Research Problem
The importance of financial decisions in business is evident, since many of the factors that contribute to failure can be managed properly with strategies and financial decisions that drive growth and the organization’s objectives. The main causes of business failure are the lack of financial planning, limited access to funding, lack of capital, unplanned growth, low strategic and financial projection, excessive fixed-asset investment and capital mismanagement. Many of these causes of failure are challenges that can be successfully managed with financial strategies developed and implemented by the organization (Lopez, 2012).
One of the main features of small businesses is that they do not have useful financial information to make decisions. The information generated is utilized to pay taxes but does not reflect the real situation of the organization. In addition, small businesses do not have specialized personnel with expertise for planning, administration and financial decision-making, and the owner has to make decisions without a solid foundation. Because small-business owners concentrate mainly on obtaining resources for operating expenses, it is difficult to develop financial plans: there is no knowledge of how to implement them, daily problems overwhelm entrepreneur decision-making and the urgency is to solve basic problems in order to generate income (Mallette, 2006). However, this does not imply that financial decisions should not be based on financial planning.
65 percent of small businesses shut down in less than two years, while twenty-five percent survive during this period with a very low probability of development (Lopez, 2012). Although small businesses do not struggle only in the financial area, it represents a central problem that affects their development. Therefore, this study seeks to examine the impact of financial decisions on the growth of small and medium enterprises.
The objectives are:
- to understand and analyze the major financial decisions made by SMEs
