Smes, Family Involvement, And Financial Management

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SMEs, Family involvement, and Financial Management In the Philippines, MSMEs can be considered as the backbone of the economy as they are major contributors of job creation and play a vital role as providers of goods and services to large firms. In fact, 99.6% out of 941,174 establishments in 2013 are micro, small, and medium enterprises. However, the attrition rates for startup MSMEs in the country can go as high as 50 percent, which means that many MSMEs are having a difficult time keeping their business alive. According to Fatoki (2014), one of the key reasons why startup businesses fail is the lack of management control. This commonly leads to poor use of accounting information to manage finances and cash flow. Additionally, the often neglected area in managing MSMEs is the accounting and finance function, which actually handles the accounting information needed to properly manage a business. Another interesting fact is that 80% of Philippine enterprises are family-managed. Family- managed generally means that there is strong family involvement in the decision making process of the business. Moreover, these family-owned enterprises, particularly MSMEs, are not only faced with business issues, but also with family issues. For instance, personal expenses of the family are being paid using the assets of the business without any formal records or adjustments. Because of this, it is usual for relatively small businesses to neglect the basic accounting principle known as
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