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Research Paaper on The Challenges of Implementing Financial Controls in SMEs
The Challenges Of Implementing Financial Controls In Sm Es
Length: 11 pages (3043 Words)
The Challenges of Implementing Financial Controls in SMEs
Small and Medium Enterprises (SMEs) are among the most promising investment sectors of any economy. In fact, economies aiming at boosting their GDP growth need to reinvest in their SMEs and implement strategic management systems. One of the major problems experienced by SMEs is the implementation of financial controls. Some SMEs do not survive in the industry for more than two years. One of the common issues behind their downfall has been internal financial controls. Most SMEs are either under sole proprietorships or partnerships. The business is therefore under a sole proprietor's or a partner’s management perspective. The lack of a standard management policy or clear SME finance control policies could explain the reduced implementation levels of financial checks. This paper will highlight some of the problems of implementing financial controls on SMEs at the management level. The paper will also offer solutions that could assist this sector. As long as SMEs continue to face financial constraints and low-profit growth, the effects of their poor performance will have a ripple effect on the overall economic growth. Therefore, it would be in the best interests of the growing economies to integrate various SME finance controls as part of the standard requirements for all businesses.
There are several problems that most SMEs face in regards to financial controls. Some of the challenges of implementing financial controls in SMEs would require management orientation interventions. There are cases where the issue has been the lack of relevant skills in financial management and the overall business management (Jiang, 214). Some of the internal control issues revolve around controlling the activities, the business environment, information and communication, business monitoring and risk assessment (Oseifuah and Agyapong, 241). Most of the times, information and communication processes are within the top positions where the management determines what would work for the company and what would not. Poor risk assessments would mean that the company would be overlooking financial implementation controls that could risk the company’s returns on investments. There are also cases when their monitoring activities do not involve thorough scrutiny and analysis of all the company’s activities.