Financial Management Practices For SMEs: An In-Depth Study Among SMEs In Kedah

The important contribution of small and medium-scaled enterprises in Malaysia's GDP, employment, and industrialization has been well documented. Although their role in the economy is substantial, many SMEs are plaqued by management problems (Hashim & Wafa, 2002). These management problems include human resource management,
marketing management, operations management, financial management, and strategic management. Given that financial management is one of the key aspects of the well being
and survival of a business, it is important that this topic is explored in depth. Thus, the main purpose of the present study was to investigate the financial management
components and techniques practiced by the SMEs in Malaysia. The study comprised two analyses. In the first analysis six financial management components were identified, namely, financial planning and control, financial accounting, financial analysis, management accounting, capital budgeting, and working capital
management. Subsequently, in the second analysis, various financial management techniques were identified under each component stated earlier. Data for the study were obtained via face-to-face interviews using structured questionnaires with respondents from selected SMEs. The study sample comprised 30 SMEs operating in the Kota Setar and Kubang Pasu district of Kedah Darul Aman. The findings of the study show three core components of financial management practiced by the SMEs in the survey. They are financial planning and control, financial accounting,
and working capital management. Three other components, which are financial analysis, management accounting, and capital budgeting, can be regarded as supplementary
components practiced by the SMEs under study, due to the small percentage of the SMEs using these components in the management of their businesses.