- Email: [email protected]
How Slovak Small and Medium Enterprises Perceive Financial Controlling
Available online at www.sciencedirect.com
ScienceDirect Procedia Economics and Finance 26 (2015) 82 – 85
4th World Conference on Business, Economics and Management, WCBEM
How Slovak small and medium enterprises perceive financial controlling Mariana Sedliacikova a*, Vladimir Vacek b, Eva Sopkova c a
Technical University, T.G. Masaryka 24, Zvolen 960 53, Slovakia Technical University, T.G. Masaryka 24, Zvolen 960 53, Slovakia Matej Bel University, Tajovskeho 10, Banska Bystrica 975 90, Slovakia b
c
Abstract This paper deals with the financial controlling in small and medium enterprises (SMEs) in Slovakia and also presents the results from the questionnaire survey. Mapping the subject of financial controlling in practice conditions of Slovak SMEs was carried out on a sample on SMEs of woodworking and furniture industry. The aim of the survey was to determine the level of understanding and implementation of financial controlling in practice, as well as identifying the potential interest in its implementation in the future. Based on the results of the research a framework model of financial controlling for SMEs was proposed, which will be possible to use, with partial modifications in SMEs regardless their type and branch of business. © 2015 2015The TheAuthors. Authors.Published PublishedbybyElsevier Elsevier B.V. © B.V. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/). Peer-review under responsibility of Academic World Research and Education Center. Peer-review under responsibility of Academic World Research and Education Center Keywords: Financial controlling, small and medium enterprises (SME), liquidity, profitability, financial health;
1. Introduction The enterprise in a market economy is under great pressure of competition, in which it cannot survive without quality financial and economic management (Satanova et al., 2014). The inflow of new knowledge regarding the management of the company is closely related with the entry of foreign capital on our market (Markova, 2005). The effort of enterprises to know themselves is escalating, they are increasing their financial and economic performance to adapt and survive (Kokavcova and Mala, 2009). To become competitive the SMEs need to know the causes of success and failure of their business that could affect the factors leading to their prosperity in the future (Potkany,
*
Mariana Sedliacikova. Tel.: +421-45-5206-420 E-mail address: [email protected]
2212-5671 © 2015 The Authors. Published by Elsevier B.V. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/).
Peer-review under responsibility of Academic World Research and Education Center doi:10.1016/S2212-5671(15)00842-4
Mariana Sedliacikova et al. / Procedia Economics and Finance 26 (2015) 82 – 85
Hajdukova and Teplicka, 2012). Effectiveness of the various management systems depends on many factors (Kanderova and Uradnicek, 2005). One of them is the consistent definition of each system elements (Zavadsky and Hiadlovsky, 2014). Just as in a medicine, there is necessary for the company to establish a diagnosis of the enterprise organism and then to propose a variant options (solutions) of treatment (Zavadsky, Zavadska and Sirotiakova, 2013). The tool for treating the economic systems is controlling, which allows not only detecting the action of economic and non-economic factors, but also their future development, analysis of deviations from the desired state and prepare corrective actions. The aim of controlling-oriented concept of the enterprise in financial management, i.e. financial controlling is ensuring of liquidity taking into account the objectives of profitability. Longstanding experience of many foreign enterprises point to the importance of applying the financial controlling in SME's, from the point of view of active management of the financial health of a company based on the information in real time. The presented ideas have led to the currying out of the empirical research on the sample of Slovak woodworking and furniture SMEs and to the consecutive proposal of the framework standardized model of financial controlling for them. 2. Methods and resources To suggest the model of financial controlling for SMEs, it was required a use of methods of summary, synthesis and analogy of the knowledge and creation of a short literature review. In the second phase, a questionnaire method to process an empirical study was used, which represents an analysis of the situation in the solved subject matter within practice of woodworking and furniture SMEs in Slovakia. The aim of empirical research was to find out the level of understanding and implementing of financial controlling in woodworking and furniture SMEs in Slovak as well as the detection of potential possibilities and interest in implementation of the subject matter into enterprise practice in future. Carrying out the empiric research was the starting point for the proposal of the model of financial controlling for SMEs. Partial aims of the research were to find out if enterprise practice is corresponding in the given area with modern knowledge of theory, to process the gained data and according to these to formulate findings and recommendations which would enrich theory and would contribute to better enterprise practice quality. At primary level of information gathering we used a questionnaire but also basic methods of theoretical research such as analyses, synthesis, induction, deduction, analogy and comparison. The questionnaire targeted 450 most significant Slovak woodworking and furniture SMEs. The ratio of questionnaire return was 28,67 % that means 129 completed questionnaires. The questionnaire was evaluated by a description method, numerically, in percent in tables and graphs and by analyses of variance. We were looking for a statistical dependence among the questions in relation to the size of the businesses, type of businesses, and their length of operation on the market. In the third phase we designed the model of financial controlling for SMEs. In the final part of the paper we evaluated the obtained results by the deduction method and defined its assets for science, theory and practice.
3. Results and discussion 3.1. Results of empirical research From the empirical research we found out the following results: 41.9 % of asked small and 55.2 % of medium enterprises do not consider financial management and financial controlling as identical areas. 11.6 % of small and 37.2 % of medium enterprises deal with financial analyses and prognoses. The methodology of financial planning carry out 9.7 % of small and 40 % of medium enterprises. Controlling activities which support management of liquidity use 4.8 % of asked small and 16 % of medium enterprises. Financial control techniques aimed at analyzing and monitoring the causes of variations in the cash flow, carry only 6.5% of small and 35.7% of medium enterprises. It was found that seminar on this issue would welcome 38.6% of small and 41.7% of medium enterprises, what indicates a relatively high interest to learn something more in this area.
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Mariana Sedliacikova et al. / Procedia Economics and Finance 26 (2015) 82 – 85
However, only 5.1% of small and 19.5% medium enterprises expressed positively to the implementation of financial controlling to their practice in the future, what cannot be consider as positive finding. The following conclusions were formulated summarizing the survey results: Level of understanding of financial controlling as well as implementation of controlling in economic practice is generally low in Slovak SMEs. Medium enterprises from the point of view of size and production enterprises from the point of view of the type are mostly recognising the benefits and effects of the presented instrument from the point of view supporting their financial management of the company and from the point view of the financial health of the company. Conversely, small production enterprises with short-lasting operation on the market are the worst. The analysis of variance confirmed that in all findings the factor size of enterprise (small or medium enterprise) is the factor that is statistically significant also in the most of questions the factor the type of enterprise (production or trade enterprise). The factor time - duration of operation on the market (up to 1 year, to 5 years, to 15 years and above 15 years) is statistically significant factor in all questions. Although companies use these methods to some extent we substantially did not meet with a comprehensive form of tools and techniques of financial controlling in Slovak SME's. Despite this, the interest in the implementation of this instrument is relatively very low. From the findings it can be concluded that the business-economic practice of SME's in this field does not correspond to the modern theory of knowledge. As the survey was carried out on a sample of SME's in the woodworking and furniture industry, which are not very specific in comparison with other sectors of the national economy, it is possible to generalize the obtained results for Slovak SME's as a whole.
3.2. Model of financial controlling for SMEs
AcTIVITIES OF FINANCIAL CONTROLLING
Empirical results of research present, that the practice of small and medium enterprises in Slovakia do not dispose of a unified monitoring methodology and appraisal of financial controlling. Our proposed model of financial controlling for SMEs (Fig. 1) consists methodologies and processes in seven base areas. Base on these findings, it can help enterprises to create a compact controlling reporting system in the area of corporate finance. The fundamental of this model is the fact that the role of financial controlling is not to make decisions but to prepare methodological procedures and alternative solutions for the management of the company on which management decisions will be received (Sedliacikova, Satanova and Foltinova, 2012).
1. Financial analyses. (ex-post, ex-ante) 2. Modern methods of enterprises performance evaluation (EVA, RONA, DCF) 3. Financial planning. (simulation models) 4. Controlling of working capital. (receivables, stocks)
5. Controlling of ongoing liquidity. 6. Controlling of short-term liquidity surpluses and deficits .
7. Financial control. Fig. 1. Model of financial controlling for SMEs
Mariana Sedliacikova et al. / Procedia Economics and Finance 26 (2015) 82 – 85
4. Conclusion Theoretical as well as practical experience of authors of this paper can point to the importance of financial controlling for ensuring the financial health of SME's. From results obtained within the analysis of secondary sources it can be concluded, that controlling is carried out in enterprises in the various functional areas, the area of cost – cost controlling, the area of investment – investment controlling, finance area – financial controlling, etc. Considerable diversity of opinion resulted from the analysis of the approaches taken by different authors to the content of the financial controlling. The approach of author (Foltinova and Belan, 1997) limits the financial controlling only for controlling of operating capital, ongoing liquidity and controlling of short-term liquidity surpluses and deficits. This approach can be regarded as very closely-oriented. The authors Blazek (2002), Claussen (2003), Fickert et al. (2003), Fischer (2012), Freiberg (1996) and Taets von Amerongen (2003) have enriched this approach with financial planning and control, which is an improvement when we compared the previous approach. The authors Horvathova and Gallo (2003) included as the part of the financial controlling also, determination of financial policies and objectives of the business, financial and economic analysis of a company, as well as modern methods of assessment of business performance, but on the other hand, there is not included the financial control in their approach. It can be stated, that the current business and economic theory and practice have significant different opinion of domestic and foreign experts on the content of financial controlling, as well the unclear definition and division of tasks between the financial controlling and financial management. For these reasons, the mapping of relevant problem in conditions of the practice of woodworking and furniture SME's has been the subject of the research with the proposal of the financial controlling model for SMEs.
Acknowledgements This paper was processed in the frame of projects No.1/0527/14 and No. 1/0495/15 as the result of authors' research at significant help of VEGA agency, Slovakia. References Blazek, A. et al., (2002). Finanz – Controlling. Planung und Steuerung von Bilanzen und Finanzen. Berlin: Verlag fur Controllingwissen. Claussen, H., (2003). Instrumente fur das Finanzcontrolling. Controlling NEWS, 2003, 25 (2), 17-18. Fickert, R. et al., (2003). Finanzcontrolling. Bern: Fr. 98.-Haupt Verlag. Fischer, T. M. et al. (2012). Controlling – Grundlagen, Instrumente, Perspektiven. Stuttgart: Schaffer-Poeschel Verlag. Foltinova, A. Belan, M., (1997). Financny controlling podniku II. casť. Financny poradca podnikateľa, 7 (4), 115-129. Freiberg, F., (19969. Financny controlling. Bratislava: Elita. Horvathova, J., Gallo, P.,( 2003). Controlling. Presov : Dominanta. Kanderova, M., Uradnicek, V., (2005). Statistika a pravdepodobnosť pre ekonomov, Banska Bystrica: Obcianske zdruzenie FINANC Kokavcova, D., Mala, D., (2009). Knowledge sharing – the main Prerequisite of Innovation. Revised Journal Organiyaciju vadyba sisteminiai tyrimai, 2009, 51, p.47-56. Markova, V., 2005. Male a stredne podnikanie. Banska Bystrica: Univerzita Mateja Bela, Ekonomicka fakulta. Potkany, M., Hajdukova, A., Teplicka, K., (2012). Target Costing Calculation in the Woodworking Industry to Support Demand at the Time of Global Recession. Drewno, 55 (187), 89 – 104. Sedliacikova, M., Satanova, A., Foltinova, A., (2012). Financny kontroling v teorii a praxi malych a strednych podnikov. Ekonomicky casopis / Journal of Economics, 52 (9), 148 – 159. Satanova, A., Hekelova, E., Zavadsky, J., Kucerova, M., Klementova, J., (2014). Trendy v manazerstve kvality. Zvolen: Vydavateľstvo Technicka univerzita vo Zvolene. Tarts van Amerongen, F., (2003). Finanzcontrolling im Kleinunternehmen. Convisa, 2003, 15 (10), 20-21. Zavadsky, J., Hiadlovsky, V., (2014). The consistency of performance management system based on attributes of the performance indicator: An empirical study. Quality Innovation Prosperity, 2014 18 (1) 93-106. Zavadsky, J., Zavadska, Z., Sirotiakova, M., (2013). Process model and its real application in the selected management areas. E a M: Ekonomie a Management, 16 (1), 113-127.
85
ScienceDirect Procedia Economics and Finance 26 (2015) 82 – 85
4th World Conference on Business, Economics and Management, WCBEM
How Slovak small and medium enterprises perceive financial controlling Mariana Sedliacikova a*, Vladimir Vacek b, Eva Sopkova c a
Technical University, T.G. Masaryka 24, Zvolen 960 53, Slovakia Technical University, T.G. Masaryka 24, Zvolen 960 53, Slovakia Matej Bel University, Tajovskeho 10, Banska Bystrica 975 90, Slovakia b
c
Abstract This paper deals with the financial controlling in small and medium enterprises (SMEs) in Slovakia and also presents the results from the questionnaire survey. Mapping the subject of financial controlling in practice conditions of Slovak SMEs was carried out on a sample on SMEs of woodworking and furniture industry. The aim of the survey was to determine the level of understanding and implementation of financial controlling in practice, as well as identifying the potential interest in its implementation in the future. Based on the results of the research a framework model of financial controlling for SMEs was proposed, which will be possible to use, with partial modifications in SMEs regardless their type and branch of business. © 2015 2015The TheAuthors. Authors.Published PublishedbybyElsevier Elsevier B.V. © B.V. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/). Peer-review under responsibility of Academic World Research and Education Center. Peer-review under responsibility of Academic World Research and Education Center Keywords: Financial controlling, small and medium enterprises (SME), liquidity, profitability, financial health;
1. Introduction The enterprise in a market economy is under great pressure of competition, in which it cannot survive without quality financial and economic management (Satanova et al., 2014). The inflow of new knowledge regarding the management of the company is closely related with the entry of foreign capital on our market (Markova, 2005). The effort of enterprises to know themselves is escalating, they are increasing their financial and economic performance to adapt and survive (Kokavcova and Mala, 2009). To become competitive the SMEs need to know the causes of success and failure of their business that could affect the factors leading to their prosperity in the future (Potkany,
*
Mariana Sedliacikova. Tel.: +421-45-5206-420 E-mail address: [email protected]
2212-5671 © 2015 The Authors. Published by Elsevier B.V. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/).
Peer-review under responsibility of Academic World Research and Education Center doi:10.1016/S2212-5671(15)00842-4
Mariana Sedliacikova et al. / Procedia Economics and Finance 26 (2015) 82 – 85
Hajdukova and Teplicka, 2012). Effectiveness of the various management systems depends on many factors (Kanderova and Uradnicek, 2005). One of them is the consistent definition of each system elements (Zavadsky and Hiadlovsky, 2014). Just as in a medicine, there is necessary for the company to establish a diagnosis of the enterprise organism and then to propose a variant options (solutions) of treatment (Zavadsky, Zavadska and Sirotiakova, 2013). The tool for treating the economic systems is controlling, which allows not only detecting the action of economic and non-economic factors, but also their future development, analysis of deviations from the desired state and prepare corrective actions. The aim of controlling-oriented concept of the enterprise in financial management, i.e. financial controlling is ensuring of liquidity taking into account the objectives of profitability. Longstanding experience of many foreign enterprises point to the importance of applying the financial controlling in SME's, from the point of view of active management of the financial health of a company based on the information in real time. The presented ideas have led to the currying out of the empirical research on the sample of Slovak woodworking and furniture SMEs and to the consecutive proposal of the framework standardized model of financial controlling for them. 2. Methods and resources To suggest the model of financial controlling for SMEs, it was required a use of methods of summary, synthesis and analogy of the knowledge and creation of a short literature review. In the second phase, a questionnaire method to process an empirical study was used, which represents an analysis of the situation in the solved subject matter within practice of woodworking and furniture SMEs in Slovakia. The aim of empirical research was to find out the level of understanding and implementing of financial controlling in woodworking and furniture SMEs in Slovak as well as the detection of potential possibilities and interest in implementation of the subject matter into enterprise practice in future. Carrying out the empiric research was the starting point for the proposal of the model of financial controlling for SMEs. Partial aims of the research were to find out if enterprise practice is corresponding in the given area with modern knowledge of theory, to process the gained data and according to these to formulate findings and recommendations which would enrich theory and would contribute to better enterprise practice quality. At primary level of information gathering we used a questionnaire but also basic methods of theoretical research such as analyses, synthesis, induction, deduction, analogy and comparison. The questionnaire targeted 450 most significant Slovak woodworking and furniture SMEs. The ratio of questionnaire return was 28,67 % that means 129 completed questionnaires. The questionnaire was evaluated by a description method, numerically, in percent in tables and graphs and by analyses of variance. We were looking for a statistical dependence among the questions in relation to the size of the businesses, type of businesses, and their length of operation on the market. In the third phase we designed the model of financial controlling for SMEs. In the final part of the paper we evaluated the obtained results by the deduction method and defined its assets for science, theory and practice.
3. Results and discussion 3.1. Results of empirical research From the empirical research we found out the following results: 41.9 % of asked small and 55.2 % of medium enterprises do not consider financial management and financial controlling as identical areas. 11.6 % of small and 37.2 % of medium enterprises deal with financial analyses and prognoses. The methodology of financial planning carry out 9.7 % of small and 40 % of medium enterprises. Controlling activities which support management of liquidity use 4.8 % of asked small and 16 % of medium enterprises. Financial control techniques aimed at analyzing and monitoring the causes of variations in the cash flow, carry only 6.5% of small and 35.7% of medium enterprises. It was found that seminar on this issue would welcome 38.6% of small and 41.7% of medium enterprises, what indicates a relatively high interest to learn something more in this area.
83
84
Mariana Sedliacikova et al. / Procedia Economics and Finance 26 (2015) 82 – 85
However, only 5.1% of small and 19.5% medium enterprises expressed positively to the implementation of financial controlling to their practice in the future, what cannot be consider as positive finding. The following conclusions were formulated summarizing the survey results: Level of understanding of financial controlling as well as implementation of controlling in economic practice is generally low in Slovak SMEs. Medium enterprises from the point of view of size and production enterprises from the point of view of the type are mostly recognising the benefits and effects of the presented instrument from the point of view supporting their financial management of the company and from the point view of the financial health of the company. Conversely, small production enterprises with short-lasting operation on the market are the worst. The analysis of variance confirmed that in all findings the factor size of enterprise (small or medium enterprise) is the factor that is statistically significant also in the most of questions the factor the type of enterprise (production or trade enterprise). The factor time - duration of operation on the market (up to 1 year, to 5 years, to 15 years and above 15 years) is statistically significant factor in all questions. Although companies use these methods to some extent we substantially did not meet with a comprehensive form of tools and techniques of financial controlling in Slovak SME's. Despite this, the interest in the implementation of this instrument is relatively very low. From the findings it can be concluded that the business-economic practice of SME's in this field does not correspond to the modern theory of knowledge. As the survey was carried out on a sample of SME's in the woodworking and furniture industry, which are not very specific in comparison with other sectors of the national economy, it is possible to generalize the obtained results for Slovak SME's as a whole.
3.2. Model of financial controlling for SMEs
AcTIVITIES OF FINANCIAL CONTROLLING
Empirical results of research present, that the practice of small and medium enterprises in Slovakia do not dispose of a unified monitoring methodology and appraisal of financial controlling. Our proposed model of financial controlling for SMEs (Fig. 1) consists methodologies and processes in seven base areas. Base on these findings, it can help enterprises to create a compact controlling reporting system in the area of corporate finance. The fundamental of this model is the fact that the role of financial controlling is not to make decisions but to prepare methodological procedures and alternative solutions for the management of the company on which management decisions will be received (Sedliacikova, Satanova and Foltinova, 2012).
1. Financial analyses. (ex-post, ex-ante) 2. Modern methods of enterprises performance evaluation (EVA, RONA, DCF) 3. Financial planning. (simulation models) 4. Controlling of working capital. (receivables, stocks)
5. Controlling of ongoing liquidity. 6. Controlling of short-term liquidity surpluses and deficits .
7. Financial control. Fig. 1. Model of financial controlling for SMEs
Mariana Sedliacikova et al. / Procedia Economics and Finance 26 (2015) 82 – 85
4. Conclusion Theoretical as well as practical experience of authors of this paper can point to the importance of financial controlling for ensuring the financial health of SME's. From results obtained within the analysis of secondary sources it can be concluded, that controlling is carried out in enterprises in the various functional areas, the area of cost – cost controlling, the area of investment – investment controlling, finance area – financial controlling, etc. Considerable diversity of opinion resulted from the analysis of the approaches taken by different authors to the content of the financial controlling. The approach of author (Foltinova and Belan, 1997) limits the financial controlling only for controlling of operating capital, ongoing liquidity and controlling of short-term liquidity surpluses and deficits. This approach can be regarded as very closely-oriented. The authors Blazek (2002), Claussen (2003), Fickert et al. (2003), Fischer (2012), Freiberg (1996) and Taets von Amerongen (2003) have enriched this approach with financial planning and control, which is an improvement when we compared the previous approach. The authors Horvathova and Gallo (2003) included as the part of the financial controlling also, determination of financial policies and objectives of the business, financial and economic analysis of a company, as well as modern methods of assessment of business performance, but on the other hand, there is not included the financial control in their approach. It can be stated, that the current business and economic theory and practice have significant different opinion of domestic and foreign experts on the content of financial controlling, as well the unclear definition and division of tasks between the financial controlling and financial management. For these reasons, the mapping of relevant problem in conditions of the practice of woodworking and furniture SME's has been the subject of the research with the proposal of the financial controlling model for SMEs.
Acknowledgements This paper was processed in the frame of projects No.1/0527/14 and No. 1/0495/15 as the result of authors' research at significant help of VEGA agency, Slovakia. References Blazek, A. et al., (2002). Finanz – Controlling. Planung und Steuerung von Bilanzen und Finanzen. Berlin: Verlag fur Controllingwissen. Claussen, H., (2003). Instrumente fur das Finanzcontrolling. Controlling NEWS, 2003, 25 (2), 17-18. Fickert, R. et al., (2003). Finanzcontrolling. Bern: Fr. 98.-Haupt Verlag. Fischer, T. M. et al. (2012). Controlling – Grundlagen, Instrumente, Perspektiven. Stuttgart: Schaffer-Poeschel Verlag. Foltinova, A. Belan, M., (1997). Financny controlling podniku II. casť. Financny poradca podnikateľa, 7 (4), 115-129. Freiberg, F., (19969. Financny controlling. Bratislava: Elita. Horvathova, J., Gallo, P.,( 2003). Controlling. Presov : Dominanta. Kanderova, M., Uradnicek, V., (2005). Statistika a pravdepodobnosť pre ekonomov, Banska Bystrica: Obcianske zdruzenie FINANC Kokavcova, D., Mala, D., (2009). Knowledge sharing – the main Prerequisite of Innovation. Revised Journal Organiyaciju vadyba sisteminiai tyrimai, 2009, 51, p.47-56. Markova, V., 2005. Male a stredne podnikanie. Banska Bystrica: Univerzita Mateja Bela, Ekonomicka fakulta. Potkany, M., Hajdukova, A., Teplicka, K., (2012). Target Costing Calculation in the Woodworking Industry to Support Demand at the Time of Global Recession. Drewno, 55 (187), 89 – 104. Sedliacikova, M., Satanova, A., Foltinova, A., (2012). Financny kontroling v teorii a praxi malych a strednych podnikov. Ekonomicky casopis / Journal of Economics, 52 (9), 148 – 159. Satanova, A., Hekelova, E., Zavadsky, J., Kucerova, M., Klementova, J., (2014). Trendy v manazerstve kvality. Zvolen: Vydavateľstvo Technicka univerzita vo Zvolene. Tarts van Amerongen, F., (2003). Finanzcontrolling im Kleinunternehmen. Convisa, 2003, 15 (10), 20-21. Zavadsky, J., Hiadlovsky, V., (2014). The consistency of performance management system based on attributes of the performance indicator: An empirical study. Quality Innovation Prosperity, 2014 18 (1) 93-106. Zavadsky, J., Zavadska, Z., Sirotiakova, M., (2013). Process model and its real application in the selected management areas. E a M: Ekonomie a Management, 16 (1), 113-127.
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