtors' management in Oman. Management & Sustainability: An Arab Review.

    Ashshiddiqi, M. T., & Rahmat, T. (2022). Optimizing the Financial Management Behavior of Msme Actors Through Digital Financial Knowledge in the Digital Era. International Journal of Nusantara Islam, 10(1), 34-48.

    Biswas, A. (2024). From passion to profit: unveiling the strengths of proactive mindset, perseverance, excellence and education in the entrepreneurial success of MSMEs. International Journal of Productivity and Performance Management.

    Di Mauro, C., Ancarani, A., & Hartley, T. (2020). Unravelling SMEs’ participation and success in public procurement. Journal of public procurement, 20(4), 377-401.

    Edwy, F. M., Firdaus, M. I., Febia, I., Leonardi, S., & Ramadhani, Z. A. (2023). Financial Management: The Implementation in MSMEs. International Journal of Multicultural and Multireligious Understanding, 10(10), 273-283.

    Hasanudin, H. (2023). Effective Financial Management Strategies to Improve MSME Performance. Journal of Economics and Business (JECOMBI), 3(03), 132-137.

    Hendrawan, S. A., Chatra, A., Iman, N., Hidayatullah, S., & Suprayitno, D. (2024). Digital transformation in MSMEs: Challenges and opportunities in technology management. Jurnal Informasi dan Teknologi, 141-149.

    Hoang, T. G., & Bui, M. L. (2023). Business intelligence and analytic (BIA) stage-of-practice in micro-, small-and medium-sized enterprises (MSMEs). Journal of Enterprise Information Management, 36(4), 1080-1104.

    Matare, P. G., & Sreedhara, T. (2020). Financial management practices and growth of MSMEs of Tanzania. MUDRA: Journal of Finance and Accounting, 7(1), 30-44.

    Nadiyani, P., & Lubis, K. S. (2024). Implications of Financial Understanding and Attitude in The Context of Financial Management MSMEs. J-MAS (Jurnal Manajemen dan Sains), 9(2), 1401-1406.

    Panya, F., & Petchsawang, P. (2024). Innovation capability as a mediator of the relation between talent management and entrepreneurial firm performance. Journal of Small Business and Enterprise Development.

    Rijal, S., Ausat, A. M. A., Kurniawati, R., & Suherlan, S. (2023). Opportunities and Challenges for MSMEs in Indonesia in the Face of Ramadan. Community Development Journal: Jurnal Pengabdian Masyarakat, 4(2), 2035-2039.

    Rita, M. R., Kristanto, A. B., Nugrahanti, Y. W., & Usmanij, P. (2022). Funding and performance pattern matrix in the startup phase: a study of startup MSMEs in Indonesia Artisan Entrepreneurship (pp. 127-160): Emerald Publishing Limited.

    Singh, S., Raj, R., Dash, B. M., Kumar, V., Paliwal, M., & Chauhan, S. (2024). Access to finance and its impact on operational efficiency of MSMEs: mediating role of entrepreneurial personality and self-efficacy. Journal of Small Business and Enterprise Development.

    Sitinjak, C., Johanna, A., Avinash, B., & Bevoor, B. (2023). Financial Management: A System of Relations for Optimizing Enterprise Finances–a Review. Journal Markcount Finance, 1(3), 160-170.

    Supatmin, S., Paeno, P., & Sutrisno, S. (2022). The Role of Analysis Financial Report Management in Increasing MSMES Incomes. Jurnal Ekonomi, 11(03), 1815-1819.

    Tjahjadi, B., Soewarno, N., Nadyaningrum, V., & Aminy, A. (2022). Human capital readiness and global market orientation in Indonesian Micro-, Small-and-Medium-sized Enterprises business performance. International Journal of Productivity and Performance Management, 71(1), 79-99.

    Utama, S., Yusfiarto, R., Pertiwi, R. R., & Khoirunnisa, A. N. (2024). Intentional model of MSMEs growth: a tripod-based view and evidence from Indonesia. Journal of Asia Business Studies, 18(1), 62-84.

    Wibisono, B., & Chaerudin, A. R. (2022). Factors Affecting The Success Of Msmes (Empirical Study On Msmes In West Kalimantan). Jurnal Ekonomi, 11(01), 352-358.

  1. Al-Hashimy, H. H., Alabdullah, T. T. Y., Ries, E., Ahmed, M. A., Nor, M. I., & Jamal, K. A. M. (2022). The Impact of Financial Management Elements and Behavioral Intention on the Financial Performance. International Journal of Scientific and Management Research, 5(12), 117-149.
  2. Alalawi, M. A., Thottoli, M. M., Al-Shukaili, A. H., & Al-Amri, F. K. (2023). Unveiling the secrets: decoding the factors influencing MSMEs' accounting process and strategic debtors' management in Oman. Management & Sustainability: An Arab Review.
  3. Ashshiddiqi, M. T., & Rahmat, T. (2022). Optimizing the Financial Management Behavior of Msme Actors Through Digital Financial Knowledge in the Digital Era. International Journal of Nusantara Islam, 10(1), 34-48.
  4. Biswas, A. (2024). From passion to profit: unveiling the strengths of proactive mindset, perseverance, excellence and education in the entrepreneurial success of MSMEs. International Journal of Productivity and Performance Management.
  5. Di Mauro, C., Ancarani, A., & Hartley, T. (2020). Unravelling SMEs’ participation and success in public procurement. Journal of public procurement, 20(4), 377-401.
  6. Edwy, F. M., Firdaus, M. I., Febia, I., Leonardi, S., & Ramadhani, Z. A. (2023). Financial Management: The Implementation in MSMEs. International Journal of Multicultural and Multireligious Understanding, 10(10), 273-283.
  7. Hasanudin, H. (2023). Effective Financial Management Strategies to Improve MSME Performance. Journal of Economics and Business (JECOMBI), 3(03), 132-137.
  8. Hendrawan, S. A., Chatra, A., Iman, N., Hidayatullah, S., & Suprayitno, D. (2024). Digital transformation in MSMEs: Challenges and opportunities in technology management. Jurnal Informasi dan Teknologi, 141-149.
  9. Hoang, T. G., & Bui, M. L. (2023). Business intelligence and analytic (BIA) stage-of-practice in micro-, small-and medium-sized enterprises (MSMEs). Journal of Enterprise Information Management, 36(4), 1080-1104.
  10. Matare, P. G., & Sreedhara, T. (2020). Financial management practices and growth of MSMEs of Tanzania. MUDRA: Journal of Finance and Accounting, 7(1), 30-44.
  11. Nadiyani, P., & Lubis, K. S. (2024). Implications of Financial Understanding and Attitude in The Context of Financial Management MSMEs. J-MAS (Jurnal Manajemen dan Sains), 9(2), 1401-1406.
  12. Panya, F., & Petchsawang, P. (2024). Innovation capability as a mediator of the relation between talent management and entrepreneurial firm performance. Journal of Small Business and Enterprise Development.
  13. Rijal, S., Ausat, A. M. A., Kurniawati, R., & Suherlan, S. (2023). Opportunities and Challenges for MSMEs in Indonesia in the Face of Ramadan. Community Development Journal: Jurnal Pengabdian Masyarakat, 4(2), 2035-2039.
  14. Rita, M. R., Kristanto, A. B., Nugrahanti, Y. W., & Usmanij, P. (2022). Funding and performance pattern matrix in the startup phase: a study of startup MSMEs in Indonesia Artisan Entrepreneurship (pp. 127-160): Emerald Publishing Limited.
  15. Singh, S., Raj, R., Dash, B. M., Kumar, V., Paliwal, M., & Chauhan, S. (2024). Access to finance and its impact on operational efficiency of MSMEs: mediating role of entrepreneurial personality and self-efficacy. Journal of Small Business and Enterprise Development.
  16. Sitinjak, C., Johanna, A., Avinash, B., & Bevoor, B. (2023). Financial Management: A System of Relations for Optimizing Enterprise Finances–a Review. Journal Markcount Finance, 1(3), 160-170.
  17. Supatmin, S., Paeno, P., & Sutrisno, S. (2022). The Role of Analysis Financial Report Management in Increasing MSMES Incomes. Jurnal Ekonomi, 11(03), 1815-1819.
  18. Tjahjadi, B., Soewarno, N., Nadyaningrum, V., & Aminy, A. (2022). Human capital readiness and global market orientation in Indonesian Micro-, Small-and-Medium-sized Enterprises business performance. International Journal of Productivity and Performance Management, 71(1), 79-99.
  19. Utama, S., Yusfiarto, R., Pertiwi, R. R., & Khoirunnisa, A. N. (2024). Intentional model of MSMEs growth: a tripod-based view and evidence from Indonesia. Journal of Asia Business Studies, 18(1), 62-84.
  20. Wibisono, B., & Chaerudin, A. R. (2022). Factors Affecting The Success Of Msmes (Empirical Study On Msmes In West Kalimantan). Jurnal Ekonomi, 11(01), 352-358.