The financial management of SMEs in hanoi

Analysis and financial planning Financial analysis for business managers to: - Create a regular cycle to assess the operational management during the period was over, the implementation

INTRODUCTION

1 Reason for choosing thesis:

The Vietnam SMEs also have limitations in management, especially

financial management The limitations of financial management is one of the

reasons why most difficult SMEs get loans from commercial banks

However, the in-depth study of the financial management of SMEs in

most of the world refers to the financial management of the relationship with

the other variables of the SMEs For example, research on the relationship

between technology variables to financial performance, by developing

indicators of financial performance (So Young Soh et all, 2009), or studies of

the impact of access to financial services to the financial performance of

SMEs in the fisheries sector in African countries (John Linton et all, 2012),

Michael Peer et all (1998) studied the influence of the evaluation to project

the performance of SMEs in the UK

2 The aim of the thesis research

Thread made with 3 main objectives:

- Investigate and describe the financial management practices of small and

medium-sized enterprises in Hanoi

- To study the impact of these factors in financial management and financial

results of the management of small and medium enterprises in Hanoi

- To propose a complete solution for the financial management of small and

medium enterprises in Hanoi

3 Objects and scope of research

- Research Subjects: TC management activities of SMEs

- Scope of Study: SMEs in Hanoi

4 Research Methodology

Quantitative methods, the data collected will be processed by the computer and the SPSS statistics software

5 New contributions of the thesis

- Formalized previous research on TC managers of SMEs

- If the status of SME managers TC on Hanoi Analysis of the practical aspects of TC and TC management of SMEs

- Data analysis and description of the impact of each factor in the outcome TC management financial management of SMEs in the province's capital

- Develop financial management model for SMEs in the province's capital

6 Layout of the thesis

The thesis is organized into five chapters:

Chapter 1: Overview of Research Issues Chapter 2: Basic theory of financial management of SMEs Chapter 3: Research Methodology

Chapter 4: Research results Chapter 5: Perfecting the financial management of SMEs in Hanoi Also includes an appendix of tables and statistics of primary data, secondary research purposes

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CHAPTER 1 OVERVIEW OF RESEARCH ISSUES

1.1 The situation related research

1.1 1 The study abroad

Great Britain (2011) emphasized the objectives of financial management including liquidity, profitability and growth Therefore, the specific areas that financial management should be concerned with the management of liquidity (cash flow, working capital management), earnings management (profit

analysis, profit planning) and development management (planning and

funding decisions)

Sudhindra Bhat (2008) consider the specific area of financial

management covers all areas related to the items on the balance sheet of the

business The specific areas of financial management including working

capital management, long-term asset management, finance management,

financial planning, planning and evaluating profitability

Eugene F Brigham, Michael C Ehrhardt (2008) defines financial

management based on the mobilization and use of resources: financial

management is interested in raising the necessary funds to finance the assets

and operation of the business, the amount allocated threads between

competing applications, and to ensure that the funds are used effectively and

efficiently in achieving corporate goals

PK Jain (2007) also pointed out three major financial decisions including

investment decisions, financing decisions and dividend decisions

Sudhindra Bhat (2008) suggested another way to identify the key decisions of

financial management is to look at the balance sheet of a business There are

many decisions related to the items on the balance sheet accounting

However, they are classified into three main categories: investment decisions,

financing decisions and the decisions of profit distribution

1.1.2 The local research

In Vietnam, the theme of SMEs are also quite a lot of research interest,

studied under many angles Finance's theme of SMEs, such as tools, financing

solutions, credit to SME development is also a Fellow of the study Nghiem

Van Bay thesis (2009) entitled, "The credit solutions to promote SME

development in Vietnam" has studied an overview of the actual use of credit

to support the development of knowledge SMEs in Vietnam in the coming

time Thesis "The solution capacity of SMEs in Vietnam Finance today" by

Pham Thi Van Anh (2012) evaluated the status of SMEs financing capacity in Vietnam for 5 years (2007-2011) at 4 criteria: size and growth of capital, self-funded and debt capital raising capabilities, profitability, ability to ensure the safety of financing business Monographs "which results in the use of small and medium enterprises" by Dam Van Hue (2006) has studied and evaluated the status of capital of the company using it

1.2 Overview of SMEs

1.2.1 The development of SMEs in Vietnam

- Newly registered businesses reduce, increase dissolution and bankruptcy

- Revenue decreased

- Income tax reduction

- Current tax increase

1.2.2 The development of SMEs in Hanoi

At the time of 12/2010, the number of enterprises in Hanoi by capital and by location

Total number of SMEs with less than 50 billion capital is 225.469 enterprises, accounting for 26.67% of the total enterprises in the country, this shows that SMEs in Hanoi well developed, creating a significant revenue source to the capital each year

1.2.3 SME structure Hanoi

According to research and report latest SME associations in 2012, the structure of enterprises by industry (the industry considered relative, because most of the businesses are registered multidisciplinary, but usually only one

or two business mainstream industry)

CHAPTER 2 BASIC PROBLEMS OF FINANCIAL MANAGEMENT

SMALL AND MEDIUM ENTERPRISES

2.1 Overview of SMEs

2.1.1 Definition of SMEs

SMEs are business establishments registered business in accordance with

law, is divided into three levels: micro, small, medium, according to total

capital (total capital equivalent to total assets is defined in the table balance

sheet of the enterprise) or the average number of employees (total capital is

the priority criteria) [7], namely:

• Micro enterprises: less than 10 employees

• Small businesses: agriculture, forestry and fisheries, industry and

construction: from 10 to 200 employees and capital of 20 billion VND

or less; Trade and services: from 10 to 50 employees and capital of 10

billion VND or less

• Medium enterprises: agriculture, forestry and fisheries, industry and

construction: from 200 to 300 employees and capital from 20 to 100

billion; Trade and services: from 50 to 100 workers and capital from

the 10 to 50 billion

2.1.2 Characteristics of SMEs

- Features the organization's structure: fewer personnel; Organizational units

such as departments often unclear; Not deep specialization of personnel in the

unit; Seniority employees in the unit are usually low, often have a higher

proportion of young big business

- Typical technologies and intellectual content: SMEs often do not participate

in the high-tech sector or apply high technology to production; Knowledge

content, the gray matter in the products of these units are usually not much Tends to be small

- Typical capital and financial management: small capital, fixed assets low, low ability unsecured; Rarely has the financial ability to mobilize rapidly, with large costs and low interest rates; Often there is no CFO With small business unit accounting and finance professionals often low, bringing multitasking

- Flexibility and efficiency: easily switch personnel structure, business structure; Easy to switch main areas of activity of the company in the direction of market volatility, volume up and down easily; Often the average capital cost / low labor, but the results are often higher for capital, employment outcomes for society generally higher

- Characteristics of SMEs in Hanoi: Results lower production business; young entrepreneurs; have diverse lines of business; better access to information

2.2 Theoretical framework and concepts of corporate financial management

Financial management is the use of the information accurately reflect

the financial condition of a unit to analyze its strengths and weaknesses, establish an action plan, plans to use the funds, assets fixed, the demand for labor in the future in order to achieve specific goals to increase the value for that unit [45]

Financial management is the management of the impact to the financial

performance of the business It is done through a mechanism It is a mechanism of corporate financial management Financial management mechanisms are now understood as an overall method, forms and tools are employed to manage the financial operations of the business in the specific conditions in order to achieve the goals certain [18]

2.3 The content of the basic financial management

There are five main elements of financial management processes in order

to achieve the goal of business is to maximize asset value for owners:

2.3.1 Selection of Investment Opportunities

[21] The construction and selection of investment projects due to various

parts of the business done in collaboration On the financial perspective, the

main thing to consider is the result primarily of finance Selection of

investment opportunities is one of the important contents of financial

management as it creates value for the enterprise Where to invest, what?

When investment is appropriate? And investment scale like?

2.3.2 Mobilizing capital

All operations of the business require capital to operate Financial

managers need to determine the level of capital requirements for the operation

of the business in the period The working capital includes capital tied-term

and long-term capital, managers need to mobilize adequate resources to

ensure adequate operational needs of the business

2.3.3 Management and cost accounting

The cost is represented by the entire amount of labor wasted life and

character of that labor now spent to carry out productive activities during

certain business Production cost is an important indicator of the system

economic indicators report for the financial management of the business and

is closely related to business management and accounting thu.Quan well costs

will contribute increase sales for businesses

2.3.4 Profit distribution and reinvestment

Profit is the goal of business activity, is an indicator that businesses have

particular interest as it relates to the existence, development and expansion of

the business Can not talk now operating well, high in the results when

corporate profits fell Enterprises need to have the optimal method of profit

distribution, appropriation and use of corporate funds Accumulated profit is

an important source for businesses in general and SMEs in particular, additional fixed capital and working capital to facilitate expansion of production and business activities

2.3.5 Analysis and financial planning

Financial analysis for business managers to:

- Create a regular cycle to assess the operational management during the period was over, the implementation of fiscal balance, profitability, liquidity and financial risk in the operation of the business

- Ensure that the decision of the Board of Directors in accordance with the actual situation of enterprises, such as investment decisions, funding, distribution of profits; Provide baseline information for the financial projections; Pursuant to check, control activities, management of the business The financial activities of the company should be anticipated through financial planning Make good financial planning tool is essential for enterprises to actively melon solutions in time when the volatility of the market The process of financial planning is the process of making financial decisions appropriate to achieve the objectives of the business

2.4 Evaluation results of financial management Results of financial management is understood that bring results from

the way the financial management of business owners through the implementation of the contents of financial management, how good or not good This outcome was assessed through indicators of corporate finance The financial indicators are often considered when evaluating the results of the financial management of the business, including [9]:

• Group liquidity ratios - Capacity assessment payments

• Group the leverage ratio - Capacity Assessment capital balance

• Group operating ratio - rating business capacity

• Group profit ratios - Capacity Assessment profit

2.4.1 The liquidity ratio - Capacity assessment payments

Payment capacity of the enterprise is the capacity to repay maturing debt

of all kinds of enterprises, is an important criteria reflect the financial position

and business of the business, assess important aspects of the financial results

of the business, through the evaluation and analysis in this regard can clearly

see the financial risks of the business

- Current ratio (current ratio The - Rc) Rc = current assets / current liabilities

Accounts

- Net Working Capital: Working capital = net total of current assets - total

current liabilities

- Quick Ratio (The Quick Ratio - Rq): Rq = (current assets - Inventories) /

short-term debt

2.4.2 The operating ratio - rating business capacity

The capacity of the enterprise business is the capacity of circulating

capital enterprises, is an important aspect of evaluating the financial

performance of the business Because of corporate capital is used to invest in

assets: liquid assets and fixed assets, the need to measure results using total

assets, and each component of total assets

- The rate of inventory turnover-turnover stocks (Inventory Ratio - Ri):

Ri = Net Sales / Inventory

- The average collection period (Average Collection Period - ACP):

ACP = Accounts Receivable / Sales per day

- Results using the entire property (The Total Assets Utilization - TAU)

TAU = Net sales / total assets

2.4.3 The leverage ratios - Assessment of capacity to balance capital

Capitalized balance capacity is the ability of financial autonomy of

enterprises Managers should evaluate the results raise capital to ensure

results using maximum capital This is important not only for business but a top concern of investors, suppliers, lenders, If the financial autonomy of enterprises creates strong trust for the relevant object, thereby creating favorable conditions for enterprises in many aspects of business and increased working capital for the business

- Debt ratio (Debt Ratio - Rd) Rd = Total debt / Total assets

- Ratio of interest-rate time can pay (Times Interest Earned Ratio- Rt): Rt = EBIT / interest expense

- Funded Ratio: Funded Ratio = Equity / total assets

2.4.4 The ratio of profits - profits Capacity Assessment

Through profit ratio, the management capacity assessment of corporate profits, the profit ability of the business Because profit is the end result of the business of business, profit is the main goal of the existence of the business, is

an important aspect in evaluating the results of the financial management of the business Investors, owners, managers, are interested in the capacity of corporate profits

- Rate of Return on Equity (ROE Business owners - ROE): ROE = Net Income / Equity

- Business interests Assets (ROA): ROA = earnings before interest and taxes / assets Or: ROA = Net income / assets

2.5 Model and hypotheses

Hypothesis 1: The content of financial management does not have any relationship to the payment capacity of SMEs in Hanoi

Hypothesis 2: The content of financial management does not have any relationship to the business capacity of SMEs in Hanoi

Hypothesis 3: The contents of financial management does not have any relationship to the balancing capability of SMEs in the capital Hanoi

Hypothesis 4: The contents of financial management does not have any

relationship to the benefit of SMEs capabilities in Hanoi

Financial Management

Figure 2.1: Model theory research

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CHAPTER 3: RESEARCH METHODOLOGY

3.1 Study Design

3.1.1 Scale

In this study, the authors have chosen the form of closed questions, ie the

questionnaire design will make always the answer choices with the statement

of the respondent's assessment (is the asset management main) completely

agree, agree, not sure, disagree, totally disagree

3.1.2 Sampling

To achieve the research objectives set out at the beginning of the study,

non-probability design to select a random sample forms are convenient to use and

is considered reasonable to conduct research topic this The reason for

Selection of Investment

Opportunities

Organization of raising capital

Cost management and cost

accounting

Distribution of profits and

re-invest

Analysis and Financial

Planning

Results of financial management

Capacity payments Business capacity Weight capacity double capital Capacity to profit

choosing this method of sampling because the respondents readily accessible, they are willing to answer a questionnaire study and less costly in time and cost required to gather research information Sample size: sample size is 410

originally planned, but when carried by only 306 votes

3.1.3 Cleaning and data encryption

After collecting the questionnaire, to be cleaned in the following manner: Check out all the preliminary questionnaire, remove the faulty boards or inconsistent answers Next, the collected votes will be entered into the computer Data from individual answers on each vote is encoded according to the rules and standards to ensure logic After data entry is complete, a series

of commands in the SPSS software was performed to check and clean the data before final analysis

3.2 Data analysis techniques

3.2.1 Testing the reliability of the scale

Cronbach's alpha to test the reliability of the variables used to measure each element of financial management These variables can not guarantee the reliability will be removed from the scale and will not appear in the factor analysis

3.2.2 Correlation coefficient and linear regression analysis

First of all, the correlation coefficient between the results for the financial management elements of financial management will be considered Next, linear regression analysis using multivariate methods ordinary least squares (ORDINAL Least Squares - OLS) Enter the variable selection methods were conducted Coefficient of determination adjusted R2 is used to determine the suitability of the model Finally, to ensure the reliability of the regression equation is eventually built accordingly

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CHAPTER 4: FINDINGS

4.1 An overview of the research data:

The author conducted 306 investigations SMEs Among them, there are 50

private companies (16.3%), 105 Co., Ltd (representing 34.3%) and 150

joint-stock companies (49%)

Table 4.1: Disaggregation types of enterprises in the sample

Type of business

Frequency Percent Valid Percent Cumulative

Percent

Valid

Source: Data analysis thesis

4.2 Analysis of the reliability and relevance of the scale

The scale reliability was tested using Cronbach's Alpha tool

Reliability Statistics

Cronbach's

Alpha

N of

Items

The test results are reliable with Cronbach's Alpha scale showing all

scales are theoretically allows achieving reliability In the EFA analysis, the

authors extracted using Principal Component Analysis method with Varimax

rotation and stops when extracting factor eigenvalue greater than 1

EFA analysis results showed that the coefficient of KMO

(Kaiser-Meyer-Olkin) = 0816 should be EFA consistent with the data Chi-square

statistic of Bartlett expertise 4346.459 valued at 0.000 significance is thus

observed variables are correlated with each other considering the overall scope

KMO and Bartlett's Test

Kaiser-Meyer-Olkin Measure of Sampling Adequacy .816 Bartlett's Test of Sphericity Approx Chi-Square 4346.459

4.3 The statistical analysis described

4.3.1 Selection and Training opportunities

SMEs have to draw up a DT project, using indicators such as NPV TC, IRR, in the selection and decision-Tel This is the best media manager Tel decision correctly and gives businesses better business results Investment decision-making of enterprises based on the most up investment projects (data

in tables 4.4 and 4.5) Still many SMEs in Hanoi Tel decision not to consult the original TC (see Table 4.6), with 34% of SMEs at the time did not refer (as the casual), only 51% of enterprises Reference and Consultation Committee comments critical to the investment decision of the business owner

4.3.2 Organization of raising capital

When businesses need capital to 33.3%, there is the use of equity (Table 4.11), inability to raise external capital This is one of the weaknesses of SMEs in the organization raise capital Few businesses have to find ways to raise capital loan heating (Table 4:13): only 11.5% Meanwhile, 57.1% of firms have to borrow money from banks (Table 4:14) This proves that the access of SMEs which have been many changes in a good way As many as

173 enterprises (accounting for 57.1%) was the capital of the bank loan when

in need of capital (Table 4:14) Thus, the number of SMEs access to bank loans increasing This is a good sign for the mobilization of SMEs in particular and the financial management of SMEs in general

4.3.3 Cost management and cost accounting

Most SMEs often informatics applications in financial management and

the most common applications is creation of financial statements The

financial statements have been prepared and analyzed regularly This

indicates that SMEs are interested in the methods of financial reporting and

the preparation of financial reports has become routine for most SMEs 63.2%

of SME manufacturing costs classified according to the content of the

economic costs (Table 4:24) This classification clearly shows the cost of

labor and the labor of live animals in the entire production cost This problem

is important and necessary to identify key cost management and check

balance with other plans, such as cost estimation, planning procurement,

financial plans,

4.3.4 Distribution of profits and re-invest

Overall, profit distribution policy and reinvestment in SMEs have

different flexibility, depending on the situation of business connections

Regarding the setting up of financial reserves: the setting up of financial

reserves in SMEs is a problem, a need for policy reserves set aside in each

SME financing for the prevention of financial risks business Regarding the

setting up investment funds to develop, with: 48.8% DN not remitted funds

from development profit after tax; only 21.5% of firms remitted funds to

develop a minimum of 50% of profit after tax (Table 4:33)

4.3.5 Analysis and Financial Planning

The SME reporting and financial analysis of them based on financial

indicators, but not much (less than 50% of enterprises) This proves especially

SME enterprises in Hanoi has gradually standardizing financial management

of the business, come up with a business management apparatus finance all

the activities and specialization Financial planning is also done SMEs all the

way

4.3.6 Capacity payments

71/306 SMEs always repay maturing debt, DN 20/206 was never paid on the debt

62/306 SMEs maintain its solvency ratio at current high levels

4.3.7 Business capacity

SME 19/306 ratio Inventory turnover is low, 47/306 now maintain the inventory turnover ratio at a high level

28/306 SMEs maintain the average collection period at a high level, 25/306 now maintains the average collection period is low

4.3.8 Weight capacity double capital

102/306 SME debt ratio at a reasonable level, 24/306 enterprises with high debt ratios

36/306 SMEs solvency ratio is low, 44/306 enterprises solvency ratio at a high level

4.3.9 Capacity to profit

95/306 SMEs achieve high ROA, ROA businesses 19/306 low, 191/306 firms averaged

41/306 SMEs achieve high ROE, ROE businesses 143/306 low, 112/306 firms averaged

140/306 SMEs have poor profitability, 42/306 enterprise profitability as expected now

4.4 Regression analysis correlation

capacity payment

Five factors include selections investment opportunities, capital raising Organisation, cost management and cost accounting, profit distribution and

reinvestment, and analysis and financial planning are intended impact

statistical significance to the payment capacity of the selected enterprises

Specific independent variables could explain 68.1% of the group rate

variability indices capacity assessment payment; factors including cost

management and cost accounting have the greatest impact on the liquidity

index group (represented by the partial correlation coefficient is 0.245 the

largest)

4.4.2 Regression analysis correlated with the dependent variable is the

business capacity

Three factors including the Organization of raising capital, cost

management and cost accounting, profit distribution and reinvestment impact

significantly the capacity of business enterprises are selected Option Two

factors are investment opportunities and analysis and financial planning no

statistically significant change in the activity index (Sig Respectively in 0164

and 0825, greater than 0:05) Specifically, the model obtained can explain

56.5% of the variation in the capacity of business enterprises; Organizations

factors including capital raising biggest impact to the team performance

indicators (represented by the partial correlation coefficient is largest 0283)

4.4.3 Regression analysis correlated with the dependent variable is the

weight capacity for capital

Four factors include: Selecting Investment Opportunities, Mobilizing

capital, distribution of profits and reinvest, analysis and financial planning

and has significant impact on the statistical capacity of the capital balance

selected businesses Factor cost management and cost accounting no

statistically significant change in the balance of capital capacity (Sig Equal

0.290, greater than 0:05) Specifically, the model obtained can explain 71.3%

of the variation in capital balance capacity of the company; Analyze which

factors and financial planners have the greatest impact on the group balance

debt leverage index (shown by the partial correlation coefficient is maximum 0283)

4.4.4 Regression analysis correlated with the dependent variable is the capacity to benefit

Three factors including cost management and cost accounting, profit distribution and re-investment, planning and analysis and financial impact brought significant benefit to the capacity of enterprises choice Option Two factors are investment opportunities and capital mobilization Organization no statistically significant change to the benefit of the capacity of the selected enterprises (Sig Respectively by 0115 and 0999, larger 0:05) Specifically, the model obtained can explain 52.8% of the variation in the capacity of corporate profits; factors including cost management and cost accounting have the greatest impact to the capacity of corporate profits is selected (shown

by the partial correlation coefficient is 0.407 the largest)

4.5 Synthesis of study results

4.5.1 The main findings from the statistical analysis described

- Selection of investment opportunities: SMEs have to draw up an investment project, using the financial indicators such as NPV, IRR, in the selection and decision making investment

- To raise capital: When businesses need capital to 33.3%, there is to use equity (Table 4:11), does not have the ability to raise outside capital

- Cost management and cost accounting: Most SMEs often informatics applications in financial management and the most common applications is creation of financial statements

- Profit distribution and reinvestment: In general, the division of profits and re-invest in SMEs with different flexibility, depending on the situation of business connections

- Analysis and Financial Planning: The SME reporting and financial

analysis of them based on financial indicators, but not much (less than 50% of

enterprises)

4.5.2 The main findings from the regression analysis

This study indicates that the contents of financial management,

including: (1) Selection of investment opportunities, (2) Organization and

mobilization of capital, (3) cost management and cost accounting, (4 ) profit

distribution and reinvestment, and (5) analysis and financial planning are

linked and impact on financial results management

Table 4:58: Summary of regression models obtained

Partial

correlation

coefficients

are not

standardized

Selection of Investment Opportunities

Organization

of raising capital

Cost management and cost accounting

Distribution

of profits and re-invest

Analysis and Financial Planning Capacity

payments

Business

capacity

Weight

capacity

double

capital

Capacity

to profit

Source: Data analysis thesis

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CHAPTER 5 FINISHING SOLUTIONS FINANCIAL MANAGEMENT

AREAS OF SMEs IN HANOI

5.1 Basic view of the complete financial management of SMEs

SMEs play important role in socio-economic development of Vietnam

So complete financial management of SMEs to help businesses with grave financial good health and productive activities a good business is essential

5.1.1 Completing the financial management of SMEs should comply with the provisions of law

5.1.2 Completing the financial management of SMEs should implement immediately, ensuring regular and legacy has agreed a short-term and long-term

5.1.3 Perform a complete synchronization of content management and finance towards priority

5.2 The view of the results of financial management of SMEs in Hanoi

Results of financial management of SMEs in the study were divided into 5 groups:

(1) A group of enterprises that do not meet certain criteria (DN 158) meant that financial firms are poorly managed, are unprofitable, high risk of bankruptcy Enterprises need more effort, gradually turn focus to target groups results management to achieve individual targets

(2) Group 1 businesses achieve targets (53 enterprises) businesses of poor financial management

(3) Group 2 businesses achieve targets (48 enterprises) business financial management at an average

(4) Group 3 enterprises achieve the target group (2 firms): corporate financial management is quite good

(5) For the 4 businesses achieve the target group (45 firms): the financial management business achieved good results

5.3 Complete solutions for financial management of SMEs in Hanoi