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

https://doi.org/10.35912/ijamis.v2i1.3210
Published: Jul 21, 2025

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 business. The primary focus is to identify the 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 to analyze relevant studies, reports, and articles related to MSME financial management. This 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, is crucial for MSME success. Despite the recognition of its importance, many MSME owners face barriers such as a lack of financial knowledge, limited access to financial resources, and reliance on manual accounting methods. Moreover, many fail to engage in long-term financial planning, which impedes their ability to manage risks and plan for business expansion effectively.

Conclusions: Understanding financial management is vital for MSME success. However, limited literacy, resources, and manual practices hinder effective implementation, highlighting the need for targeted support and education.

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

Contribution:. This research provides valuable insights for MSME owners, financial institutions, and policymakers to understand the critical role of financial literacy and provide better support for MSMEs.

Keywords:
1. Business Success
2. Financial Management
3. Financial Planning
4. MSMEs
Authors:
Meileginta Kaban
Universitas Sriwijaya, Indonesia
https://orcid.org/0000-0001-5080-5032
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How to Cite
Kaban, M. (2025). Understanding financial management as a determining factor for the success of MSMEs: A qualitative study. International Journal of Accounting and Management Information Systems, 2(1), 51–60. https://doi.org/10.35912/ijamis.v2i1.3210
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Issue & Section
Vol. 2 No. 1 (2024): February
Articles
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This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

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. doi:http://doi.org/10.37502/IJSMR.2022.51210

    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.

    Bambang, W., & Abdul Rauf, C. (2022). FACTORS AFFECTING THE SUCCESS OF MSMEs (Empirical Study on MSMEs in West Kalimantan). Jurnal Ekonomi, 11(01), 352-358.

    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, 73(8), 2530-2557. doi:10.1108/IJPPM-05-2023-0269

    Chigora, F., Kapesa, T., & Svongoro, P. (2021). Revisiting nation branding: An infrastructure financing perspective in Zimbabwe. International Journal of Financial, Accounting, and Management, 3(2), 179-192. doi:https://doi.org/10.35912/ijfam.v3i2.611

    Di Mauro, C., Ancarani, A., & Hartley, T. (2020). Unravelling SMEs’ participation and success in public procurement. Journal of Public Procurement, 20(4), 377-401. doi:10.1108/JOPP-03-2018-0013

    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. doi:10.58471/jecombi.v3i03.60

    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. doi:10.1108/JEIM-01-2022-0037

    Matare, P. G., & Sreedhara, T. (2020). Financial Management Practices and Growth of MSMEs of Tanzania. Mudra: Journal of Finance & Accounting, 7(1). doi:10.17492/mudra.v7i1.195417

    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. doi:http://dx.doi.org/10.33087/jmas.v9i2.1978

    Oktaria, E. T., Raras, P. N., Alam, I. A., Barusman, A. R. P., & Habiburrahman, H. (2024). Factors for Increasing Competitive Advantage in MSMEs Reviewed from a Systematic Literature Review. Jurnal Akuntansi, Keuangan, dan Manajemen, 5(3), 235-247. doi:10.35912/jakman.v5i3.3132

    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, 32(1), 56-75. doi:10.1108/JSBED-02-2024-0074

    Rahmadianti, S. S., Maryani, M., & Pentiana, D. (2024). Faktor – Faktor Yang Mempengaruhi Pemahaman Penerapan SAK EMKM pada Pelaku Usaha Mikro, Kecil dan Menengah (UMKM) Di Kecamatan Tanjung Karang Pusat. Reviu Akuntansi, Manajemen, dan Bisnis, 4(1), 1-12. doi:10.35912/rambis.v4i1.2693

    Reniati, R., Akbar, M. F., & Rudianto, N. A. R. (2019). The effect of Covid-19 on the economy of Bangka-Belitung and the performance of MSME and its impact on competitive strategies in the new normal era. Annals of Management and Organization Research, 1(1), 51-63. doi:https://doi.org/10.35912/ijfam.v1i3.108

    Reniati, R., Akbar, M. F., & Rudianto, N. A. R. (2020). The effect of Covid-19 on the economy of Bangka-Belitung and the performance of MSME and its impact on competitive strategies in the new normal era. Annals of Management and Organization Research, 1(1), 51-63. doi:10.35912/amor.v1i1.289

    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. In V. Ratten, P. Jones, V. Braga, & E. Parra-López (Eds.), 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, ahead-of-print(ahead-of-print). doi:10.1108/JSBED-01-2024-0053

    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. doi:10.55849/jmf.v1i3.104

    Stolper, O. A., & Walter, A. (2017). Financial literacy, financial advice, and financial behavior. Journal of Business Economics, 87(5), 581-643. doi:10.1007/s11573-017-0853-9

    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. doi:10.1108/IJPPM-04-2020-0181

    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. doi:10.1108/JABS-08-2022-0291

  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. doi:http://doi.org/10.37502/IJSMR.2022.51210
  2. 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.
  3. Bambang, W., & Abdul Rauf, C. (2022). FACTORS AFFECTING THE SUCCESS OF MSMEs (Empirical Study on MSMEs in West Kalimantan). Jurnal Ekonomi, 11(01), 352-358.
  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, 73(8), 2530-2557. doi:10.1108/IJPPM-05-2023-0269
  5. Chigora, F., Kapesa, T., & Svongoro, P. (2021). Revisiting nation branding: An infrastructure financing perspective in Zimbabwe. International Journal of Financial, Accounting, and Management, 3(2), 179-192. doi:https://doi.org/10.35912/ijfam.v3i2.611
  6. Di Mauro, C., Ancarani, A., & Hartley, T. (2020). Unravelling SMEs’ participation and success in public procurement. Journal of Public Procurement, 20(4), 377-401. doi:10.1108/JOPP-03-2018-0013
  7. 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.
  8. Hasanudin, H. (2023). Effective Financial Management Strategies to Improve MSME Performance. Journal of Economics and Business (JECOMBI), 3(03), 132-137. doi:10.58471/jecombi.v3i03.60
  9. 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.
  10. 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. doi:10.1108/JEIM-01-2022-0037
  11. Matare, P. G., & Sreedhara, T. (2020). Financial Management Practices and Growth of MSMEs of Tanzania. Mudra: Journal of Finance & Accounting, 7(1). doi:10.17492/mudra.v7i1.195417
  12. 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. doi:http://dx.doi.org/10.33087/jmas.v9i2.1978
  13. Oktaria, E. T., Raras, P. N., Alam, I. A., Barusman, A. R. P., & Habiburrahman, H. (2024). Factors for Increasing Competitive Advantage in MSMEs Reviewed from a Systematic Literature Review. Jurnal Akuntansi, Keuangan, dan Manajemen, 5(3), 235-247. doi:10.35912/jakman.v5i3.3132
  14. 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, 32(1), 56-75. doi:10.1108/JSBED-02-2024-0074
  15. Rahmadianti, S. S., Maryani, M., & Pentiana, D. (2024). Faktor – Faktor Yang Mempengaruhi Pemahaman Penerapan SAK EMKM pada Pelaku Usaha Mikro, Kecil dan Menengah (UMKM) Di Kecamatan Tanjung Karang Pusat. Reviu Akuntansi, Manajemen, dan Bisnis, 4(1), 1-12. doi:10.35912/rambis.v4i1.2693
  16. Reniati, R., Akbar, M. F., & Rudianto, N. A. R. (2019). The effect of Covid-19 on the economy of Bangka-Belitung and the performance of MSME and its impact on competitive strategies in the new normal era. Annals of Management and Organization Research, 1(1), 51-63. doi:https://doi.org/10.35912/ijfam.v1i3.108
  17. Reniati, R., Akbar, M. F., & Rudianto, N. A. R. (2020). The effect of Covid-19 on the economy of Bangka-Belitung and the performance of MSME and its impact on competitive strategies in the new normal era. Annals of Management and Organization Research, 1(1), 51-63. doi:10.35912/amor.v1i1.289
  18. 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.
  19. 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. In V. Ratten, P. Jones, V. Braga, & E. Parra-López (Eds.), Artisan Entrepreneurship (pp. 127-160): Emerald Publishing Limited.
  20. 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, ahead-of-print(ahead-of-print). doi:10.1108/JSBED-01-2024-0053
  21. 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. doi:10.55849/jmf.v1i3.104
  22. Stolper, O. A., & Walter, A. (2017). Financial literacy, financial advice, and financial behavior. Journal of Business Economics, 87(5), 581-643. doi:10.1007/s11573-017-0853-9
  23. Supatmin, S., Paeno, P., & Sutrisno, S. (2022). THE ROLE OF ANALYSIS FINANCIAL REPORT MANAGEMENT IN INCREASING MSMES INCOMES. Jurnal Ekonomi, 11(03), 1815-1819.
  24. 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. doi:10.1108/IJPPM-04-2020-0181
  25. 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. doi:10.1108/JABS-08-2022-0291