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Financial Management : Constraints of growth-oriented enterprises

Written by: Journal of Development Entrepreneurship

Article Overview: Whereas the enterprise managers are well aware of the importance of external finance, they seem to underestimate the importance of financial management. This is an issue that the entrepreneurs did not raise directly themselves as a constraint, but something that was deduced from analyzing the empirical data.

Financial Management : Constraints of growth-oriented enterprises

Whereas the enterprise managers are well aware of the importance of external finance, they seem to underestimate the importance of financial management. This is an issue that the entrepreneurs did not raise directly themselves as a constraint, but something that was deduced from analyzing the empirical data.

In the focus group discussions, it became quite clear that many of the financial problems raised would not best be addressed by additional capital resources, but by better financial management. Cash-flow problems are quite common. There are also several leakages as a consequence of poor credit management, theft/fraud and not using resources efficiently enough. In general, the financial management problems boils down to a lack of systematic use of record-keeping and being able to monitor and interpret these records so that the appropriate action may be taken. This problem is compounded by what appears to be a relatively poor understanding of the macroeconomic context among the majority of business leaders. The mechanisms behind interest and exchange rate fluctuations are for example quite often poorly understood. This is likely to have an impact on their ability to plan for the future. To grow, enterprises thus must develop better systems for financial management and obtain an adequate understanding of economics so that they may develop better ideas on what the future might hold.

Constraints of growth-oriented enterprises in the southern and eastern African region
Journal of Developmental Entrepreneurship, Oct 2002 by Trulsson, Per

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Article Tags: business leaders, capital resources, cash flow problems, consequence, constraint, constraints, developmental entrepreneurship, empirical data, enterprise managers, exchange rate fluctuations, external finance, financial management, focus group discussions, fraud, leakages, macroeconomic context, management problems, mechanisms, poor credit management, using resources



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