Poor financial planning at tea automation and electric technology co , ltd

19 Figure 7: Poor financial planning, Low net profit margin & Negative cash flow .... 21 Figure 8: the relation between Poor financial planning and High inventory days .... The author wi

UNIVERSITY OF ECONOMICS HO CHI MINH CITY

International School of Business

-NGUYEN TRUONG GIANG

POOR FINANCIAL PLANNING AT TEA AUTOMATION AND ELECTRIC

TECHNOLOGY CO., LTD

MASTER OF BUSINESS ADMINISTRATION

Ho Chi Minh City – Year 2021

UNIVERSITY OF ECONOMICS HO CHI MINH CITY

International School of Business

-NGUYEN TRUONG GIANG

POOR FINANCIAL PLANNING AT TEA AUTOMATION AND ELECTRIC

TECHNOLOGY CO., LTD

MASTER OF BUSINESS ADMINISTRATION

SUPERVISOR: Dr Anh-Tuan Doan

Ho Chi Minh City – Year 2021

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TABLE OF CONTENTS

TABLE OF CONTENTS 1

LIST OF ABBREVIATIONS AND DEFINITION 4

LIST OF TABLE 4

LIST OF FIGURES 4

ACKNOWLEDGMENT 5

EXECUTIVE SUMMARY 6

1 INTRODUCTION 7

1.1 Company overview 7

1.2 Industry overview 9

2 PROBLEM CONTEXT 11

2.1 Symptoms analysis 11

2.1.1 Negative cash flow 12

2.1.2 Low Net profit margin 13

2.1.3 High inventory days 14

3 PROBLEM IDENTIFICATION 15

3.1 Potential problems 15

3.1.1 Poor Cash flow management 15

3.1.2 Poor Financial planning 18

3.2 Problem validation 23

3.2.1 Poor Financial planning 23

3.2.2 Poor Cash flow management 26

3.2.3 Consider Poor Financial planning is the main problem 28

4 CAUSE VALIDATION 30

4.1 Potential causes 30

4.1.1 Experience based decision 30

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4.1.2 Lack of financial literacy 31

4.1.3 Lack of financial control 34

4.1.4 Lack of Enterprise Resource Planning system 36

4.2 Causes validation 38

4.2.1 Experience based decision 39

4.2.2 Lack of financial literacy 39

4.2.3 Lack of financial control 40

4.2.4 Lack of Enterprise Resource Planning system 41

4.2.5 Main causes 42

5 SOLUTIONS 43

5.1 Alternative solution 1: Training for the owners of TEAC to improve the financial literacy 43

5.1.1 Solution exploration 43

5.1.2 Training process 44

5.1.3 Benefit and Cost 49

5.2 Alternative solution 2: Hire an internal accountant, and document standardization 49

5.2.1 Solution exploration 49

5.2.2 Methodology: Set up accounting cycle 50

5.2.3 Benefit and Cost 53

5.3 Alternative solution 3: Hire an experienced finance manager 54

5.3.1 Solution exploration 54

5.3.2 Methodology: Define the role of Finance manager 54

5.3.3 Benefit and Cost 56

5.4 Solution selection 57

6 ACTION PLAN 58

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7 SUPPORTING INFORMATION 61

7.1 Interviewees timeline 61

7.2 Summary of interview transcript 61

APPENDIX 73

REFERENCES 81

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LIST OF ABBREVIATIONS AND DEFINITION

ERP Enterprise Resource Planning

SEC U.S Securities and Exchange Commission

SMEs Small and medium-sized enterprises

TEAC TEA Automation and Electric Technology Co., Ltd

LIST OF TABLE

Table 1: Cash flow statement in TEAC from 2018 to 2019 12

Table 2: Data of profitability in TEAC from 2018 to 2019 13

Table 3: Inventory days at TEAC in 2019 14

Table 4: TEAC financial leverage and its profit in 2018 & 2019 16

Table 5: Collection days and cash flow at TEAC in 2018 & 2019 17

Table 6: Inventory statistic at TEAC in 2018 & 2019 25

Table 7: short-term loan of TEAC in 2018 & 2019 28

Table 8: Use of technology by the owners/managers in the SMEs 36

Table 9: The course's content 47

Table 10: Percentage of time spent on each task of the Finance manager 54

Table 11: Action plan for Solution 1 & 2 59

Table 12: Gantt-chart of the action plan 60

LIST OF FIGURES Figure 1: The organization chart of TEAC Vietnam in 2021 8

Figure 2: TEAC's products 8

Figure 3: The relation between Over Leveraging with Low net profit margin 16

Figure 4: Relative between over leveraging and Negative cash flow 16

Figure 5: Poor client credit check lead to Negative cash flow 17

Figure 6: Poor cash flow management lead to Negative cash flow 18

Figure 6: Financial planning process 19

Figure 7: Poor financial planning, Low net profit margin & Negative cash flow 21

Figure 8: the relation between Poor financial planning and High inventory days 22

Figure 9: Preliminary cause and effect tree (consolidated by the author) 23

Figure 10: Updated preliminary cause and effect tree (consolidated by the author) 30

Figure 11: Potential causes (consolidated by the author) 30

Figure 12: An Overview of an ERP System 37

Figure 13: Training process 45

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ACKNOWLEDGMENT

Firstly, let me give my appropriate and pleasure to my supervisor Dr Anh-Tuan Doan, for guiding, helping, and supporting me with the necessary knowledge during the time I conduct the thesis Thanks to him, I was able to detect my mistakes and correct them accordingly Besides, I would like to thank the committee of the International School of Business for their comments to improve my proposal I also thank the teachers and staff of ISB for making conditions for me to have a good study environment to absorb the knowledge of the course in a timely manner effective

In addition, I would also like to thank BOD and all employees of TEA Automation and Electric Technology Co., Ltd for facilitating me to analysing of the company's reports, in-depth interviews, research the problems, and causes And give me suggestions on solutions suitable to the current situation of the company It helped me

to experience and apply the theoretical knowledge I have learned in practice at the company

Finally, I would like to thank my family and friends for encouraging, helping, and make conditions for me to complete the course and complete my thesis

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EXECUTIVE SUMMARY

TEA Automation and Electric Technology Co., Ltd have worked for more than five years under the leadership of two experienced technicians In the beginning when the company has established The company revenue grew really fast, the next year's revenue increase more than 100% of the previous year 2018 is the highest revenue that TEAC has been reached in five years However, in 2019, the trend of growth slowdown due to many reasons

After conducting in-depth interviews with TEAC's BOD and staff The author got the authority from TEAC's BOD to analyse the company's financial statements in two years 2018, and 2019 At that time, the company still haven't finish consolidate the company's financial statements in 2020 However, after analyse the secondary data and combine with the primary data get from the in-depth interview The author withdraws three symptoms at TEAC that related to three aspects of finance with the corresponding are Negative cash flow from the Cash flow statement, Low Net profit margin from the Income statement, and High Inventory days from the balance sheet

After read some theories, and got advice from the supervisor The problems at TEAC should lead to three symptoms are related to finance and the nature of the core problem and difficult to change in the near future if the company doesn't solve the root causes Two potential problems should be "Poor Cash flow management" and "Poor Financial planning"

Combine with the theory, the secondary data, and re-confirm from the company The main problem is Poor financial planning Combine with theory-informed, empirical study, and after validating with the company, the main causes that lead to that problem are "Lack of financial literacy", and "Lack of financial control"

With the found main causes, the author also discussed with TEAC and suggested two solutions that meet the requirements of the company are the solutions should not be too expensive and could be implemented in phases The author also designs the solutions with the detailed benefit & cost, together with the action plan and the person in charge for each activity

The aim of the thesis is to figure out the causes of the main problem and design the solutions that have the high abilities to solve the problems After discussion with the

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company, the solution of "Training for the owners of TEAC to improve the financial literacy" and "Hire an internal accountant" will be implemented in 3 phases and the priority is to conduct the Training for the owners first The evaluation stage is out of the thesis's scope of work However, the author will follow up with the company to observe and support the company to implement the plan in order to lessons learned for future studies

1 INTRODUCTION

1.1 Company overview

- Vietnamese name: CÔNG TY TNHH KỸ THUẬT ĐIỆN VÀ TỰ ĐỘNG TEA

- English name: TEA Automation and Electric Technology Co., Ltd

- Short name: TEAC

- Established in 2015 by Mr Duy – Director and Mr Minh – Vice director

TEA Automation and Electric Technology Co., Ltd is the convergence of a team of enthusiastic and experienced engineers, they have successfully participated and played

an important role in many large projects on the supply and installation of control systems automation for factories in the fields of Package utilities in industrial zones, fertilizers, chemicals, cement, water - water treatment, food - beverage, plastic, packaging, building control, power cables - telecommunications cables, animal feed processing, etc

With the operating principle of "Providing smart solutions" being put on the top, TEAC is committed to providing our customers with the best products, solutions, and services

To achieve the above core value, TEAC has constantly improved the quality of human resources, researched and applied new solutions to improve the quality of products and services In addition, TEAC often trains inherited staff to expand performance capacity and meet customer requirements well

Currently, TEAC is a professional supplier and integrator for Rockwell electrical equipment and automation solutions in Vietnam

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Organization structure in 2021

Figure 1: The organization chart of TEAC Vietnam in 2021

 TEAC Location: 679/95 Quang Trung street, Go Vap district, Hochiminh city

 Number of employee

- Director + Sales: 02 person

- Accountant + Purchasing: 02 person

- Technical team: 6 person

 Main business: Provide the solution, equipment and install the automation system

that fits with the customer application Ex: process kit for shampoos such as Comfort, Vim, and etc

 Product: Rockwell technology solution

Figure 2: TEAC's products

 Market area: throughout Vietnam

Main area: Dong Nai province, Binh Duong province

- With the same function, TEAC provides the cheaper price to the customer

- With the same price, TEAC provides a higher function to the customer

- This product (Rockwell) provides more library (function) than others

 Weakness: The main product has a higher tier in the industry Hence, it has a higher

price and more difficult to sell than other competitors

1.2 Industry overview

Industrial automation is a series of solutions that use computer-controlled systems, robots, and information technology to handle production tasks to improve productivity and increase accuracy in manufacturing The original idea and purpose of automation are to increase productivity because machines can operate 24/7 and have high accuracy, which can take on heavy tasks that humans cannot do The use of automation can reduce workers and save costs

In the field of industrial automation, PLCs (programmable logic controllers) are used in most applications Applications are pre-programmed by the system to perform the installed tasks The system automatically operates efficiently and continuously as peripheral sensors and easily changes configuration through HMI (Human Machine Interface) screens

To monitor and control large and complex systems in real-time at a central control station SCADA (supervisory Control and Data Acquisition) systems are commonly used The system will collect data from PLC stations or from sensors directly connected

to the system and send it to the server processor to analyze data, monitor, and control the system's operation effectively Contribute to solving problems if any arise

These systems are often connected directly with factory management software (manufacturing Operation Technology), integrated into the information management system, and linked with enterprise management software such as ERP, PLM, MES, etc Using industrial automation systems has the following benefits:

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- Increase production productivity: In a company, if people occupy the main part of the production process, there are times when there is a shortage of resources due to illness, leave, holidays With the automation system, machines can operate continuously 24/7 Easy planned system maintenance and partial maintenance through preventive maintenance

- Improve quality: Skilled workers also sometimes make mistakes and sometimes reduce their work efficiency during the day Machines work tirelessly and always have

a high accuracy rate if maintained regularly and properly

- Collected data has high reliability: The use of an automatic system helps to collect data quickly, timely, and with high accuracy Helps to limit errors from human input, limiting waiting time The businesses have an accurate and fast data source that greatly contributes to planning and decision-making work

- Work safety: in heavy, hazardous, and dangerous environments The use of automation lines will ensure the health and safety of workers

Besides the benefits, the disadvantages of industrial automation systems are large investment costs and long payback periods Because machines are modern and complex, enterprises must also train workers and maintainers to a higher level to be able to use, operate and maintain machines effectively Operating a complex automated system is also high pressure on the factory management team

The new era of Industry 4.0

In recent years, the 4th industrial revolution is developing very strongly in the world and especially in Vietnam The government is advocating and supporting domestic businesses to catch up with the development trend in the industrial era 4.0 to improve the productivity and production efficiency of domestic industries The ability to intelligently connect to the Internet of Things integrated with information technology platforms helps to reduce investment costs for industrial automation systems at a reasonable price Today's systems are not only capable of handling single tasks but can handle a series of systems thanks to the application of artificial intelligence (AI), Big data, VR/AR, and Block Chain are beginning to replace the existing automated system and rapidly changing the traditional industrial automation industry

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Facing the industrial wave 4.0 Major companies in the automation industry have taken significant steps to adapt to the new era such as General Electric, Seimens, ABB, Schnieder, Rockwells, Hitachi, etc They digitize the platform and sales strategy around IoT and provide digital transformation services for businesses in the industry

The greater the opportunity, the greater the challenge And one of these challenges

is that the threat to the future of the automation industry is security as well as cybersecurity With the growth of the Internet of Things, more and more devices are connected to the internet As a result, creating more risks for hackers to penetrate the systems of enterprises, causing very serious consequences To catch up with the trend

of the industrial wave 4.0 Businesses need to change quickly if they do not want to be eliminated from the race.(1)

In order to maintain the business and develop TEAC, the company wants to change However, they are struggling with the finance issue when do not have the historical data

to support the innovation Besides, slow update of the new technology is also the obstacle of TEAC at the moment In order to survive, TEAC has to change immediately The big concern of the director is how to find the resource to enhance the internal ability to adapt to the external change The survival stage at TEAC has over when it has worked in the industry for 5 years The company has to move forward to the success stage and move very quickly to the Take-off stage in order to catch the investment wave

2.1 Symptoms analysis

After conducting in-depth interviews with three people in two different departments

at TEAC We withdraw 3 symptoms that can be observed as follow:

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2.1.1 Negative cash flow

According to Birt et al, "Cash flows are the lifeblood of the business".(2) A cash flow statement records the inflow and outflow of cash (cash equivalent) of a company in a specific period of time Some SMEs owners/managers don't pay attention to cash flows statement due to they think their revenue is big and they have enough cash for all the disbursement In fact, it doesn't If the SMEs owners/manager doesn't manage the cash flow well, they will have the cash shortage for the monthly expenses.(3)

Table 1: Cash flow statement in TEAC from 2018 to 2019

Lưu chuyển tiền thuần từ hoạt động kinh doanh

Net cash flows from operating activities (782,328,688) (1,088,226,048)

Tiền thu từ đi vay

-Tiền trả nợ gốc vay

Lưu chuyển tiền thuần từ hoạt động tài chính

Net cash flows from financial activities 502,666,666 (104,000,004)

Source: from TEAC's financial statements

With the cash flow statement in 2018 and 2019 in TEAC It shows the net cash flow

of the operating activities of TEAC negative in two years continuously It means with the whole year's business, the firm lacks money for the operating activities

The financing activities are the changes from the company equity and liability, the cash inflow from the financing activities comes from the cash of the owner or borrowing, and the cash outflow is for repayment of the borrowing and dividend The cash inflow

is used for temporary borrowing in order to expand the business However, if the company borrow for a long period in order to have enough money for the operating activity, it can lead to the problem of the increase the interest payment and influent negatively the cash flow of the company.(2) On Table 1, Net cash flows from operating

activities in 2018 is -782,328,688 VND According to Mr Minh – the vice director, TEAC have a borrowing of the amount 520,000,000 VND in order to has enough cash

to continue the company's business (operating activities) This action causes a consequence is the Repayment of principal in 2019 increased 500% compared with 2018

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(increased 86,666,670 VND), and it makes negative cash flow from the financing activities in 2019 causes by the previous year borrowing

Consequences: When a company's cash flow results are negative A company with low

leverage will have room to borrow and will tend to borrow more to cover its cash shortfall Although negative cash flow does not actually contribute to the increase in the company's transaction costs, it does promote borrowing to increase debt to cover the cash shortfall in the company's business.(4) That means the more negative cash flow, the more negative impact on the company's liquidity balance And the company tends to increase its debt to have the cash for the normal operation

2.1.2 Low Net profit margin

On Table 2 we can observe and realize that the Net profit of TEAC is so small

compared with its revenue Hence, it causes the Net profit margin of TEAC is only 0.77% in 2018 and 0.66% With this indication, the company hard to gain profit and develop in long run

Table 2: Data of profitability in TEAC from 2018 to 2019

Doanh thu thuần về bán hàng và cung cấp dịch vụ

Net revenues from sales and services rendered 15,120,062,700 8,674,642,880

Lợi nhuận sau thuế thu nhập doanh nghiệp

Profits after enterprise income tax 116,797,987 57,621,842

Biên lợi nhuận ròng

Source: from TEAC's financial statements

Net profit margin is calculated by divide the Profit after Tax by the Net revenues This ratio shows that how many percent the company gain from its revenue into the net profit(3) With the current Net profit margin, with 1,000,000 VND from revenue, after deducting all the expenses, TEAC got 6,600 VND profit only in 2019 It is easy to see TEAC is not good at using its capital and abilities to convert the revenue into profit

Consequences: On a study of Nariswari el al, there is a positive and significant

impact on Net profit margin to Profit Growth by 0,398785, if Net Profit Margin increases by one unit, profit growth can also increase by 0.398785 Net profit margin and profit are not always proportional and reflective of each other, sometimes companies

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with high net profit margins are not very profitable But companies with high net profit margins are better able to cut operating costs Therefore, it can bring high expected returns to investors

For skilled investors, often pay attention to the company's profit growth rate Investors look at the profit growth rate as a tool to measure a company's good or bad performance This aspect will probably affect potential investors in the future, so if the company wants to attract investors, they must try to maintain and enhance the annual profit growth rate

When analyzing the profit growth of a company, it is possible to partly evaluate the performance of the company, thereby considering whether to invest in a company or not If the operating profit of a business is high, the operating results are good, which means that the company is effectively utilizing the capital of investors From there, it is possible to predict the development trend of the company and also reduce the risk in investment activities(5)

Hence, the Net profit margin affects the Profit Growth of a company With the low and reduce Net profit margin at TEAC in 2018 & 2019, it could have a negative impact

on the investors who wants to invest in TEAC in the future If TEAC doesn't find an appropriate method to enhance its Net profit margin ratio, strongly believe that TEAC

is difficult to attract the investor when the company wants to develop its business

2.1.3 High inventory days

Days inventory shows the average days for a company to sell the products stored

in their warehouse(2) The inventory days are calculated by multiply the average inventory for 365 over the Cost of goods sold The reason to use the cost of goods sold instead of the sale revenue is in order to eliminate the profit margin out of the result.(3)

Table 3: Inventory days at TEAC in 2019

Hàng tồn kho

Inventories 886,602,704 7,777,642,615

Giá vốn hàng bán

Costs of goods sold 13,208,600,533 6,987,282,644

Số ngày tồn kho (ngày)

Inventory turnover (days) 226.3

Source: from TEAC's financial statements

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Inventory turnover is a critical aspect for SMEs in order to manage their capital It indicates how fast the company converts its products into cash The smaller inventory turnover days the company has, the faster the company has cash in hand

With the calculated inventory days at TEAC, it is not a good situation that the company is facing with The longer inventory days means the company has a higher risk

of the thief, product obsolete, product damage, and more cost to retain the product in the warehouse such as labor cost, audit cost, and warehouse rent cost.(3)

Consequences: According to DeHoratius et al, inventory accuracy is crucial for

any company Twenty-one percent (21%) of participants stated inventory inaccuracy as

a problem with their company According to the research, there are significant differences between recorded and actual inventory quantities in the firms Obsolete inventory is defined as products that have become unsaleable and should be discarded,

as well as items that are no longer valuable to the company These items can result in significant losses for the company For the SMEs surveyed, developments in technology and the perishability of commodities were the two causes that rendered their inventory obsolete.(6)

3 PROBLEM IDENTIFICATION

3.1 Potential problems

3.1.1 Poor Cash flow management

According to Qamar et al, with a small company, leverage is always impacted the company performance negatively The more leverage, the more profit of the small company will decrease.(7) A study of Ozenbas & Portes also confirm that the small firms with asymmetric information will has the strong negative impact to their profit if they use their debt to lever the business, and it is costly.(8)

According to Hande et al, the debt to equity ratio is an important financial indicator and called financial leverage That shows if the company has the ability to repay its debts If a firm lever too much and exceed 50%, that firm is too risky to run the business and considered a negative factor(3)

The debt to equity ratio is calculated by using the Total Liability divide by the Total Equity

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𝐷𝑒𝑏𝑡 − 𝑡𝑜 − 𝐸𝑞𝑢𝑖𝑡𝑦 𝑟𝑎𝑡𝑖𝑜 = 𝑇𝑜𝑡𝑎𝑙 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑦

𝑇𝑜𝑡𝑎𝑙 𝐸𝑞𝑢𝑖𝑡𝑦

With this formula, we are easily to see in the Table 4 that TEAC is overleveraging

its debts with the ratio is corresponding is 1.23 times & 2.39 times in 2018 & 2019

Table 4: TEAC financial leverage and its profit in 2018 & 2019

2018 2019 Unit

Số lần Nợ/Vốn chủ sở hữu

Lợi nhuận sau thuế thu nhập doanh nghiệp

Profits after enterprise income tax 116,797,987 57,621,842 VND

Source: from TEAC's financial statements

With the theory combine with the actual data It is strongly affirmation that Debt to Equity too high is one of the factors lead to Low net profit at TEAC With the above arguments, we have the proved figure related to the over leveraging and Low net profit

on the Figure 3

Figure 3: The relation between Over Leveraging with Low net profit margin

One research of Ahmad et al, overleveraged will put the owners/manager in the situation to push more the cash out flow to repayment for the company debt The more the company lever, the remaining cash of the company is less and cause the negative cash flow.(9) (see Figure 4)

Figure 4: Relative between over leveraging and Negative cash flow

According to Hande, the company has to check the "customer credibility and collection risk considerations" before deciding to make the credit sales to their clients

It will help the company to reduce the collection period.(3)

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One of the studies by Huang et al mentioned that information asymmetry leads to moral hazard That means when the customer or borrower has more information than the others They can try to increase the time to payback the debt of their business from the loan or credit sales.(10) If one company has no effective method to collect the debt from their customer, it might cause bad debt and affect the company's account receivable and collection period That amount of account receivable will be maintained in the company balance sheet and have a negative effect on the company's financial ratio

By the research of Uwonda et al, nearly 40% of the company cannot avoid their customer buy the products on credit It is a risk when the firm provided the debtor a longer period of time for the payment It leads the firm to have a longer collection period and cause negative cash flow for their operation.(11)

Table 5: Collection days and cash flow at TEAC in 2018 & 2019

2018 2019 Unit

Số ngày thu tiền khách hàng

Lưu chuyển tiền thuần từ hoạt động kinh doanh

Net cash flows from operating activities (782,328,688) (1,088,226,048) VND

Source: from TEAC's financial statements

In Table 5, the data shows that the more collection period days, the more negative

cash flow from operating activities that TEAC is facing with Hence, we can consolidate the relation between the Poor client credit check leads to Negative cash flow and in

Figure 5

Figure 5: Poor client credit check lead to Negative cash flow

Cui et al in 2010 confirmed that poor cash flow management lead to inadequacy working capital, and lack of cash for the daily activity.(12) As per Pedro which is cited in

a study by Peel that with some SMEs poor in cash flow management, and more frequently has a short-term loan to compensate the unpredicted cash shortage.(13)

The short-term loan is added to the company's liability and has the obligation to be paid back periodically Hence, the company has to gain the profit big enough from its

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business Otherwise, most of the profit will be allocated for repayment and interest expenses Whenever the debt that got from the past short-term loan is paid, the rest of the profit is not enough to pay for the company's operation cause the negative cash flow.(14)

In Figure 6 shows the relation between the poor cash flow management and

Negative cash flow

Figure 6: Poor cash flow management lead to Negative cash flow

3.1.2 Poor Financial planning

a Financial planning evaluation

Financial planning is the process to use all the resources that the company had in order to achieve the company's goal and objectives The result of the financial planning

is the company's planning budget Financial planning is included in the financial report system with a purpose to make the forecasting more precise and support the company make the right decision.(15) However, it is difficult to measure the effectiveness of the qualitative nature such as Financial planning But we can evaluate it indirectly via the company performance and financial ratios

According to Muizzuddin et al, the Goal setting is an important aspect of financial planning, there are some things you can do to achieve optimal results when doing financial planning, such as: [1] Establish measurable financial goals and have a term, [2] evaluate the financial condition periodically, [3] make financial planning as early as possible, [4] set the realistic financial goals, [5] gain the understanding that achieving goals is a struggle, then planning is a process that requires time and continuously follows

its development (see Figure 7) (16)

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Figure 7: Financial planning process

The same concept with Muizzuddin, Susan et al also define the planning include five steps are [1] setting your goals, [2] analyzing and evaluating your situation, [3] provides recommendations, [4] implementation of the process, monitoring, and evaluating of a firm's goals, and [5] generating new ideas Those steps help the company set its potential budget and establish its goals(17)

When a business is dealing with unpaid debt and rising costs, a good and proper financial plan is extremely beneficial An organization should plan ahead of time for their financial plan in order to foresee the situation To do this, an organization should create a financial plan from the start and continue to revise and update the plan every quarter of the year to ensure that it is accurate(18) The company would not be able to save or spend without adequate financial planning If no investment is made, the company is likely to have a liquidity problem Creating a strategic plan helps the company outline and have a broader vision in setting short-term and long-term business goals This is the first and important step in planning the company's financial future in the short and long term During the implementation of the plan, the decisions made will

be more directional and more accurate so that the company can achieve its financial goals.(19)

The companies use a variety of financial planning techniques to sustain and improve their financial performance One of the most important variables that determine the financial success of a company is management efficiency To evaluate management

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performance by measuring financial ratios as total asset growth, loan growth rate, and earnings growth rate.(20) Some financial ratios in financial statements can be used to estimate management efficiency Asset management ratios, such as inventory turnover ratios, will be used to assess management efficiency

Financial planning is a very important and indispensable job for any business, especially small and medium-sized enterprises, for the purpose of determining business goals and performance According to literature reviews, Macharia found that the right financial planning led to good financial performance.(21)

Based on those literature reviews, there is a conclusion that proper financial planning leads to financial performance via financial ratios such as asset management ratios, total asset growth, earnings growth rate, loan growth rate, inventory turnover ratios, operating profit to income ratio, expense to asset ratio, profitability ratios, and liquidity ratios

With the assessment of those ratios, the company can measure and evaluate the company has good or poor financial planning in order to adjust the plan accordingly

b Importance of financial planning

Financial planning is one of the critical factors leading to the success of SMEs in South Africa With the SMEs, the owner/manager usually has the obstacle with the financial planning They have approximately 30.7% failure to do the financial planning

The break-even point is the number of the products/services the company sold that makes the total cost and revenue equal Over the quantity of the products/service that the company could sell at the break-even point, the company is getting profit

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The Break-even point (B/E) is calculate by

B/E= Total Fixed Cost

Contribution per unit =Number of units to be sold to break-even

Information:

Total Contribution = Sales value - Total Variable Costs

Contribution per unit = Selling price of a unit - Variable costs of a unit

Variable Cost (VC) = Labor + materials + components/assemblies + maintenance + consumables

Assume the total Fixed Cost maintain the same, the number of units to be sold to break-even will decrease when the contribution per unit increases To increase the Contribution per unit, there are two methods is to increase the selling price of a unit or decrease the variable cost of a unit

The variable cost dependent on the quantity of the products and the time life of the project The more project is prolonging; the more variable cost will be charged to the project That means the firm has to sell more units of products/services or increase the selling price to reach the break-even point

However, globalization and the market are fiercely competitive in this field in Vietnam that the author mentioned in the problem context SMEs in Vietnam usually is the price taker and difficult to increase the selling price Without calculating the break-even point properly, the firm will have lost its Net profit margin

Then we have the relation between Poor financial planning and Low Net Profit

margin, and Negative cash flow on Figure 8

Figure 8: Poor financial planning, Low net profit margin & Negative cash flow

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According to Armstrong, sales prediction one manner of financial planning, with

a purpose is predicting the amount that the customer will buy the product/service from

a company, then prepare the budget to buy of inventory at the suitable time to serve the project and make it profitable Overconfidence forecast might lead to the wrong forecasting if the person in charge recognizes the trend of the market and readjust the forecast It can make the whole plan getting wrong and harm the company's performance(23) One manner of wrong sales prediction is a wrong financial measurement of the inventory, which leads to the wrong decision was made on the quantity of inventory that will be carried out.(24) That means whenever the sales prediction is wrong, it will affect the inventory management

With those arguments, the relation between Inaccurate sales prediction and High inventory days is drawn out as below figure

Figure 9: the relation between Poor financial planning and High inventory days

Based on above analysis, the author withdraws the preliminary cause-and-effect tree

for TEAC as the Figure 10 And the potential problem could be the Poor Cash flow

management, and Poor financial planning

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Figure 10: Preliminary cause and effect tree (consolidated by the author)

3.2 Problem validation

3.2.1 Poor Financial planning

According the Mr Duy – Director

"I know about the importance of calculating the break-even-point, but my company has never calculated it precisely."

Whenever the break-even-point cannot be determined correctly, it is easy to buy the material at a higher price than normal and selling the products/service under the break-even-point Some owners/managers think the price on their quotation is competitive to make a profit However, with a single project, they can be able to compare the cost and revenue Hence, it creates a feeling that the project is making a profit Nevertheless, the other expenses are still not calculating into the selling price properly That makes low profit compare with its cost of goods sold which leads to a low net profit margin

According to Mr Duy – the director, even his company used and distribute Rockwell's products much more than another distributor in Vietnam But the price that TEAC bought from Rockwell is as same as another distributor But, he also admits that the more quantity the company bought at one time, the more discount that Rockwell provides to its distributor That means, if TEAC calculates the buying quantity correctly, the cost will reduce and significantly affect the Net profit margin of TEAC

According to Mr Duy – Director:

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"The product is specifying and based on the customer detail request Hence, when a material is allocating for one project It cannot be re-use for the other project If the customer prolongs or cancels the project, the product has to be kept in the warehouse until has a new project has the same requirement to use the same material Then that material can be re-used and cleared out of the warehouse"

With this characteristic, the sales prediction has to be accurate Otherwise, the inventory will be high

One of the roles of financial planning is to set the inventory budget The owners/managers have to balance their financial situation to make the appropriate decision If the current situation of the company is not good in cash flow, but buy in advance the material is mandatory to start the project If the financial planning is not good The owners/managers could be easy to choose to increase the short-term loan in order to buy the material to start the project According to Mr Duy, win the project is the higher priority of the company With that decision, the inventory budget is usually not be set and easily increases suddenly to serve the project It can cause oversupply, and if the project has any issue and making it prolonging or cancel The material will be kept in the warehouse for a long time lead to high inventory days at TEAC Nevertheless, the priority of the company is the order, and with this policy, the company will serve their customer the best to get the order Hence, sales revenue is not the problem when TEAC can get a lot of projects for the company business

According to Ms Cuc – the purchasing staff, the projects that TEAC had every year are fluctuating, and the time for each project might be prolonging into two years compared with the original plan is 6 months The cause comes from both sides, from the customer, and from TEAC Hence, it leads to the amount of inventory could be increased significantly due to the project cannot be finished in the fiscal year

Tiền chi trả cho người cung cấp hàng hóa và dịch vụ

Expenditures paid to suppliers (VND) 10,645,955,671 8,548,216,890 -20%

Số ngày tồn kho

Source: from TEAC's financial statements

In Table 6 we can see that the inventory in 2019 increased 777% compared with

2018 However, the amount of expenditures paid to suppliers in 2019 is decreased by 20% compared with 2018 According to Ms Cuc, the most increased amount of inventory that bought in early 2019 is served for the projects in 2019 but prolonged to

2020 It explained why the expenditures paid to suppliers reduce but the Inventory is

increased

According to Mr Minh – the vice director, his company poor in classify his clients Hence, in some projects some specific customers, the project will be longer than the initial plan According to Mr Duy – the director, at the end of each year, he will forecast which ongoing project will finish in the next year But the exact time the project

is finish is unforeseen That means the company passive in the time and money of the projects The more the project is prolonged, the sales revenue is affected due to the company cannot issue the VAT invoice to TEAC's customer and cannot get the revenue

as well

According to Mr Duy – the director, TEAC has to pay the salary for the technicians who use the material to assembling the semi-product from Rockwell to create the finished products for TEAC's customer in a specific project The more project is prolonging; the more variable cost will be charged to the project That means TEAC has

to sell more units of products/services or increase the selling price to reach the even point

break-According to Mr Minh – the vice director His company has no cost planning; the selling price is calculated manually by his experience-based With the specific project

or customer, he will create a different quotation with a special price or discount

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According to Ms Cuc – Purchasing staff:

"For some projects, it could be prolonging to 1.5 to 2 years due to the customer has to wait for the client's project"

One of the critical matters of financial planning is sales prediction With the ongoing projects, the owners/managers have to predict the sales revenue precisely For every project, the time to finish the project, and the time the company receives the payment from its clients is the most important matter The owners/managers have to balance between the account receivable, account payable to choose the time to buy and/or clear the products out of the inventory Whenever the sales prediction is inaccurate, the project can be prolonging lead to an increase in the inventory days The more project is prolonging, the more operating cost occurs will be charged to the project and cause low net profit for the company

Mr Duy - the director said that he didn't know how to do the financial planning for his company His main purpose is to find the order for his company and find the way to win the project to get the orders and not pay attention to planning He has never seen the financial ratio to make the decision His background is in engineering, and the decision making by his experience in technical aspect rather than the finance matter

With those facts, TEAC lack of cost planning cause High material prices and made the wrong selling price lead to Low net profit and Low net profit margin

TEAC has inaccurate sales prediction make some projects is prolonging and over supply cause High inventory days, and indirectly lead to Low net profit margin

3.2.2 Poor Cash flow management

According to Ms Cuc – purchasing staff:

"The company usually lacks cash in some period of time And at the end of 2018 & 2019, the cash is always negative"

When the company manages the cash flow not well enough, it is usually having a cash shortage in some months or even a quarter The temporary solution is to increase a short-term loan to have enough cash for the disbursement at the end of the month or quarterly The more cash loan, the more interest expense the company has to pay in the future And the firm has to cut its profit to pay for the interest expense, which causes the outflow of cash is greater than the inflow leads to the negative cash flow of the company

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According to Mr Duy – director:

"The company has never checked the credit of his client The company's priority is to get the order The credit checks take time and complicated procedure That kind of process costly and make the customer unsatisfied Hence, a credit check is not the priority in the company's current business"

With this strategy in business, TEAC's priority is the orders And they don't pay attention to their client's financial credit check If one of TEAC's customers has a problem with their business or does not have enough credibility, it is a risk for TEAC if they continue to sell to that kind of customer It may lead to bad debt and difficult for debt collection It will increase TEAC's collection period when the debts are still maintaining in the balance sheet as the account receivable This reason causes the negative cash flow for TEAC whenever the bad debt still not be recovered

According to Mr Duy, he wants to increase the sales revenue and has a bigger chance to win the projects The more opportunity the company has, the lower the credit check that TEAC has conducted

In fact, according to Mr Minh – vice director, the amount of TEAC's bad debts is approximately 1 billion VND The reason is due to TEAC have never checked the customer's credibility before decide to implement a credit sale The reason he mentioned

is under the pressure to earning the new customer and want to win the project, the company has to do that even though that activity might harm the cash flow of the company

According to Mr Minh – the Vice director, his company has to let their client pay the finished project after 30 days or even more after issues the invoice However, TEAC's client has not pay for the whole project, they only paid 20% for the first down payment If the project is prolonging, means TEAC has to bear all the fixed cost related

to the salary of the employees, office rents, and other expenses That makes the company out of cash due to the account receivable is high and the collection days is also high Over-leveraging means a company has too much debt compared with its cash and equity A company overleveraged is difficulty in paying its interest if its profit margin

is not bigger than the interest rate The more interest expense, the more difficult for that firm to pays its operating expenses due to the excessive cost to pay for the interest and

Tiền thu từ đi vay

Tiền trả nợ gốc vay

Source: from TEAC's financial statements

With those arguments, TEAC usually has cash shortage, and the BOD solve that problem by increase the short-term loan lead to cause interest expense and lead to Negative cash flow

Besides, the company has never check the customer's credibility before make the credit sales contribute to increase the bad debt and lead to increase the collection periods cause Negative cash flow The more negative cash flow, the more TEAC over leverage and cause more Negative cash flow

3.2.3 Consider Poor Financial planning is the main problem

As per Uwonda which is cited in a book by Surridge and Gillespie who supposed that one of the causes of the cash flow problems due to lack of planning Cash flow management sound is simple, but most of the SMEs do not pay attention enough of the cash planning to make sure the firm enough cash for operation month-to-month.(25) The purpose of Financial planning is to help the company leverage all of the resources to set and have a strategic method to reach the target However, all of the planning will be worthless if the company does not have the cash on hand to put these plans into action - cash flow management is crucial to guarantee that the company are paid in full and on time, or the company will rapidly find itself in significant financial

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problems Cash flow management is helping the company to reach its objective Hence,

it is the tool to implement financial planning Combine with the literature reviews on the topic of financial planning Good or poor financial planning is assessed by the company's performance and the financial ratios Good financial planning combine with good cash flow management will lead to a good performance of a company However, with poor financial planning it difficult to have a good cash flow management It is easy

to realize all the financial ratios in TEAC are not good enough, and we qualified for evaluation that TEAC has a poor planning process in its business The consequence of poor financial planning is the poor cash flow management at TEAC

According to Mr Duy – the director, he knows the importance of cash flow management when his company usually out of cash due to credit sales However, he also admitted that his company has no expertise person who handles the financial planning, all the planning is conducted by him with more related to experience base Hence, the poor financial planning is significantly impacted his company's cash flow management

With that evidence, we can see that Poor financial planning causes Poor cash flow management, and Poor financial planning is considered the main problem at TEAC The updated preliminary cause and effect was consolidated as follow figure

poor financial planning in TEAC as the Figure 12

Figure 12: Potential causes (consolidated by the author) 4.1.1 Experience based decision

Based on experience to make decisions without following financial planning is one

of the common weaknesses of business owners The quick decision based on experience

to achieve the goals of business owners will have a negative impact on scheduled plans The following theories will explain further

4.1.1.1 Overconfident and low risk perception

According to Ogarcă, one of the matters affect decision-making at SMEs is overconfident and based on the entrepreneur's experiences One of the major traits is their risk perception; they have a propensity to generalize their perceptions and believe that they can succeed When circumstances necessitate a decision in a complex, uncertain environment, decision-makers attempt to format the initial evidence in proportion to prior interactions or expertise As a result, the current scenarios are tailored

to the old decisional conditions, and the same strategies as before are used Such a

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strategy can be dangerous in today's business world, where industry characteristics change quickly and require change management.(26) With this characteristic, the owner usually makes the decision based on their own experience due to they think their decision will be good for their company and accept the higher risk for each decision

4.1.1.2 High need for achievement

According to strategic choice analysis, the personal characteristics of strategic decision-making affect the choices they make One of the major personality traits has been identified: high need for achievement.(27) A variety of studies have found that decision-makers with a strong need for accomplishment express a high need for achievement to affect and influence the situation in which they work Furthermore, they are more likely to be challenged by more formalized and logical decision-making(28) They carefully analyze circumstances, especially in smaller companies, in order to proactively manipulate their people, and they often prefer structured strategic planning and measurement and control systems That means, the owner's willingness to manipulate their people to reach his/her achievement They analyze the situation and make the decision based on their experience to reach the objective at all cost

4.1.2 Lack of financial literacy

A study of Akhtar et al, there is a positive and significant relationship between the financial literacy of the owners/managers of SMEs and the performance of the firm With R2 = 0.574 and significant that means 57 percent of financial literacy of the owners/managers of the SMEs explain the effect on the firm performance change.(29) As

we clarified, the firm's performance is the result of financial planning Hence, financial literacy is one of the effects of the elements to financial planning of the firm

4.1.2.1 Reactive behavior

Poorly run business owners often use Reaction Strategies, the worse the performance, the more they use reactive behavior and the formation of a bad habit Reactive strategy means that a person is motivated by the situation, does not use knowledge effectively, and does not prepare plans and implement the planned activities.(30) The lack of financial knowledge often leads to limitations in financial resources internal and external of the business, which have an indirect and direct impact

on the performance of the firm And therefore, negatively affect the company's

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operations, once the business situation worsens, it will also affect the behavior of the owner/manager Hence, the lower performance of the firm, the more reactive strategy is used by the owners/managers And they less focus on complete financial planning And indirectly leads to the company's low performance That is a loop that reinforces each other between the reactive strategy and the firm's performance

4.1.2.2 Low financial awareness

Awareness belongs to the field of management, usually the owner/manager has the responsibility and obligation to find new solutions and apply them in the most beneficial way for the company Normally, owners/managers should be able to read, understand, analyze, handle and solve various financial situations with the ultimate aim of generating profits for the company

As a study of Akhtar et al, there is a strong relationship and significance between financial awareness and SMEs attitude and the firm performance The more financial awareness of the owners, the better performance of the firm could have.(29)

With those arguments, the more finance awareness of the owners/manager, the better attitude of the owners/manager will approach to the method for better planning in order to lead enhance the company performance In contrast, low financial awareness leads to ineffective planning and performance

4.1.2.3 Low owner financial education

Understand the financial statement of the company helps the owner makes the right decision However, most of the SMEs owners lack the necessary expert knowledge to read and explain the factors of the financial statement.(31) It usually leads to wrong decision due to poor managerial and indirectly lead to poor company performance There is small amount of owner/manager who usually use the balance sheet, financial report and statement for the decision making The larger percent of the SMEs owner/manager don't use those powerful tools serve for financial planning While it may appear technical and complicated, preparing a balance sheet is actually a simple task, especially for micro businesses or new ventures with a small number of operations, which can even be done by SME owners In practice, this job is typically delegated to accountants because business owners prefer to focus on other aspects of their businesses, such as production, service, or marketing, and they do not trust their financial literacy

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to prepare and analyze financial tables Nonetheless, understanding the logic and fundamentals of a balance sheet gives small business owners and managers a significant advantage, as these statements can provide extremely valuable information about the company and its performance.(3)

Financial planning is comprehensive for almost the daily activities of the company And one factor lead to failure in financial planning is Lack of knowledge of the current business literature.(32) It leads to the financial planning has less meaningless when most

of the decisions are made by the owner/manager's experience and business sense but not based on the expertise knowledge and literature in finance

4.1.2.4 Not auditing the company

Using an external accounting and auditing service is seen to improve SME performance further, implying that auditors' depth of knowledge is useful to SME management.(33)

According to Malet, understanding control systems, disclosure standards, and audit practice and procedure are all examples of financial literacy It may involve the competence and confidence to chase "red flags" lurking in the lines of suspect transactions It will occasionally incorporate issue sensitivity and nuance in alternate approaches to complex accounting challenges.(34) That means auditing is considered one important element of financial literacy

The main purpose of the audit for a company managed by the owner is to support the internal monitoring system and the system as well as the capacity and experience of the auditors to help the company operate effectively Instead of organizing a company's oversight for the benefit of external stakeholders, because SME companies simply rarely attract capital from investors, the audit is often aimed at protecting their corporate interests With all the benefits of auditing a company, the owner-managers should use

an external auditing service for their own company annually During the auditing, the auditor with their large and expert knowledge in the industry can give some formal and informal advice to the firm in order to help the owner control and improve the company's performance Lack of auditing a company is one of the reasons lost the control in finance aspect that will limit the company growth

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4.1.3 Lack of financial control

The SME owners/manager usually focus on sales, technical solutions, and customer management, but rare to focus on internal financial control There are many studies confirmed that lack of financial control is one of the reasons for cause failure of SMEs The following theories will explain further related to this matter

4.1.3.1 Lack of internal accounting staff

According to the study's findings of Agyei-Mensah, the primary reasons for SMEs (60 percent) that do not have internal account staff are:

1 Not enough money to hire an experienced accountant (93%) Business owners/managers think that the wage paid to internal accountants or outsourced accounting services is more than what they deserve to receive Professional accountants also say that SMEs do not pay fair compensation for the work they have done for the business

2 The accounting books are too confusing to keep track of and there are many rules

to follow (87%) The lack of accounting knowledge of the owner/manager is the main cause of this situation

3 Lack of internal accounting staff (73%) The inability of these SMEs to pay their accountants well makes it difficult to attract qualified and experienced accountants The lack of internal accounting staff is a barrier to implementing a good financial management system(35)

When the SMEs decided to use external tax accounting to serve the purpose of tax payment to save the cost instead of hiring an internal qualified accountant with the purpose to have a better financial control at the firm In most of the cases, the owner will manage the company with their experience in accounting and financial aspects, and usually lack financial literacy that mentioned above Most small businesses do not keep adequate accounting records for daily transactions, due to a lack of accounting knowledge and cumbersome compliance with accounting rules, so they prefer to use external accounting services to legalize the records and avoid the inspection of the tax authorities However, Robson et al report no relationship between the services of an external accountant (any service) and SME performance using three SME performance measures:

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(1) headcounts change due to an increase in the number of customers;

(2) the structure of the enterprise's revenue changes; and

(3) the profit divided per headcounts changes.(36)

More addition, as a study of Bennett et al, the proportion of SMEs utilizing an accountant (for any reason, measured as a binary variable) was higher in the fast-growth group (89.9%) than in the medium-growth category (84%), or in the declining/stable-growth category (77.3 percent).(37)

As a consequence, accounting knowledge by the internal accountant or by the owners/manager is inefficiently used in financial results assessment Small companies' access to finance is heavily reliant on the accuracy of their financial records Quality accounting knowledge can improve financial reporting as well as small business access

to finance

4.1.3.2 Lack of experienced finance manager

The majority of SME owners/managers come from a technical background or technical related professions, once they have worked for period and gained experience and capital, they will tend to open businesses and do business on their own, so their knowledge of finance and accounting is limited If this is true, most SME owners/managers avoid recruiting experienced finance managers and they do not delegate their "managerial authority," which allows their financial issues to worsen and even endanger the viability of their businesses.(38)

On the other hand, small businesses do not have the financial resources to employ a financial controller A hired worker would therefore be less interested in measuring the worth of each dollar expended

4.1.3.3 Unwillingness to delegate the job

One of the issues that small businesses encounter is the owner's desire to keep control over all elements of the business.(39) Owner-managers lacked confidence in their managing skills, which limited progress The important management weaknesses identified were an unwillingness to delegate, an inability to encourage employees, and

a lack of knowledge of finance, marketing, and human resource management They perceived themselves to be busy in general because they were unwilling to give

up personal control This reluctance to transfer control suppresses progress and puts the

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business at danger of failing if the owner-manager disappears The entrepreneur's desire

to keep control may result in the effective span of managerial control being exceeded, and the owner-manager failing to cope.(40) The less knowledge of the owner's manager especially the sensitive aspect is finance control, the more unwillingness of the owner

to delegate the and grand the authority of finance control for the other people

4.1.4 Lack of Enterprise Resource Planning system

According to Kharuddin et al (2010), information systems increase the reliability and performance of SMEs.(41) ERP systems can provide businesses with both tangible and intangible advantages Reduced inventory, decreased labor and production expenses, and reduced time taken to complete sales are tangible advantages However, there is some reason the owners/managers don't know the benefit of an ERP or don't want to use it at their company Some potential causes of it could be the following reason

4.1.4.1 Low awareness of business finance technology

According a study of Fatoki, most of the owners/manager has low awareness of

business finance technology Furthermore, the findings in

Table 8 reflect a restricted use of technology Most of the respondents do not have

a business email address, they often do not care about the branding promotion through company's email, but often use a free email service, and some owners do not have a website for the company because they think maintaining a website is not beneficial for their business Information technology can make it easier to gain access to information that can help enhance financial literacy and help to establish a good financial planning.(42)

Table 8: Use of technology by the owners/managers in the SMEs

Source: Fatoki O The financial literacy of micro entrepreneurs in South Africa Journal of social sciences 2014;40(2):151-8

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Even for simpler accounting systems, however, owner-managers may lack the necessary competencies and may be unaware of the systems' potential benefits While they may be knowledgeable about their line of business, they may not be qualified or fluent in business management skills, particularly when the business is just getting started

4.1.4.2 An ERP system is expensive

In 1950s, connecting the various sections of the company was a key goal, but there were several roadblocks Most systems were actually designed at various times for different functions Accounting processes such as labor monitoring and payroll served accounting procedures, while financial controls were served by systems such as asset management and cash management, and others However, nowadays, the financial and accounting

report system is integrated into the ERP system (see the Figure 13)

Figure 13: An Overview of an ERP System

Source: Jenab K, Staub S, Moslehpour S, Wu C Company performance improvement by quality based intelligent-ERP

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However, an ERP solution and its installation are very costly The system needs comprehensive The Reality modifications, otherwise the organization needs to go through a massive reengineering exercise to use it Zhang et al also mentioned that ERP system implementation takes a significant amount of time, money, and internal capital Firms take a long time to fully absorb the high cost of ERP deployment, which is often followed by extensive business process reengineering and operational learning.(43)

4.1.4.3 Low making entry discipline

Challenges in data entry of records and transactions of an enterprise are divided into smaller difficulties One of them is that business processes are different and often non-standard However, even after three years of implementing and applying ERP, employees still don't know what the processes in ERP are and how they relate to the company's operations As a result, employees are confused as to why it is so important

to enter data into the ERP system in various operations around the company Another difficulty in making entries is that the input process is too complicated This increases the working time because the implementation process is too complicated and prone to errors The staff was frustrated by the incorrect entries Moreover, modifying incorrectly entered data is a real challenge, it takes a lot of time and resources Most of the staff have basic competence for making entry but no expertise in fix the mistakes Sometimes the source of the error cannot be identified, making it even more difficult to correct these wrong entries The use of ERP is not considered by the employees as part of their job, but they are required to do it They would rather work on creating products or communicating with customers than spending hours and hours performing a basic task

on ERP (44) With those matters, the employee will have avoided inputting the data into the ERP system That makes the ERP can't take advantage and promote the effectiveness

in planning and managing the firm, thus hindering applying and implementation of an ERP system by many SMEs

4.2 Causes validation

Potential causes are withdrawal by theories and the information collected from the data and interview In order to figure out the root cause of the main problem The practice from TEAC will be considered to reconfirm the theories