Impact of financial management strategies on the profitability of small and medium-sized enterprises (Review).

Abstract

This review article takes an in-depth look at the relationship between financial management strategies and the profitability of small and medium-sized enterprises (SMEs). Various relevant research is analyzed to understand how sound financial practices impact the financial performance of these companies. The findings reveal that the effective implementation of appropriate financial strategies has a positive and significant impact on the profitability of SMEs. Key strategies include establishing clear and detailed financial plans that allow SMEs to project their income, expenses and investments efficiently, optimizing the use of resources and maximizing profitability. Implementing efficient collection and payment practices, such as timely tracking of accounts receivable and negotiating better payment terms with suppliers, improves cash flow and reduces financial risks. A detailed analysis of costs allows you to identify areas of inefficiency and opportunities for savings, optimizing the cost structure and improving profitability. Carefully evaluating potential investments through risk-return analysis and feasibility studies ensures informed decision-making that contributes to the profitable growth of the SME. Seeking and obtaining financing strategically, considering the different options available and carefully evaluating the conditions and terms, allows SMEs to boost their growth and profitability without compromising their financial stability. Sound financial management strategies are critical to the success and profitability of SMEs. Effective implementation of these strategies allows companies to optimize resource use, improve cash flow, make informed decisions, and achieve their financial goals sustainably.