Financial Management Knowledge for Small and Medium Enterprise Sustainability in Ethiopia

Though small and medium enterprises (SMEs) impact Ethiopia’s socioeconomic and political progress, most of these SMEs terminate their operations ahead of reaching their fifth anniversary. A significant number of owners require the enhancement of their comprehension of financial management knowledge, which is essential for the continuous functioning and growth of their company. An in-depth analysis of the financial strategies that SME owners in Ethiopia may use to enhance the long-term sustainability of their business operations was the objective of this qualitative multiple-case study. The present study was grounded in financial literacy theory and the leadership skill model. Data were collected from semi-structured interviews with 12 proprietors of SMEs with fewer than 200 employees in industries including education, agriculture, healthcare, and accounting/consulting. The data analysis identified five themes that clarified the financial strategy practices of SME owners: appropriate use of funding alternatives, the implementation of strategic financial practices, the engagement of inefficient long-term financial planning, the acquisition of core financial and business knowledge, and the exploitation of technology. The findings suggest that owners of SMEs should demonstrate flexibility in their approach to financial strategy methodologies. Through the implementation of this strategy, owners of SMEs could guarantee the long-term viability of their businesses. This can facilitate social change by creating job prospects, dispersing economic resources, promoting technical progress, facilitating local community development, and enhancing the total gross domestic product.