Financial management in SMEs

Abstract

The principal goal of this paper is to review recent studies on small and medium sized companies in order to concentrate on the main critical issues of SMEs financial management. There are three core elements of financial management: (1) the question of liquidity management and cash flow management. Cash is company’s most precious nonhuman asset. (2) The question of long term asset acquisition – which directs the long term course of business. (3) Questions of funding, capital structure and cost of funding. The most imminent question is the liquidity management. A business will never see the long term if it cannot plan an appropriate policy to effectively manage its working capital. Generally, the poor financial management of owner-managers is the main cause underlying the problems of SMEs.