STI College-San Jose

IMPACT OF FINANCIAL MANAGEMENT TO THE SMALL ENTERPRISES IN SAN

JOSE CITY, NUEVA ECIJA

Cabico, Rovelyn B.

Enriquez, Jasmine P.

Garcia, Emily M.

Rivera, Roiven E.

BSAIS302A

Ma’am. Melody Dela Cruz

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 Republic of the Philippines

STI College-San Jose

San Jose Campus

San Jose City, Nueva Ecija

APPROVAL SHEET

This research entitled “Impact of Financial Management to the Small Enterprises in San Jose

City” prepared and submitted by Rovelyn B. Cabico, Jasmine P. Enriquez, Emily M. Garcia, and

Roiven E. Rivera in partial fulfillment of the requirement in Accounting Research Method has

been examined and is recommended for approval and acceptance.

MELODY DELA CRUZ

Research Adviser

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Table of Contents

CHAPTER I INTRODUCTION 5

1.1Background of the Study………………………………………………….…….…5

1.2Statement of the Problem………………………………………………….………7

1.3 Research Question………………………………………………………….……...7

1.4 Significance of the Study…………………………………………………….……8

1.5 Scope and Limitation……………………………………………………………...9

CHAPTER II LITERATURE REVIEW 10

2.1 Review of Related Literature……………………………………………………...10

CHAPTER III THEORETICAL FRAMEWORK 12

3.1 Theoretical Framework 12

3.2 Conceptual Framework 13

CHAPTER IV RESEARCH METHODOLOGY 14

4.1 Research Design 14

4.2 Population Selection 14

4.3 Data Collection 15

4.4 Research Instrument 15

4.5 Statistical Treatment 15

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 4.6 Survey Questionnaire 16

CHAPTER V RESULT AND DISCUSSION 18

5.1 Result 18

52 Discussion 19

5.2.1 Importance of Financial Management in Small Enterprise 19

5.2.2 Ideal method in setting up budget for Small Enterprise 20

5.2.3 Effect of Financial Management in

operation of Small Enterprise 22

CHAPTER VI SUMMARY CONCLUSION AND RECOMMENDATION 24

6.1 Conclusion 24

6.2 Summary 24

6.3 Recommendation 35

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 CHAPTER I: INTRODUCTION

Managing a small enterprise is not that easy because it is small. Just like any other

business it composes employees, resources and finances that needed to handle to provide an

operation that satisfies its expenditure and finances.

Financial management impact in the small enterprise will be highlight to define its role to

every business in San Jose City. Running a business need a planning just like how company first

started their business. In financial management is where the business relies on allocating their

fund and how the business manage its expenses through the study small enterprise will be able to

express on how financial management act its role from organizing, planning, budgeting and

controlling the resources of the business.

The number of small enterprises in San Jose city raise through the years from Barangays

there are already many small enterprises that is able to operate regardless of not being the in the

market. Small enterprises established considering the location where costumer can access their

product or business. Knowing the current situation where pandemic strike and resulted to other

business shutdown it also resulted to other business to start.

1.1 Background of the Study

Every enterprise has their way to manage its operation and financial management has a

big role in business operation. Financial management consist of strategic planning, organizing,

directing, and controlling of financial undertakings in an organization or an institute. Finances

that are needed in order for the business to continue its operation is needed to manage in order

for a business properly operate. Every sector of business that needed to provide finances will

need financial management for its allocation of funds that organize which sector need the most

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finances to increase their budget. Each department of business has different need that’s why

financial management is necessarily needed in every business.

The daily operation of every small enterprise in San Jose City starts from planning that

help them to organize the implementation and execution of their business. In small enterprise all

little things matter just like any other enterprises every decision reflect to the structure of

business. From every equipment a business to buy, location and the prices of the product or

service that a business offer really matter where in planning it is indicated. Income is the main

purpose by establishing a business and not a loss that resulted from the failed management.

Small Enterprise suffer losses where they are not able to see and target the factor that they need

to improve in order to save the run of their business.

Small enterprise is the start of every big company and growing companies they all start

from planning and smart management of their financials. Financial management is one of the

essential needs for a business in order to operate and continue its operation in the long-run.

Financial management is one of the most important aspects in business as it finances the money

that is important in order for a company to fuel it operation. Every department of business there

is employee that needed salaries and operation that needed money transaction in order to

complete its transaction. Small enterprises in San Jose City not only build a business without

planning on where to get funds and how they will manage the funds. When there is needed to

accomplish and when there is a goal there is always planning and organizing the resources that is

needed in order to accomplish the set goal.

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1.2Statement of the Problem

The study focused on the Impact of Financial Management to Small Enterprises in San Jose City

during the Second semester of Academic Year 2021-2022.

It aims to answer the following question:

1. Why Financial management is important in small enterprise?

2. What is the ideal method in setting up budget for small enterprise?

3. How Financial management affect the operation of small enterprise?

1.3 Research Question

1. How long since the enterprise is established?

2. Does the enterprise already gain loss?

3. Do you consider quality over its cost?

4. Do you consider cost over quality?

5. Does the enterprise able to cover its debt/obligation?

6. Does the enterprise have a monthly budget?

7. Does the enterprise forecast monthly revenue and compare them at the end of the month?

8. Does the enterprise keep record all of its inventory?

9. Does the enterprise monitor the monthly revenue?

10. Does the enterprise allocate funds base on how much it needed?

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1.4 Significance of the Study

Financial management is the umbrella term for bookkeeping, making accurate

projections, creating financial statements and accessing business financing. Managing all of this

efficiently lets you make the decisions to run your businesses successfully. Some of the first

steps for good financial management include starting a budget, accessing lines of credit and

opening a bank account for business expenses like payroll and other utilities expenses. The

importance of efficient financial management into small business/enterprise in San Jose City is

the knowledge and experience with credit, high level of unused credit balance, Budget

management and monitoring.

Financial management is important because it helps the business: See and understand its

profit, make decisions on planning inventory and setting prices, determine whether it has

sufficient cash flow to sustain operations and make decisions on buying assets provide banks and

investors with the financial reporting they need to loan money or invest in the business and

Conduct sound financial analysis for better business forecasting and projections. The research

aims to know how the Financial Management important in our society specially in terms of small

enterprises or businesses. The researcher conducts on how the small businesses helped by

financial management to sustain their profits and conduct an operation that accurate in their

decisions to run the business successfully. If small business known all the criteria in financial

management their turn on being successful and they determined that their business is going

concern.

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 Inefficient financial management may damage business efficiency and this will

continuously affect the growth of the small and medium enterprises. However, efficient financial

management is likely to help SMEs to strengthen their business efficiency and, as a result, these

difficulties can partly be overcome.

1.5 Scope and Limitation

This study focuses on the Impact of Financial Management to the Small Enterprises in

SJC. The researcher uses quantitative research and include set of questions for this topic. We

also use survey to record the feedback from our selective respondents. There are ten (10)

respondents of this study coming from Small Enterprises in San Jose City.

The main source of data was the survey questionnaire, which was prepared by the

researcher and statistically treated by the use of descriptive such as frequency, percentage, means

and graphical analysis.

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CHAPTER II: REVIEW OF RELATED LITERATURE

2.1 Literature Review

Being a financial manager required essential skills for different roles and position. Aside

from essential skill required for a financial manager employers look out for in a financial

professional and irrespective of the job profile being considered (Shah, 2019). Considering that

the study is all about small enterprise naturally the owner is already the one who is managing the

finances of the business it is essential regardless of the size of business to know about the

essential skill in financial management. The essential skills are interpersonal skills, problem

solving skill, understanding technology and analytical skill (Shah, 2019). Financial managers are

the one who have responsibilities in the flow of the money in the business. The plan that they

establish reflect on how the business will going to operate in order to meet its financial goals.

They are also responsible in reviewing the profit and also to the employee’s performance as well

as guiding to understand the business operation and how to use its resources efficiently (Shah,

2019).

Financial management is accomplished through business financial plans, setting up

financial controls, and financial decision-making (Kenton, 2021). It is one of the important

components that the business should’ve through its operating period. Having a long-term focus

helps a company maintain its goals, even as short-term rough patches or opportunities come and

go. As a result, strategic management helps keep a firm profitable and stable by sticking to its

long-run plan. Strategic management not only sets company targets but sets guidelines for

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achieving those objectives even as challenges appear along the way (Kenton, 2021). Will Kenton

(2021) asserted that the ultimate goal of having financial management is to that the long-term are

properly planned for and ultimately met. There is a business that stablished for a long-term and

for a short-term but they are same that they have a goal in stablishing the business. With the

Financial management owners are able to plan on how they are going to deal with their finances

in order to achieve their goal that also consider that challenges that the business might face in the

future. These challenges that might affect the business objectives is consumer or the buyer who

will avail the product or service considering the situation it is included in the financial

management the organizing and planning how the business will earn.

The study of effect of financial management to small and medium enterprises in Kenya

stated that Financial Management has a positive effect on the organization business performance.

The budgeting became a tool that boost organization performance through providing a guideline

on how the activities are conducted where the study concluded base on its finding that financial

management enable business to plan, to borrow and have an efficient control on its expenditures

(Addo, 2017).

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CHAPTER III: THEORETICAL FRAMEWORK AND CONCEPTUAL FRAMEWORK

3.1 Theoretical Framework

The theory of Pecking Order theory that was first suggested by Donaldson in 1961 that

was layer modified by Stewart C. Myers and Nicolas Majluf in 1984. The theory stated that

companies prioritize the source of their financing to raise equity as financing last resort. Internal

are the first one used in paying debt, buying resources and when there is no enough funds equity

is issued for the payment. In Pecking order theory, the one who is managing the finances should

know the all the information about the business perspective, risk and the value than the external

users and investor. Person involves in financial management affects by the internal and external

information that needed to be consider in order to make a decision that will benefit the business

and also address the issue of debt or equity. Therefore, Pecking Order Theory exist in order to

finance future operation of the business considering the future finances that needed to be address

in order to not have a lack of finances.

Pecking order theory prefer to use internal funds rather than external funds like

borrowing from bank unless the internal funds was not able to finance the need of the business.

Equity is the said last resort for fund in order to cover its need, when the company liquidate its

last resort in order to cover it debt and other expenses is its equity. Financial management in

Pecking order theory consider the future finances that make the business invest in its equity not

only to cover its debt but also to raise its capital that help the business operation. The theory

helps the business to manage its finances effectively by not expensing too much but investing to

its equity. Understanding the financial management practices help to minimize risk and in order

to improve its performance by gaining income rather than loss.

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 Pike (1986) proposed the Contingency Theory that aimed to explain the various concepts

of financial management that’s been using in every business operation. The theory stated that

there are different ways on how financial management address the different issues that the

business encounter and there is different aspect the needed to be consider in order to proceed in

making decision. The theory makes an assumption that the reason why company has different

ways of accounting system and have different financial performance is that the contextual factors

that each consider because every business have different environment and operation. Pike (1986)

stated that practices of financial management should be done considering the external factors that

is viewed that have an effect to the business.

This implies that there is no standard financial management that every business needed to

adapt in order to have a stable finance. The theory suggested that there is financial management

practice that work with other business but doesn’t work with other. That’s why the theory stated

that there are various concepts of financial management of business where setting, on how the

business operate and the resources that it needed to manage is appropriate to its goal that is

achieving. Pike (1986) the positive financial performance of firm is measure when the setting

and the financial management practice that used is suitable and appropriate.

3.2 Conceptual Framework

Financial managers/ owners’
decision making

Financing practices Impact to small enterprises

Forecasting

Business setting 13
 CHAPTER IV: RESEARCH METHODOLOGY

4.1 Research Design

The study used a Descriptive research design. According to Williams (2007)

descriptive research is a research method that can determine the situation in current

phenomenon. It allows researcher to determine the current situation that the study is

being conduct. This allow researcher to gather a timely information that will be

applicable to the study making the data collected updated that can be use in future study

that is related to the study. Gay (1992: 217), descriptive research involves collecting data

in order to test hypotheses or to answer questions concerning the current status of the

subject of the study. A descriptive design describes the phenomenon that being describe

by the study and report the related situation in the study.

In this study the researcher will going to use Quantitative questionnaire.

Quantitative questionnaire well be used in the study to gather information. The

questionnaire consist the following choices (4)Strongly Agree, (3)Agree, (2) Disagree,

and (1) Strongly Disagree.

4.2 Population Selection

The proponent selected ten (10) Small Enterprises in San Jose City to be the

respondents of the study. Owner, financial Manager and employee will be the possible to

answer he following question in the Survey questionnaire.

The population is limited to the Small Enterprises in San Jose City. The selection

of respondent will be random not considering their income and year the business was

established. The respondent will be randomly selected as long as they are located and

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 own a small enterprise in San Jose City. The sampling method that will be used in the

study is simple random sampling as we researcher will be randomly selecting respondent.

4.3 Data Collection

The data collection will be through using a survey questionnaire. The survey

questionnaire will be the medium for the researcher to gather the data that needed in the

study. Survey questionnaire will be given through Messenger as it is the easiest

communication that the society currently has. The researcher will be using the Google

form as medium for survey questionnaire where respondent will answer the questions that

is needed in the study.

4.4 Research Instrument

The researcher used a survey questionnaire to gather data. The survey will be

conducted through online using the Messenger and Google form. Using the technology to

gather data where Messenger is the most efficient way to communicate where it doesn’t

consume too much time as the researcher can give the questionnaire anytime to the

respondent and collect after the respondent answered the survey questionnaire. Name of

the respondent within the small enterprise but the Small Enterprise itself will be included

in the question needed to be answer by the respondent.

4.5 Statistical Treatment

The data that will be gathered in online questionnaire of the Small Enterprises in San Jose

City will be analyzed and tally statistically. The data will be statistically entered with the

requirement of the study.

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 To describe and summarize the characteristics we researcher will be using descriptive

statistics. Through the chosen research instrument, the sample data such as variab` le, mean,

percentage and frequency will be analyzed and describe.

The frequency will be affected by the respondent answer in each question. The

calculation of number who answer in certain question will be reflected to the data

collection of the study. This summarizes the data result base on the response of each

respondent in every question.

F
P= x 100
N

Where:

P = Percentage

F = Frequency

N = Total number of respondents

4.6 Survey Questionnaire

Name (Optional):
Name of the Enterprise:
Age:
Question Strongly Agree Disagree Strongly
Agree Disagree
1. Expenses is part of managing the
finances of the enterprise

2. Financial manager or owner take

a big part in managing finances of
the enterprise.

3. Business needed to have

organization/proper allocation of
funds.
4. Managing finances needed to be
computerized.

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5. Every cent that come in the
enterprise also needed
management.
6. Losses is the result of improper
financial management.

7. Transaction is always needed to

be recorded.
8. Cooperation within the
department or personnel of the
enterprises is a must.
9. Finding the best financial
management strategy is needed to
be compatible to the enterprise.
10. Profit is the result of having a
good financial management.

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 CHAPTER V: RESULT AND DISCUSSION

In this chapter all the collected data will be presented. The data collected in this chapter will

represent the answer to the statement of the problem that is stated. The following data will help

the researcher to analyze and provide information they conduct “The Impact of Financial

Management in Small Enterprises in San Jose City”.

5.1 Result

Question Strongly Agree Disagree Strongly

Agree Disagree
1. Expenses is part of managing the 7 3 0 0
finances of the enterprise

2. Financial manager or owner take 9 1 0 0

a big part in managing finances of
the enterprise.

3. Business needed to have 5 5 0 0

organization/proper allocation of
funds.
4. Managing finances needed to be 4 5 1 0
computerized.
5. Every cent that come in the 7 3 0 0
enterprise also needed
management.
6. Losses is the result of improper 5 5 0 0
financial management.

7. Transaction is always needed to 6 4 0 0

be recorded.
8. Cooperation within the 9 1 0 0
department or personnel of the
enterprises is a must.
9. Finding the best financial 7 3 0 0
management strategy is needed to
be compatible to the enterprise.
10. Profit is the result of having a 6 4 0 0
good financial management.

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5.2 Discussion

5.2.1 Importance of Financial Management in Small Enterprise

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The study revealed the importance of financial management in Small Enterprises. The collected

data in the study shows what are the importance of financial management in managing Small

Enterprises in San Jose City. One of the importance is having a knowledge about how expenses

affect the business. Out of ten (10) respondent 7 respondent answered strongly agree that

expenses are part of financial management which help them in making decision in the future.

Expenses are the cost that spend through the operation that reflect to the financial position of the

business. Managing expenses contribute on the performance of business reflect to the income of

the business. Through having a knowledge about expenses business is able to know the

limitations what to purchase and how many to purchase base only to the operating status or the

capacity of the business. Financial Management helps in managing all the cost related in the

operation of the business. With the Financial management within a business planning the

Figure 1 Data collected from Question number 1

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expenses will be easier as the business already know what they have to consider before spending.

Figure 2 Data Collected from Question number 3

Figure 3 Data Collected from Question number 5

5.2.2 Ideal method in setting up budget for Small Enterprise

Base on collected data knowing how your business operate and the nature of the business is

important in order to have a compatible financial management. In order to avoid loss, a business

must have a financial management that will help them manage their finances in order to grow

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and not suffer in loss. Out of ten (10) respondent five (5) answered strongly agree that improper

implementation of financial might cause losses. There are different way and model of financial

management that different company are using and finding the best one that fit in the business

operation is a very important. Financial management alignment to the business operation will

help in allocating funds and choosing the best options in terms of financing each business

operation.

Figure 4 Data Collected from Question number 6

Figure 5 Data Collected from Question number 9

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Figure 6 Data Collected from Question number 10

5.2.3 Effect of Financial Management in operation of Small Enterprise

Financial Management doesn’t only affect the cost of the business by managing the finances but

also the decision where most of the owner depend on financial management as the key in their

decision making. That’s why every transaction is needed to be recorded because it the basis what

happened in the operation period of the business. Six (6) Out of ten (10) respondents answered

strongly agree that recording transaction is must because it the guide of the business it is the

history of the operating period of the business that will help to make a future decision.

Figure 7 Data Collected from Question number 2

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Figure 8 Data Collected from Question number 4

Figure 9 Data Collected from Question number 7

Figure 10 Data Collected from Question number 8

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 CHAPTER VI: SUMMARY, CONCLUSION AND RECOMMENDATION

This chapter contain summary, conclusion and recommendation that resulted from the study. In

this chapter the study will be summarizes according to the previous chapter and collected data

that is gathered through the study. The whole study will be presented in this chapter and

followed by recommendation for small enterprises and future researcher of the related study.

6.1 Conclusion

The study concludes from the data gathered that overall performance of the business is impacted

by the presence of the financial management. In question number one (1) we have the expenses

is part of the enterprise that needed to be manage along with the finances. Out of ten respondent

9 respondent answer strongly agree that expenses are needed to be manage is it contribute on

how the company will operate in its operating period. Majority answered strongly agree which

they are aware of the presence of the expenses effect on their business and it does need to be

manage as part of how finances should be manage. Aside from the management of expenses it

also includes the proper allocation of fund in order to avoid losses. Out of ten respondent 5

answered strongly agree approving statement question that proper allocating funds is important,

respondent answered with the reference that it is important what needed to be considered in

allocation funds, through allocation enterprise will know how they will allocate the fund by

knowing the needs of the enterprise in order to provide.

6.2 Summary

The purpose of the study was to assess the Impact of Financial Management to mal Enterprises

in San Jose City. The Overall study indicated that Financial Management is very critical even in

small businesses. The Financial Management provide not only a guidance for the business to

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manage its finances but also know what are the factors that influence the operation of the

company in terms gaining income and making decision. The data that has been collected became

the reference of summary of this study. The data gathered by survey questionnaire answering

each question which provide the data that the study needed. We have the following question in

statement of the problem which are the importance of the financial management to small

enterprises, ideal method in setting up financial management and the effect of financial

management to the operation of the small enterprises. Small Enterprises in San Jose City has

acknowledged the presence of financial management in their daily operation. The management

of income, losses, expenses, recording of transaction and proper allocation was being address by

the small enterprises in San Jose which out of ten (10) respondent that has been randomly

selected.

6.3 Recommendation

After a thorough research on the Impact of Financial Management to Small Enterprises in San

Jose City the following recommendation were given based on the objectives of the study. The

following recommendation were given in order to help future researcher and the small

enterprises in San Jose City. Though the implementation of financial management in their

organization it was recommended to implement it with observation as changes will always be

present in business. For the Small Enterprises that randomly selected it is recommended for them

to choose an applicable financial management base on their business process. As stated in

chapter one it is very important that the financial management that is being implement in the

business is aligned on how the enterprise operate. In Chapter three, Contingency theory stated

that there are various of financial management that has been using in different business operation

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this theory just stated the small enterprises have to find financial management that aligned on

how small enterprises in San Jose City operate their business.

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