FINANCIAL MANAGEMENT PRACTICES OF MICROENTERPRISES IN QUEZON

CITY

Kirsten Gale B. Dolorso1

1Polytechnic University of the Philippines, Sta. Mesa, Philippines

Corresponding Email: [email protected]

Available Online: May 2023 Volume I Issue 2 (2023)

Revised: April 2023 DOI: 10.5281/zenodo.8030998
Accepted: February 2022 E-ISSN: 2984-7184
Received: January 2022 P-ISSN: 2984-7176
https://guildofeducatorsintesol.international/research/

Abstract
Most business in the Philippines is mostly in the microenterprise. Hence, this research was accomplished in order to
assess the effectiveness of financial management practices of microenterprises in Quezon City. The city was selected
as the locale of the research since there were various microenterprises built in this location. The respondents were
classified according to the number of years in operation of their business, the number of employees, capitalization, and
their source of funds. Additionally, the individual profile was also classified into their age, highest educational
attainment, and the number of seminars or trainings related to their business that they had attended. The assessment
was specified into aspects of financial planning, financial control, and cash management. The result shows that most
businesses were newly established and only operating for zero (0) to two (2) years. The result also showed that most
of the respondents only had a capitalization of PHP 100,000.00 and they were utilizing their personal savings as a
source of funds. Most of them are aged from twenty-one (21) to thirty (30) years with no bachelor’s degrees. They
only attended seminars and training less than three (3) times. The result of this study was beneficial to business
owners, local government units, government, government agencies, banks, and other financial institutions, academe,
and future researchers.

Keywords: Financial Management, Financial Planning, Financial Control, Cash Management, Microenterprise

INTRODUCTION

According to the United Nations Philippines, Micro, Small, and Medium Enterprises comprise 95% of businesses in the
Philippines and they employ about 63% of the country’s workforce (United Nations Philippines, 2020). These small-
scale businesses are said to be the backbone of the Philippine economy as it fuels job creation and employment in the
country (Crisanto, 2018). They contribute to reducing poverty in the nation’s expanding workforce by producing jobs.
They encourage economic growth in remote locations. They also act as suppliers of products and services for big
corporations, which they find to be a beneficial partner. Lastly, they also act as a breeding environment for established
businesses as well as new ones. As a result, microenterprises are seen as a critical driver of the country’s economic
growth. But despite their undervalued contribution to the Filipinos, they continue to suffer from several issues that
hinder their growth. Due to the small size of microenterprises, a simple management mistake may also lead to business
failure. According to the Bureau of Labor Statistics Business Employment Dynamics, 20% of small businesses fail in the
first year, 30% in their second year, 50% after five years, and 70% of small businesses fail in their 10th year in the

22
business (McIntyre, 2020). In the Philippines, most businesses fail in less than five (5) years of existence (Abrugar,
2013).

Consequently, during the pandemic, various businesses have been forced to close in order to limit the spread of the
virus. Hence, small enterprises have faced some major problems during those times. One of the problems was a lack
of funding and financial sources since its operations had been forced to stop and there were no sales, profit, or income.
Small businesses suffer from high losses, decreased sales volume, failure to meet contract terms, and cuts in the
number of employees (Engidaw, 2022). Hence, they experienced the biggest downfall during the hit of the pandemic.
Whereas, in the view of the macro enterprise, there is also a problem when it comes to its financial management. In
the discussion of Xuhui and Ruoxi (2013), an enterprise that is large in scale but lacks a detailed financial management
system leads to the overall downfall of the enterprise. There is also a problem when it comes to accounting, no
distinguished accounts, poor planning of financing management, and cashier leading to unclear responsibility just like
the problem encountered by SMEs. Thus, financial management is an important component of any business
management. Lasher (2010) defines financial management practices as planning, organizing, directing, and controlling
financial activities including proper use of funds in a business. This ensures that all business transactions are undertaken
in an organized and well-managed manner. Efficient financial management practices are likely to help microenterprises
strengthen their business performance. Consequently, inefficient financial management practices may damage the
business which will affect its overall growth.

Therefore, inefficient financial management may hamper the efficiency of business operations and this will affect the
growth of microenterprises. However, sound financial management is likely to help these microenterprises as it
strengthens business efficiency, and as a result, difficulties facing can partly be overcome. In the National Capital
Region (NCR), there are 205,250 total businesses out of 1,003,111 in the whole Philippines. Out of the total, 23% or
46,748 of the total number of businesses are in Quezon City which is the largest in NCR. For this reason, this study
pursued to accomplish the entire city of Quezon City’s microenterprise to achieve the objective of this study.

Objectives

The purpose of this study was to assess the effectiveness of financial management practices of microenterprises in Quezon
City.
It specifically aimed to answer to the following questions:
1. What is the profile of the respondents in terms of the following:
a. enterprise profile:
i. number of years in operation;
ii. Number of employees;
iii. capitalization;
iv. source of Funds; and
b. individual profile:
i. age;

23
 ii. highest educational attainment;
iii. number of business-related trainings/seminars attended for the last three years?
2. How do respondents assess the level of effectiveness of the financial management practices of the micro enterprises
in terms of the following aspects:
a. financial planning;
b. financial control; and
c. cash management?
3. Is there a significant difference in the respondents’ assessment on the level of effectiveness of the financial
management practices of the enterprises when they are grouped according to profile?

METHODS
Research Design

The effectiveness of financial management practices utilized by micro-businesses in Quezon City was assessed by this
study using the descriptive survey method. According to McComber (2019), this approach can be utilized in a wide
range of research methods to explore one or more variables. It tries to describe a population, situation, or phenomenon
accurately and methodically. According to Fox and Bayat (2007), descriptive research aims to shed light on current
issues or problems through a process of data collection that enabled the researcher to characterize the situation in
greater detail than was possible without utilizing this approach.

Population and Sampling

The population for this study comprised microenterprises in Quezon City. According to Philippine Statistics Authority,
there are 37,442 microenterprises in Quezon City as of 2018 (Philippine Statistics Authority, 2018). The study used a
sample of three hundred eighty (380) microenterprises. To reduce sampling error, a basic random sampling technique
was utilized, in which each component of the target population was given an equal or unbiased probability of selection.
Because they were actively involved with the financial management practices of their respective business and therefore
had the best knowledge about the research topic, owners and managers or their equivalents at these firms were
specifically targeted.
The researcher gathered information from owners and managers of microenterprises who had businesses located in
Quezon City. The respondents were composed of three hundred eighty (380) owners or managers of microenterprises
and were described according to variables such as their age, highest educational attainment, and the number of
business-related trainings and seminars attended for the last three years.

Instrumentation

The study used secondary data collected via a survey questionnaire. The questionnaire was chosen because it delivered
authentic first-hand information in the quickest amount of time while yet protecting the respondents’ identity. Closed-
ended questions were used in the survey to encourage more organized responses that helped produce actionable
recommendations. Then reliability of the questions was identified using the Cronbach Alpha reliability test. Lee

24
Cronbach created Cronbach Alpha in 1951 to assess a tests or scale’s internal consistency, or how closely related a
group of items are to one another (Tavakol & Dennick, 2011).
There were two sections to the questionnaire: part 1, the respondent’s profile; part 2, the financial management
practices used by micro-businesses, specifically financial planning, financial control, and cash management. To evaluate
the respondents’ responses, a Likert scale was employed.

Degree of the Agreement of Respondents

Scale Interpretation Arbitrary Scale

5 Very Effective 4.50 – 5.00
4 Effective 3.50 – 4.49
3 Somewhat Effective 2.50 – 3.49
2 Less Effective 1.50 – 2.49
1 Not Effective 1.00 – 1.49
The effectiveness of financial management practices of micro-businesses was rated by the respondents on a scale of
5 to 1, as shown above. The respondents’ evaluations were compiled using the rating system.

Data Collection
The researcher personally visited some participants and sought their consent to perform the survey. The owners or
managers of micro-businesses received a letter of request and a copy of the original questionnaire. But because of the
Covid-19 pandemic and community lockdown, the researcher created a new questionnaire using Google forms which
was based on the old one. The researcher then joined various social media groups centering on micro and small
businesses and distributed the link to the survey to each group’s members for them to complete. The social media
groups being mentioned included Facebook groups named; Quezon City Small Business Owners, Quezon City Micro
and Small Business Community, Small Business Support Group PH, Support Small Business PH, and Small Business in
the Philippines. The researcher also sent the survey questionnaires via online links of the questionnaire drafted on
Google forms to the respondents through their electronic mails and social media accounts. Eighty-six (86) of 23% of
the total respondents were visited personally and given a survey questionnaire to answer because they were mostly
near the area of residence of the researcher while two hundred ninety-four (294) of 77% were given an electronic
survey questionnaire thru social media, electronic mails, and Google forms. Thus, a total of three hundred eight (380)
or 100% of the respondents were surveyed.
Prior to their involvement in the questionnaire, the researcher conducted an informal interview to clarify any questions
and make sure the respondents were the owner of a micro-business in Quezon City. Regulations for privacy and security
were particularly difficult because most social media participants did not fully trust the researcher because they were
only communicating virtually. The statistical advisor oversaw the tabulation, analysis, and interpretation of the data.
The researcher employed a qualitative analytic technique that entailed data editing, tabulation, and coding. Each
questionnaire had been reviewed and corrected during the editing process to guarantee its accuracy, clarity, and
consistency. The statistical advisor received the data, coded them, and entered them into the Statistical Package for
Social Sciences (SPSS) application. Most software packages lack the user-friendliness that SPSS provides. It is well-

25
liked because numerous data sets may be imported into it with ease as well as importing files from other programs is
also easy. Additionally, frequency tables and charts were employed by the researcher to illustrate the findings. This
made sure that the information gathered was comprehended clearly.
Pilot testing was done about the original concept among the twenty (20) respondents from various parts of Quezon
City. The developed questionnaire scored strongly on Cronbach’s Alpha, with results ranging from moderately good
correlation to a very high correlation. The researcher was able to identify questions that needed editing and those that
were confusing from this pilot survey. A final questionnaire was printed after corrections and was used to collect data.
This study primarily relied on the data that were acquired using survey questionnaires, while it also included qualitative
data from documents and related studies in the assessments of the effectiveness of financial management practices of
micro-business in Quezon City.
Because electronic and other sources were insufficient, the COVID-19 outbreak made it more challenging for the
researcher to conduct in-person data collection, access, and verification. Thus, the shutting down of the researcher’s
employment made it more difficult to collect and gather data due to the expensive and time-consuming nature of
conducting a research study.

Data Analysis

The collected data were encoded, collated, tabulated for analysis and interpretation of data. They then underwent the
following statistical process:
1. Frequency and Percentage Distribution. To describe the respondents’ qualities and characteristics, which are nominal
in nature, frequency and distribution were utilized. The equation is shown below.
𝑓
𝑃= 𝑥 100
𝑁
Where:
P = Percentage
𝑓 = Frequency
𝑁 = Total number of respondents

2. Weighted Mean. This average was created by giving various weights to various individual data. The effectiveness of
microenterprises' financial management practices was evaluated using this. The weighted mean formula is shown below.
𝛴𝑓𝑤
𝑊𝑀 =
𝑛
Where:
WM = Weighted Mean
𝛴𝑓𝑤 = Sum of the frequency and unit weight
𝑛 = Total number of respondents
3. Analysis of Variance (ANOVA). This is the first stage in determining the variables influencing a certain data collected.
The results of the ANOVA test enable the analyst to carry out additional study on the systematically affecting factors that
statistically affect the variability of the data set. The ANOVA test results can be used with F-Test in determining the overall
significance of the regression formula.

26
4. F-Ratio. The ratio of two mean squares is F-Ratio. The value from a common statistical test that was applied in this
study's ANOVA and regression analysis was utilized to assess whether there was a significant difference in the variances
between the means of the two populations.
5. Ranking. For any two items to be ranked higher, lower, or equal, Ranking was necessary to identify how a collection
of processed data connected to one another. It also refers to data whose numerical or ordinal values have been
changed to reflect their rank during organizing and sorting of data.

RESULTS and DISCUSSION

1. Profile of the Respondents According to Industry, Number of Years in Operation, Number of

Employees, Capitalization, Sources of Funds

Table 1
Frequency and Distribution of Respondents in terms of Years in Operation
Years in Operation Frequency Percent
0 to 2 years 253 66.6
3 to 5 years 63 16.6
6 to 10 years 34 8.9
11 years and above 30 7.9
Total 380 100.0

In terms of THE number of years of operation, it is shown in Table 1, the majority of the enterprises, or two hundred
fifty-three (253) or 66.6% of the respondents operating for two (2) years or below; sixty-three (63) or 16.6% is in
their three (3) to five (5) years in operation; thirty-four (34) or 8.9% is in their six (6) to ten (10) years in operation,
while thirty (30) or 7.9% is operating for eleven (11) years and above. This may imply that most micro-businesses are
new hence, they do not have enough knowledge and experience in financial management practices that may result in
business failure. Also seen in a study by Anoos et al. (2020), 37.27% of the business have been operating for only one
(1) to three (3) years. As cited by Berner, Gomez, and Knorringa (2008), many micro-businesses fail in their first few
years and remain stagnant in their progression to become small and medium enterprises. Additionally, it is claimed
that over 60% of new enterprises fail within five (5) years due to poor financial management, managerial incompetence,
and a lack of experience (Boachie-Mensah, & Marfo-Yiadom, 2005).

Table 2
Frequency and Distribution of Respondents in terms of Number of Employees
Number of Employees Frequency Percent
1 to 2 298 78.4
3 to 5 52 13.7
6 to 9 30 7.9
Total 380 100.0

Table 2 presents the number of employees employed within the enterprise. Two-hundred ninety-eight (298) or 78.4%
of the respondents have one (1) to two (2) employees within their business; fifty-two (52) or 13.7% have three (3) to
five (5) employees; and thirty (30) or 7.9% have six (6) to nine (9) employees. This may imply that most of the duties
and responsibilities are solely managed by just one (1) or two (2) persons and there is no segregation of duties within
the business which can also imply the need for stricter financial control. Due to the small amount of activity, many

27
small businesses employ a few workforce (Anoos et al., 2020), and are frequently managed and owned by the same
individual (Berry et al., 2002). With this, segregation of duties was not possible.
Table 3 below presents the capitalization of the respondents. Three hundred twenty-three (323) or 85.0% of them
started their business with less than PHP 100,000.00 capital; thirty-five (35) or 9.2% have PHP 100,001.00 to PHP
500,000.00 capital; while twenty-two (22) or 5.8% have more than PHP 500,000.00 capital.

Table 3
Frequency and Distribution of Respondents in terms of Capitalization
Capitalization Frequency Percent
Less than PHP100,000.00 323 85.0
PHP 100,001.00 to PHP 35 9.2
500,000.00
PHP 500,001.00 and above 22 5.8
Total 380 100.0

This may imply that people do not need big capital in starting their own businesses. So, before engaging in major
business endeavors in the future, it enables the entrepreneur to gain experience with the ups and downs of business
with less risk. According to Shieldgeo.com (n.d.), establishing a business in the Philippines can take approximately
twenty-nine (29) days for a total cost of PHP 7,630.00. Also, cited by Moneymax.ph (2021), anyone can start up a
business here in the Philippines for as low as PHP 5,000.00 if one has industry experience and skills.

Table 4
Frequency and Distribution of Respondents in terms of Sources of Fund
Sources of Fund Frequency Percent
Personal Savings 287 75.5
Loan 39 10.3
Sale of Assets 27 7.1
Investors 27 7.1
Total 380 100.0

Table 4 presents the sources of funds of the respondents when they started doing their business. Two hundred eighty-
seven (287) or 75.5% of the respondents have used their personal savings; thirty-nine (39) or 10.3% started using
loans while selling assets and getting funds from Investors both got twenty-seven (27) respondents or 7.1% each.
This may imply that majority of the businesses lack access to finance, so they use their personal savings to fund their
businesses. According to Kilonzo and Ouma (2015), most small enterprises rely on their own resources for funding and
have trouble obtaining loans, both of which contribute to their failure. This also agrees with Eyiah (2001) and Aldaba
(2012) that one of the most significant obstacles to the expansion of small enterprises is a lack of access to financing.

28
 2. Profile of the Respondents According Age, Highest Educational Attainment, Number of
Seminars Attended for the Last Three Years

Table 5
Frequency and Distribution of Respondents in terms of Age
Age Frequency Percent
21 to 30 years old 257 67.6
31 to 40 years old 106 27.9
41 years old and above 17 4.5
Total 380 100.0

It is presented in Table 5 that most of the respondents belong to the age bracket of twenty-one (21) to thirty (30)
years old with a frequency of two hundred fifty-seven (257) or 67.6% followed by the age bracket of thirty-one (31)
to forty (40) years old with the frequency of one hundred six (106) or 27.9%. Forty-one (41) years old and above are
the least with a frequency of seventeen (17) or 4.5%. As a result of this, younger generations may be more willing to
start their business and perhaps more inclined to take risks. According to the 2016 report of BNP Paribas Global
Entrepreneur, younger generations have started roughly twice as many businesses as older generations. It also reveals
that they started younger compared to their predecessors in prior generations (Alton, 2017).

Table 6
Frequency and Distribution of Respondents in terms of Highest Educational Attainment
Highest Educational Attainment Frequency Percent
Undergraduate 218 57.4
College Graduate 145 38.2
Postgraduate Degree 17 4.5
Total 380 100.0

Based on Table 6, most respondents are undergraduates with a frequency of two hundred eighteen (218) or 57.4%.
Hence, it can be noted that one hundred forty fifty-five (145), or 38.2% of the respondents are college graduates and
seventeen (17), or 4.5% of the respondents have postgraduate degrees. This may imply that owners of
microenterprises although educated do not have enough knowledge and skills in terms of financial management
practices. According to a study by Brijlal, Enow, and Isaacs (2014) on the adoption of financial management practices
by micro, small, and medium enterprises, most of the owners lack a college degree and appear to be lacking in financial
management education. Brijlal et al. (2014) speculates that although most of the owners attended seminars, either
the lessons learned were ineffective, or business owners did not apply what they learned in the training to their business
operations.
Table 7 below depicts that most of the respondents with the frequency of two hundred eighty-eight (288) or 75.8%
have zero (0) to two (2) seminars attended for the last three years; sixty-eight (68) or 17.9% attended three (3) to
five (5) seminars while only twenty-four (24) or 6.3% of the respondents attended six (6) and above seminars for the
past three years. This may imply that owners of microenterprises have low management capability that can be learned
from trainings and seminars.

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 Table 7
Frequency and Distribution of Respondents in terms of Number of Seminars Attended for the Last Three Years
No. of Seminars Attended Frequency Percent
0 to 2 288 75.8
3 to 5 68 17.9
6 and above 24 6.3
Total 380 100.0

Lack of managerial experiences, skills, and personal qualities that can be attained from trainings and seminars are one
of the reasons why small-scale businesses fail (Martin & Staines, 2010) as this reduced the management capability of
the owners (Herrington and Wood, 2003). Attending seminars can assist these new businesses get the tools they need
to ensure that they are one of the few that succeed (Kim, 2016).

2. Respondents’ Assessment on the Level of Effectiveness of Financial Management Practices of

Micro Enterprises in terms of Financial Planning Practices, Financial Control Practices, and Cash
Management Practices

As revealed in Table 8 below, the respondents establish a spending/budget financial plan which obtains the highest
mean score of 4.47 verbally interpreted as “Effective” while respondents who identify short and long-term financial
goals obtain the lowest weighted mean of 4.38, verbally interpreted as “Effective”. Identifying short and long-term
financial goals is an important part of financial planning as it helps increase the survival rate of the business (Berry,
2011). This may imply that microenterprises do not have a well-developed financial plan that can help them manage
their business accordingly.

Table 8
Respondents Assessment on the Level of Effectiveness of Financial Management Practices of Micro Enterprises in
Quezon City in terms of Financial Planning Practices
Financial Planning Practices Mean Verbal Interpretation Rank
We identified short and long-term financial 4.38 Effective 5
goals. (Pagkakakilanlan ng maikli at pang-
matagalang layunin)
We established financial goals that are SMART 4.43 Effective 4
(specific, measurable, attainable,realistic, and
time-bound). (Pagtatag ng pangpinansyal na
layunin na tiyak, masusukat,maaabot,
makatotohanan, at may takdangoras)
We gather relevant data and analyze current 4.45 Effective 2
financial position before making financial
decision. (Pagkalap ng may-katuturang datosat
pagsusuri sa kasalukuyang posisyon
sapananalapi bago gumawa ng pang pinasyalna
desisyon)
We established a spending/budget financial 4.47 Effective 1
plan. (Pagtatag ng planong pang gasta at
badyet sa pananalapi)
We developed alternative solution that are 4.44 Effective 3
achievable for contingencies. (Pagbuo
ngalternatibong solusyon na makakamit para sa
pangkagipitang pagkakataon).
Grand Mean 4.43 Effective

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This is in line with the claims of Mutanda (2012) that investigates the financial planning of micro and small businesses,
most of these businesses have no idea what financial planning is or what goes into it.

Table 9
Respondents Assessment on the Level of Effectiveness of Financial Management Practices of Micro Enterprises in
Quezon City in terms of Financial Control Practices
Financial Control Practices Mean Verbal Interpretation Rank
We followed the spending / budget / 4.45 Effective 2
financialplan that we have been established.
(Pagsunod ng paggastos, badyet at pinansyalna
plano na itinatag)
We maintain a spreadsheet of monthlyincome 4.42 Effective 5
and expenses. (Pagpapanatili ngisang talaan ng
buwanang kita at gastos)
We prepared different financial budgets on a 4.41 Effective 6
regular basis. (Regular na paghahanda ngiba’t
ibang badyet sa pananalapi.)
We identify accountability to avoid fraud or 4.43 Effective 4
error. (Pagkakakilanlan ng pananagutanupang
maiwasan ang pandaraya opagkakamali.)
Regular audit is conducted. (Ang regular napag- 4.44 Effective 3
audit ay isinasagawa)
The attitude and involvement of owner 4.48 Effective 1
/manager to financial control system are
efficient. (Ang saloobin at pagkakasangkot
ngmay-ari o tagapamahala sa mga control
sapananalapi ay mahusay)
Grand Mean 4.44 Effective

As shown in Table 9, the attitude and involvement of the owner or manager in the financial control system are efficient
which obtains the highest mean score of 4.48 verbally interpreted as “Effective” while the respondents who prepare
different financial budgets on a regular basis obtain the lowest weighted mean of 4.41 which also interpreted verbally
as “Effective”. Preparing different financial budgets on a regular basis prevents financial recklessness (Owizy, 2011)
helps promote efficiency and reliability (Prempeh, Twumasi, & Kyemereh, 2015). The above result may imply that
microenterprises do not prepare financial plans on a regular basis. According to a study by Kiiru, Kamau, and Nzioki
(2018), many small and medium-sized businesses do not create budgets, others do but do not do it frequently, and
yet others are unhappy with the way budgets are created. Therefore, it is advised that budgets be prepared periodically
to improve owners' and staff' knowledge of the budget planning process.

Table 10
Respondents Assessment on the Level of Effectiveness of Financial Management Practices of Micro Enterprises in
Quezon City in terms of Cash Management Practices
Cash Management Practices Mean Verbal Interpretation Rank
We ensure availability of cash in running day- 4.51 Very Effective 1
to-day operation. (Tinitiyak ng pagkakaroonng
cash sa pagpapatakbo ng pang araw-arawna
operasyon)
We use properly the surplus cash 4.37 Effective 5
throughinvestment, etc. (Wastong paggamit

31
 ngsobrang cash sa pamamagitan
ngpamumuhunan atbp.)
We consistently track accounts receivables 4.42 Effective 3
ofthe business. (Pagsubaybay ng mgaaccounts
receivables.)
We consistently track accounts payable of 4.41 Effective 4
thebusiness. (Pagsubaybay ng mga
accountspayable.)
We keep or deposit regularly the cash at the 4.32 Effective 7
bank (Pagpapanatili / pagdeposito ng pera
sabangko.
We organize financial records such as payslips, 4.46 Effective 2
billing statement, etc. (Pag-aayos ngmga talaan
sa pananalapi tulad ng pay slips,billing
statement, atbp.)
We stock the right amount of inventory. (Pag- 4.36 Effective 6
iimbak ng tamang dami ng imbentaryo.)
Grand Mean 4.41 Effective

Table 10 reveals that respondents who ensure the availability of cash in running the day-to-day operation obtain the
highest mean score of 4.51 verbally interpreted as “Very Effective” while those who keep or deposit regularly cash at
the bank have the lowest weighted mean of 4.32 which interpreted verbally as “Effective”. This suggests that
microenterprises do not keep track properly their cash flows and they might be unaware of any loss in the business
taking for granted the proper cash management practice. Taking for granted the importance of having the right cash
management can directly affect business operations (Uwondo et al., 2013). According to a research study on cash
management practices by Mungal and Garbharran (2014) and Abanis et al. (2013), small businesses frequently do not
deposit their profits, and others do not even have bank accounts to keep track of and manage their earnings and
expenditures.

Table 11
Respondents Assessment on the Level of Effectiveness of Financial Management Practices of Micro Enterprises in
Quezon City
Financial Management Practices Mean Verbal Interpretation Rank
Financial Planning Practices 4.43 Effective 2
Financial Control Practices 4.44 Effective 1
Cash Management Practices 4.41 Effective 3

As revealed in Table 11, financial control practices have the highest mean of 4.44. Financial planning practices have a
weighted mean of 4.43 while cash management practices have the lowest mean of 4.41. All have been rated as
"Effective" verbally. This suggests that microenterprises need improvement on cash management practices that they
implement in their business. Efficient and effective cash management practice is crucial for every business as it
maintains sustainability (Mugnal & Garbharran, 2014), helps meet business obligations (Thangavelu, 2020), and
improves financial performance (Hamza et al., 2015; Al Smirat, 2016).

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 3. Significant Difference in the Respondents’ Assessment on the Level of Effectiveness of Financial
Management Practices of Micro Enterprises when Grouped According to Profile

Table 12
Test of Significant Difference in the Assessment on the Level of Effectiveness of Financial Management Practices of
Micro Enterprises in Quezon City when Grouped According to No. of Years in Operation
Financial Years in Operation Mean f- p- Decision Remarks
Management test value
Practices
Financial 0 to 2 years 4.39 1.043 .374 Failed to Not
Planning 3 to 5 years 4.50 Reject Ho Significant
Practices 5 to 10 years 4.51
11 years and above 4.54
Financial Control 0 to 2 years 4.44 .849 .468
Practices 3 to 5 years 4.49 Failed to Not
5 to 10 years 4.29 Reject Ho Significant
11 years and above 4.50
Cash 0 to 2 years 4.39 .605 .612 Failed to Not
Management 3 to 5 years 4.43 Reject Ho Significant
Practices 5 to 10 years 4.54
11 years and above 4.40

Table 12 shows that the f-value for cash management practices is .605 with a p-value of .612, the f-value for financial
control practices is .849 with a p-value of .468 and the f-value for financial planning practices is 1.043 with a p-value
of. 374. The null hypothesis, which indicates that there is no significant difference in the assessment when the variables
are classified according to the number of years in operation, is accepted because all variables have p-values larger
than the anticipated .05 level of significance.

Table 13
Test of Significant Difference in the Assessment on the Level of Effectiveness of Financial Management Practices of
Micro Enterprises in Quezon City when Grouped According to No. of Employees
Financial No. of Employees Mean f- p-value Decision Remarks
Management test
Practices
Financial Planning 1 to 2 4.41 1.956 .143 Failed to Not
Practices 3 to 5 4.60 Reject Ho Significant
6 to 9 4.41
Financial Control 1 to 2 4.42 3.204 .042 Reject Ho Significant
Practices 3 to 5 4.63
6 to 9 4.31
Cash Management 1 to 2 4.38 2.041 .131 Failed to Not
Practices 3 to 5 4.58 Reject Ho Significant
6 to 9 4.35

With a p-value of. 042, which is less than the .05 level of significance, Table 13 demonstrates that there is a significant
difference in the respondents' assessment regarding financial control practices when classified according to the number
of employees. The null hypothesis is therefore rejected. The result may imply that financial control practices may vary
on how many employees are in the business. In general, microenterprises hire a limited number of employees, hence
a clear division of jobs that segregates duties and responsibilities is mostly absent making the business more vulnerable

33
to fraudulent activities (Higson, 2002). It may also imply that financial control practices are more complex with a
greater number of employees since the need for a financial audit function increases as the number of employees’
increases. According to Scrubbed.net, as the size of the business scale, there will be more transactions and processes
within the business. As this gets more complex, more control should be in place (Gopez, 2019). Also, microenterprises
benefit a lot from implementing proper financial control practices because of their vulnerability arising from their size
of operation (Teketel & Berhanu, 2009).

Table 14
Test of Significant Difference in the Assessment on the Level of Effectiveness of Financial Management Practices of
Micro Enterprises in Quezon City when Grouped According to Capitalization
Financial Capitalization Mean f- p- Decision Remarks
Management test value
Practices
Financial less than 100,000.00 4.41 1.326 .267 Failed to Not
Planning 100,001.00 to 500,000.00 4.59 Reject Ho Significant
Practices 500,001.00 and above 4.50
Financial Control less than 100,000.00 4.41 3.210 .041 Reject Ho Significant
Practices 100,001.00 to 500,000.00 4.70
500,001.00 and above 4.43
Cash less than 100,000.00 4.37 4.364 .013 Reject Ho Significant
Management 100,001.00 to 500,000.00 4.70
Practices 500,001.00 and above 4.52

As presented in Table 14, both cash management and financial control practices when grouped by capitalization
receives p-values below the .05 level of significance. These values are 0.13 and 0.41, respectively. The null hypothesis
is therefore rejected. As a result, assessment is significant to both practices. This may imply that businesses with less
than PHP 100,000.00 have a higher risk of business failure since most microenterprises have many debts and not very
much cash (Shao, 2016); thus, the needing for stricter financial control practice. The above result may also imply that
businesses with less than PHP 100,000.00 capital are more vulnerable to cash shortages which are hampering the
owner’s focus on business growth thus putting additional pressure on the cash management practice. Due to the
previously mentioned limited access to finance, microenterprises face a more challenging and expensive cash shortage
problem than larger companies (Hamza, Mutala, & Antwi, 2015). Small cash reserves within the business put one in
greater danger of not being able to pay off debts as they become due.

Table 15
Test of Significant Difference in the Assessment on the Level of Effectiveness of Financial Management Practices of
Micro Enterprises in Quezon City when Grouped According to Source of Fund
Financial Sources of Fund Mean f- p-value Decision Remarks
Management test
Practices
Financial Planning Personal Savings 4.41 1.205 .308 Failed to Not
Practices Loan 4.52 Reject Ho Significant
Sale of Assets 4.39
Investors 4.62
Financial Control Personal Savings 4.45 2.769 .042 Reject Ho Significant
Practices Loan 4.38
Sale of Assets 4.16

34
 Investors 4.64
Cash Management Personal Savings 4.39 1.584 .193 Failed to Not
Practices Loan 4.33 Reject Ho Significant
Sale of Assets 4.43
Investors 4.66

With a p-value of. 042, which is less than the threshold of significance of .05. Table 15 demonstrates that there is a
significant difference in the replies on financial control practices when classified according to the source of funding.
The null hypothesis is therefore rejected. The sale of assets as their source of funds got the lowest mean of 4.16. This
may imply that microenterprises rarely sell assets to finance they are suggesting they are not efficient in funding their
business. Hence, a strict financial control practice should be implemented. According to Katre (n.d.), one of the efficient
ways to finance a business is to sell assets as it can pay off debt easily and can meet short-term fund requirements
without shelling out from the owner’s personal funds.

Table 16
Test of Significant Difference in the Assessment on the Level of Effectiveness of Financial Management Practices of
Micro Enterprises in Quezon City when Grouped According to Age
Financial Age Mean f- p- Decision Remarks
Management test value
Practices
Financial 21 to 30 years old 4.44 .429 .651 Failed to Not
Planning 31 to 40 years old 4.44 Reject Ho Significant
Practices 41 years old and above 4.29
Financial Control 21 to 30 years old 4.45 .240 .787 Failed to Not
Practices 31 to 40 years old 4.40 Reject Ho Significant
41 years old and above 4.46
Cash 21 to 30 years old 4.36 2.482 .085 Failed to Not
Management 31 to 40 years old 4.52 Reject Ho Significant
Practices 41 years old and above 4.48

As shown in Table 16, financial control practices have an f-value of .240 and a p-value of .787; financial planning
practices have an f-value of .429 and a p-value of .651; while cash management practices have an f-value of 2.482
and a p-value of .085. All assessments have p-values that are higher than the .05 level of significance which means
that the null hypothesis is accepted. When grouped according to age, the assessment is not significant.
Table 17 below shows that the f-value for financial control practices is 3.236 with a p-value of 0.40, the f-value for
financial planning practices is 4.313 with a p-value of .014 and the f-value for cash management practices is 8.018
with a p-value of .000. Every p-value is less than the significance level of.05. Hence, the null hypothesis is rejected.
This means that there is a significant difference in the responses of financial management practices when grouped
according to highest educational attainment.

35
 Table 17
Test of Significant Difference in the Assessment on the Level of Effectiveness of Financial Management Practices of
Micro Enterprises in Quezon City when Grouped According to Highest Educational Attainment
Financial Highest Mean F-test P-value Decision Remarks
Management Educational
Practices Attainment
Financial Planning Undergraduate 4.36 4.313 .014 Reject Ho Significant
Practices College 4.55
Postgraduate 4.41
Financial Control Undergraduate 4.37 3.236 .040 Reject Ho Significant
Practices College 4.53
Postgraduate 4.56
Cash Management Undergraduate 4.30 8.018 .000 Reject Ho Significant
Practices College 4.55
Postgraduate 4.66

It can be seen from the above findings that undergraduates obtain the lowest mean score for all financial management
practices. The knowledge of financial management practices is usually depending on the competence and level of
education that an individual hold. This may imply that most owners of microenterprises have no sufficient knowledge
in order to manage their finance. According to Adomako, Danso, and Damoah (2016), most entrepreneurs of micro
and small enterprises do not have sufficient knowledge about various financial schemes and indicated that the lack of
financial management skills is prevalent in most developing nations. Some of the studies (Brijlal et al., 2014) and
(Herrington & Wood, 2003), reveal that lack of education is one of the reasons why microenterprises fail.
As shown in Table 18 below, cash management practices have an f-value of 4.299 with a p-value of .014; financial
control practices have an f-value of 5.337 with a p-value of 0.005; and financial planning practices have an f-value of
7.911 with a p-value of .000. All p-values are below than the .05 level of significance; hence, the null hypothesis is
rejected. This indicates that the assessment is meaningful and significant when the respondents are classified according
to the number of seminars, they attended during the previous three years.

Table 18
Test of Significant Difference in the Assessment on the Level of Effectiveness of Financial Management Practices of
Micro Enterprises in Quezon City when Grouped According to No. of Seminars Attended for the Last Three Years
Financial No. of Seminars Mean F-test P-value Decision Remarks
Management Attended
Practices
Financial Planning 0 to 2 4.37 7.911 .000 Reject Ho Significant
Practices 3 to 5 4.70
6 and above 4.47
Financial Control 0 to 2 4.38 5.337 .005 Reject Ho Significant
Practices 3 to 5 4.66
6 and above 4.47
Cash Management 0 to 2 4.36 4.299 .014 Reject Ho Significant
Practices 3 to 5 4.62
6 and above 4.39

It is shown above those owners who attended zero (0) to two (2) business-related seminars for the last three years
got the lowest mean score on all financial management practices. Most knowledge and skills in managing the finances
of the business can be acquired through proper trainings and seminars. The findings may imply that owners of

36
microenterprises have poor financial management skills as there is a lack of proper trainings and seminars related to
their business. In a study by Mbroh and Quartey (2015), it is revealed that most business owners have neither relevant
education nor appropriate training. According to Brijlal et al. (2014), although some of the owners of microenterprises
attend seminars, the learnings gained are not effective or the owners do not apply the knowledge gained from these
seminars and trainings.

CONCLUSIONS
Based on the findings, the following conclusions were derived. It was concluded that most of the businesses were
newly established and operating for only zero (0) to two (2) years. Also, most of the responsibilities and jobs within
the business were managed by only 1 to 2 persons. The findings of the study also showed that most of the businesses
had a capitalization of less than PHP 100,000.00 and that many of them use personal savings as their source of funds.
Most of the owners or managers were young aged twenty-one (21) to thirty (30) years old. It was revealed in the
study that most of the owners did not have bachelor’s degrees. Hence, owners of microenterprises only attended
business-related seminars less than three (3) times over the last three years. The findings of the study revealed that
identifying short and long-term financial goals was given less importance by most of the businesses. Thus, the need
for improvement of a well-developed plan that outlines in detail the short and long-term financial goals might be needed
for the business. Based on the findings, most businesses did not prepare financial budgets on a regular basis. Preparing
financial budgets regularly prevents financial recklessness and helps promotes efficiency and reliability. The findings
revealed that microenterprises did not keep track properly their cash flow as they did not keep or deposit their cash at
the bank regularly. By taking for granted one of the most important financial controls, they were unaware of possible
loss, and this directly affected the business operation. The study revealed that respondents perceived cash
management practices as the least effective. Microenterprises should adhere to strict cash management practices to
keep enough cash flow as it was the most important asset keeping the business running. The study revealed that the
respondents’ assessment of financial control practices when categorized by the number of employees, there was a
significant difference. Since microenterprises hire a limited number of employees, segregation of duties and
responsibilities was mostly absent making the business vulnerable to fraudulent activities. Based on the findings of the
study, there was a significant difference in the responses on financial control practices and cash management practices
when grouped according to capitalization. Businesses with smaller capital had a higher risk of business failure since
most microenterprises were dependent on debt to continue operating giving them a large amount of debt but not very
much cash. It was also revealed that because microenterprises had limited access to finance, they were more vulnerable
to cash shortages. The findings of the study show that there is a significant difference in the respondents’ assessment
of financial control practices when grouped according to the source of funds. It was seen that microenterprises were
not efficient enough in terms of funding their business as they rather used personal savings rather than selling assets
or getting loans. Based on the findings, when respondents were grouped according to their highest educational
attainment, there was a significant difference in their assessment of financial management practices. It was concluded
that most of the owners of microenterprises had no sufficient knowledge of managing their finances. Based on the
findings of the study, there was a significant difference in how the respondents assessed the effectiveness of financial
management practices when classified by how many seminars they had gone to in the last three years. It was concluded

37
that owners of microenterprises had poor financial management skills as there was a lack of proper training and
seminars related to their business.

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