Do you know how to manage your business? 37% of SMEs lack financial planning

When starting a company, many factors must be taken into account, without a doubt the administration of financial resources is one of the most relevant; However the 37% of Mexican companies lack financial planning because they do not know how to do it or did not find any benefit in this activity, as mentioned in the study “Financial Management” by the Association of Entrepreneurs of Mexico (Asem).

In this analysis, 513 founders, partners, managers and leaders of financial and administrative areas of micro, small and medium-sized enterprises (MSMEs) and large companies from the 32 states of the Republic participated, with the intention of identifying the processes and tools they use in your financial management.

“This analysis is key to understand the needs and main problems of companies, since, according to the Radiography of Entrepreneurship, some of the main causes of failure in companies are related to financial problems, from lack of liquidity to poor administration,” says Juana Ramírez, president of the Board of Directors of the Asem.

Indicators and process improvement

Companies with financial planning have a better chance of surviving the constant challenges presented by the market; however, it is still due improve the quality of their administrative processessince the companies qualified their financial management with an average of 6.4.

The study found that most companies working on their financial management are using three types of projections: costs and expenses with 78%, while billing and income has 74% and cash flow 49 percent. While the most analyzed indicators are liquidity with 68% and profit margin 58 percent.

“Among the main reasons why companies do not carry out financial planning, it stands out that: 36% do not know how to do it; 30% once did it, but did not know how to take advantage of it and 17% do not have time to do it”, indicates Ramírez.

There are different ways to improve the finances of a project. The managers and businessmen who participated in the study identified three key issues in their processes: comprehensive financial planning,better manage finances on a day-to-day basis and preparing for unexpected financial challenges.

Lack of liquidity and late payments

Many ventures start with the intention of finding an extra income, this leads them to take money in the short term to cover personal expenses, so when they have to cover the needs of the business, or working capital is required, they do not there will be the necessary liquidity.

Additionally, the time it will take customers to cover an invoice must be taken into account, the study pointed out that only one in three considers the financial cost of receiving payments to more than 30 days from your customers.

“It should be noted that many companies face serious financial problems due to the delay in the payment times of their clients, which, on many occasions, exceed 90 days. It is important that they take this issue into consideration and see how to collect their bills in a shorter period of time, since their survival depends on it on many occasions”, concluded Ramírez.