Financial Problems
July 19th, 2010 | 
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The financial environment of enterprises is a key factor in the success of an organization, especially in micro and small enterprises where their financial limitations forced to allocate scarce resources more efficiently possess in order to survive, preserved and ultimately, profit.
In the small enterprise, the importance and significance of the finance function is not obvious because it does not have the expertise for planning, management and financial decisions. Instead, it is the employer who makes financial decisions based on the emerging circumstances in a given time. On the other hand, in large corporations where there are directions, managers and specialist departments in the administration of resources, the financial function importance and relevance greater presence compared to small organizations. Obviously this perception is just that, a misperception that is generated in the conditions of operation of the micro and small business.
One of the main characteristics of small companies is that no information is generated to make financial decisions. The information generated is an accountant in order to cover tax liabilities, which indirectly implies that accounting data do not reflect the real situation of the organization. In this sense, the managers do not have the minimum necessary information to make decisions, not only because accounting data do not reflect reality but purely accounting approach because the information does not disclose fully the economic situation of the company, this requires which generates information relevant to financial decisions.
The analysis and financial planning are core activities of the finance function that are absent in small organizations, reflecting on problems that may account for the failure of a business. Because entrepreneurs are concentrated mainly in obtaining resources to make consequential operating costs, it is difficult to have the intention to develop financial plans when you have no knowledge about how to do, when everyday problems overwhelm the capacity of entrepreneurs and decision when there are basic problems to generate income. However, this does not imply that financial decisions must be made in the short term based on financial planning as a useful tool.
On the other hand, investment decisions and financing are activities carried out according to mediate needs of the company and the opportunities that arise. It is difficult to analyze the composition and the type of assets that the company has not provided the ideal combination of financing in the short and long term and not discussed financing options available, their costs and long-term implications. This situation represents a major obstacle for small business being in a vulnerable position where decisions are not taken analytically, but circumstantial.
In this sense, the figures are very clear. 65% of SMEs do not attain a lifespan greater than two years, while 25% survive in this period but with a very low probability of development. Although the problems of the SME does not focus only on the restriction of funding, it represents a central problem that affects their decisions, opportunities and hence their development.
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Tags: Financial Problems, limitations forced, the finance function, The financial