This work is licensed under a Creative Commons

Attribution/NonCommercial-ShareAlike 4.0

International Public License - CC BY-NC-SA 4.0

https://creativecommons.org/licenses/by-nc-

sa/4.0/legalcode.es

Sinergias educativas

October - December Vol. 7 - 4 - 2022

http://sinergiaseducativas.mx/index.php/revista/

eISSN: 2661-6661

revistasinergias@uteq.edu.ec

Page 75-83

Received: January 19 , 2022

Approved: June 09 , 2022

Successful Financial Management

Practices in Small and Medium-Sized

Businesses

Prácticas de Gestión Financiera Exitosas en las pequeñas

y medianas empresas

María Luisa Rodríguez Benavides

Burbano Ronquillo Mayra Belén

Patricia Eugenia Villacrés Jínez

Abstract

The purpose of this document is to show how financial management

practices enable small and medium-sized companies to achieve business

success. Generally, the current situation of medium and small companies

worldwide, but especially in the Latin American region, has been a

source of study on the problems they face during their operations, and

these will be deepened in the analysis of the obstacles and challenges

faced by these organizations in such a globalized world, without

neglecting the financial management practices that are effective in

achieving business success, with it will also develop some key diagnostic

tools or techniques for the scope of continuous improvement of these.

Keywords: financial management, SMEs, successful practices.

* Accounting and Auditing Engineer (I.S.T.Luis A.

Martínez), Ambato, Ecuador. luisarob15@yahoo.com

https://orcid.org/0000-0003-3761-6207

Engineer in Business Organization, Master's Degree

in Human Talent Management (I.S.T.Luis A.

Martínez), Ambato, Ecuador.

mayraburbano1983@yahoo.es

https://orcid.org/0000-0003-2521-7356

D. in Accounting and Auditing CPA (I.S.T.Luis A.

Martínez), Ambato, Ecuador.

otapgenio1@hotmail.com

https://orcid.org/0000-0002-6950-5969

Article

Sinergias educativas

Ocober - December Vol. 7 - 4- 2022

http://sinergiaseducativas.mx/index.php/revista/

Resumen

El presente documento tiene la finalidad de dar a conocer como las

prácticas de gestión financiera permiten que las medianas y pequeñas

empresas logren el éxito empresarial. Generalmente la situación actual

de las medianas y pequeñas empresas a nivel mundial, pero sobre todo

en la región de américa latina, han incidido como una fuente de estudio

en los problemas a los que se enfrentan durante sus operaciones, y es

que estos se profundizará en el análisis de los obstáculos y retos que

enfrentan estas organizaciones en un mundo tan globalizado, sin dejar

de lado las prácticas de gestión financiera que resultan efectivas para

alcanzar el éxito empresarial, con ello también se desarrollarán algunos

instrumentos o técnicas de diagnóstico claves para el alcance de la

mejora continua de estas.

Palabras clave: gestión financiera, pymes, prácticas exitosas.

Introduction

Studying small and medium-sized enterprises (SMEs) continues to be a

factor of interest, since they are linked to the economic movements of

Latin American countries, which is why it is necessary to focus on a

success factor such as financial management and administration so that

as a result of this, various studies are based on elements that determine

the success of SMEs, and with this they can manage a harmonious

organizational style, which is applicable so that these entities can

generate a healthy economic-financial state, so that they can maintain

operations and formulate strategies for survival. (González, López,

Aceves, & Navarro, 2016).

Therefore, as mentioned by Cabrera, Fuentes & Cerezo (2017) assure

that in order to meet the new market demand, a process of continuous

change in financial matters is required, hence the relevance of financial

management in organizations, because if the company sets a long-term

horizon, it is undoubtedly that this is accompanied by a radical change

in the financial model.

In this context, the use of good financial management practices has

allowed medium, small and micro companies to achieve the desired

economic-financial stability, thus generating sustainability and

sustainability, however, to understand the essence of financial

Sinergias educativas

Ocober - December Vol. 7 - 4- 2022

http://sinergiaseducativas.mx/index.php/revista/

management practices, it is necessary to define the term in terms of

application models to achieve business success.

Therefore, it is necessary to take into consideration what Westreicher

(2020) proposed, in which he states that "financial management is a

business science that analyzes how to obtain and optimally use a

company's resources". In this sense, it is important to mention that

financial management is in charge of defining how the company will

finance its operations, this involves both internal and external

investment.

Therefore, it is necessary that when considering these as the main

generators of employment, an approach that allows identifying those

weak points that may compromise their continuity and efficient

operation, and therefore a key piece, during the development of this

article is to present practices, solutions or alternatives that lead to the

organizational strengthening of SMEs.

Companies have chosen to increase within their processes some

financial management practices that are considered important in

organizational development. For this purpose, we will analyze common

practices in small and medium-sized companies that allow them to

achieve business success, thus making these organizations sustainable

and sustainable in time and space.

Currently, organizations are considered successful to the extent that

they can use information to perceive changes in the environment and

thus have the certainty for proper decision making, as long as these are

based on economic statements, financial ratios and the evaluation and

control of the results obtained based on the practices applied to achieve

business success. (Párraga, Pinargote, García & Zamora, 2021, p.4).

In this sense, it should be emphasized that business success depends

entirely on timely financial practices in accordance with the economic

business activity of the organizations. Many investigations related to

the challenges that SMEs must face in order to be successful focus on

the external impacts that these organizations must face, such as

availability of credit mechanisms, investment, administrative

procedures, strategic alliances, among others, however, this has also led

Sinergias educativas

Ocober - December Vol. 7 - 4- 2022

http://sinergiaseducativas.mx/index.php/revista/

to the study of internal factors that describe the companies, in this case

focusing on the weaknesses of business management that hinder

successful performance.

Over time, medium and small companies have been affected by their

different cultural diversities produced by the economic, social and

political openness that in a certain way has maintained a radical change

in the nature of organizations, increasing in an excessive way the

technological tools developed in the market to obtain better

information. For this reason there are some companies that have had to

modify their mental schemes and ideologies learned for the

improvement of these organizations.(Sánchez, Cervantes, & Peralta,

2016, p. 10)

According to García, Mapén & Berttolini (2019) , they consider that

financial management can be analyzed from two approaches the first

one from the financial movement of the business which refers to credit

and investments and the second one from the development level of

financial management referred to the organizational structure and

information systems (p.5)

It is important to emphasize that financial indicators are a management

support tool that allow to show the information obtained from the

financial economic situation of companies, whose use generates an

efficient decision making, so that these indicators, regardless of whether

they have a quantitative or qualitative expression of business behavior,

provide reliable information so that preventive and corrective actions

can be implemented according to the complex scenarios of the

environment.

Management indicators are a practice that guarantees the organizational

success of small and medium-sized companies that are dedicated to

generating corporate policies to become sustainable and sustainable,

however, these indicators must be based on the strategic objectives and

goals proposed by the company as a basic support instrument for the

control and execution of efficient and effective strategies.

In this context, financial management practices are understood as those

that allow continuous improvement of processes by applying

Sinergias educativas

Ocober - December Vol. 7 - 4- 2022

http://sinergiaseducativas.mx/index.php/revista/

techniques, tools, programs and technologies focused on achieving

customer satisfaction both internally and externally, therefore it is

considered important to develop investment strategies. (Quintero,

Rodríguez & Monroy, 2021) . Some of these are focused on monitoring

the financial ratios in such a way that the state of health of the financial

economic situation can be known, which implies the level of income,

the flow of working capital, the volume of expenditure, among others,

Thus, for them it is established as an alternative and a good practice of

financial management to monitor the profit margins and gross profits of

the organization through accounting and financial software that allows

to reduce risks, avoid errors and control failures so that the organization

generates adequate information for a correct decision making process

according to the possible scenarios faced by small and medium

enterprises.

As mentioned by Pinzón, Guzmán and Marín (2018), financial

management is considered efficient at the moment that the value of the

small and medium-sized company is maximized, which is reflected in

the increase in the profitability of shareholders and investors. However,

business valuation is the average that reflects the success or failure of

the financial management. p (8)

The company's financial strategy depends on its attitude towards

profitability and risk. as mentioned by Franco & Urbano (2016). A

company with solidity and good positioning in the market will reject

high-risk projects, even if they are profitable. The importance and

complexity of the financial function depends on the size of the company

and the stage of development it is going through. In small companies

that develop this culture, previous studies have been carried out to

corroborate the importance of formal institutions for the dynamism of

the companies, which establish that the environment is a source of

critical contingencies for organizational performance and that the

environmental factors that affect the performance of the functions are

related to the infrastructure and the efficiency of the markets.

According to what was explained in the previous paragraph it is defined

that here the analysis of financial indicators is based on the application

of analytical tools and techniques of the financial statements with the

purpose of obtaining from them significant measures and relationships,

Sinergias educativas

Ocober - December Vol. 7 - 4- 2022

http://sinergiaseducativas.mx/index.php/revista/

aimed at evaluating the financial economic situation of a company and

establishing estimates on its situation and future results useful for

decision making. Once the organizations have monitored the financial

ratios that are key to corporate financial management, the process of

external financing is generated as a possibility to assess the financial

management path that the organization is developing, this does not

mean that a relationship of dependence is generated, to make small and

medium-sized companies sustainable and sustainable, This does not

mean that a dependency relationship is generated, to make small and

medium-sized companies sustainable and sustainable, but it opens the

possibility of growing with guarantees, thus making use of technology

as an ally of financial management, will allow companies to develop

mechanisms, software or tools to monitor the information in this way

the process is advantageous because to control and evaluate the results

of the business activity to which companies are engaged in financial

management will be responsible and effective.

Materials and methods

For the development of this research, a descriptive study has been used

through observation, which allows the collection of primary

information of greater impact and knowledge about financial

management practices in small and medium-sized companies.

The results obtained will be used to decide whether it is necessary to

deepen the research in the future; one of its main advantages is the study

in the place of the phenomenon (such as interviews to the owners of

small and medium enterprises), so that the data collected are more

reliable, of the challenges to which they really have to adapt to achieve

business success.

For this research, the descriptive method was applied based on the

technique of qualitative and quantitative observation for the

interpretation of statistical data from updated sources of information.

The analysis of data provided by international economic impact

magazines, scientific journals, postgraduate theses, among others, was

used as a complement.

Sinergias educativas

Ocober - December Vol. 7 - 4- 2022

http://sinergiaseducativas.mx/index.php/revista/

Results

The business fabric is characterized by its high percentage of SMEs and

specifically microenterprises, according to INEC 2020 data, 82.8% of

the companies arise out of necessity, for that reason the duration and

continuity of the same is short term, most of the SMEs dedicate their

total production at the time of operation and therefore it is complex for

a few to survive.

In the following graph we will show the total production between a

comparative of the year 2019 versus 2020 with respect to medium-sized

companies.

According to the information in the graph in 2020 large companies

generated 84.6% of production while medium-sized companies reduced

their production by 17.8% in contrast to 2019.

On the other hand, in the following graph we will show how the

companies that arise out of necessity, in this case those of meals, have

been influenced by the absence of good financial management practices

in the development of their activities and therefore reduce their added

value so that incurring in the absence of the analysis of ratios or

financial indicators, generates that these medium and small companies

do not achieve success in time and space.

Discussion

Financial management practices are a trend that moves much of the

world economy applied to medium and small businesses, this situation

generates a great advantage for the sustainable and sustainable

development of SMEs, since when encountering globalized scenarios

full of competitiveness and speed, it has driven the development of

financial management practices that contribute to business growth.

(Gálvez, Hernández & Molina, 2016)

As mentioned by Rebato (2020), he states that the poor management of

companies is influenced by the absence of understanding, monitoring

and adequately controlling the organization's finances.

There this sense (Rebato, 2020; cited in Kenton, 2019) mentions that

strategic financial management and in the purpose of generating profits

Sinergias educativas

Ocober - December Vol. 7 - 4- 2022

http://sinergiaseducativas.mx/index.php/revista/

for the business and ensuring an acceptable return on investment (ROI)

so that harmony is found between financial controls and business

strategy.

In this sense, what was proposed by several authors during the

development of this article is that for an efficient financial management

practice it is necessary to make use of financial indicators as a strategic

tool for the achievement of business objectives, thus ensuring the

growth of medium and small companies over time, without neglecting

all stakeholders that influence this process of growth and development,

in addition, since everything is linked as a chain reaction, financing

should be considered intelligently in order to improve the debt ratio and

thus demonstrate the financial solvency of the company. On the other

hand, it is necessary to mention that financial management finds a

balance between profitability and risk, so that companies are already

prepared for growth.(Cadena, Rivera, Pazmiño, & Sarrade, 2020, p.

870).

References

Cabrera, C.; Fuentes, M.; & Cerezo, G. (2017). Financial

management applied to organizations. Dyalnet. 3(4). [220-

232] Retrieved from:

http://dominiodelasciencias.com/ojs/index.php/es/index

Cadena, J.; Rivera, L.; Pazmiño, M.; & Sarrade, F. (2020). Financial

indicators for small and medium enterprises in the food and

beverage sector in the metropolitan district of Quito (Ecuador).

Támbara. Retrieved from: http://tambara.org/wp-

content/uploads/2020/04/Indicadores_financieros_PYMES_C

adena_et-al.pdf

Franco, M.; & Urbano, D. (2016). Determining factors of the

dynamism of small and medium enterprises in Colombia.

Universidad del zulia. retrieved from:

https://www.redalyc.org/journal/280/28046365009/

Gálvez, E.; Hernández, L.; & Molina, V. (2016).

Departmentalization and innovation of micro small and

medium enterprises in Colombia. Redalyc. Retrieved from:

https://www.redalyc.org/journal/290/29046685007/

García, E.; Mapén, F.; & Berttolini, G. (2019). Analytical framework

of financial management in small and medium-sized

Sinergias educativas

Ocober - December Vol. 7 - 4- 2022

http://sinergiaseducativas.mx/index.php/revista/

enterprises: problems and diagnostic perspectives. Redalyc.

Retrieved from:

https://www.redalyc.org/journal/5826/582661248013/

González, N.; López, M.; Aceves, J.; & Navarro, E. (2016). Review

Administration and Finance. Factors affecting the success of

financial management and administration in SMEs. 3(8). [22-

31]. Retrieved from:

https://www.ecorfan.org/bolivia/researchjournals/Administra

cion_y_Finanzas/vol3num8/Revista_de_Administracion_y_F

inanzas_V3_N8_3.pdf

Inec (2020). Structural business survey (ENESEM). Retrieved from:

https://www.ecuadorencifras.gob.ec/documentos/web-

inec/Estadisticas_Economicas/Encuesta_Estructural_Empres

arial/2020/2020_ENESEM_Principales_Resultados.pdf

Párraga, S.; Pinargote, N.; García, C. & Zamora, J. (2021). Financial

management indicators in small and medium-sized enterprises

in Ibero-America: a systematic review. Scielo. 8(2). p. [36-45]

Doi: https://doi.org/10.46377/dilemas.v8i.2610

Pinzón, S.; Guzmán, G.; & Marín, J. (2018). Knowledge

management orientation and performance of Mexican small

and medium-sized enterprises. Redalyc. retrieved from:

https://www.redalyc.org/journal/280/28059678003/

Quintero, L.; Rodríguez, C.; & Monroy, M. (2021). Models of

integrated management systems for small medium and large

companies. Redalyc. retrieved from:

https://www.redalyc.org/journal/5604/560468688011/

Rebato, C. (12, March 2020). 6 keys to successful financial

management. [Think Big /Companies]. Retrieved from:

https://empresas.blogthinkbig.com/gestion-financiera/

Sánchez, M.; Cervantes, V.; & Peralta, P. (2016). Redalyc.

Innovation management in small and medium enterprises in

Barranquilla-Colombia [p. 10]. Retrieved from:

https://www.redalyc.org/journal/280/28049145007/

Westreicher, G. (2020). Financial management. Retrieved from:

https://economipedia.com/definiciones/gestion-

financiera.html