The prevention of crisis and the competitive edge at SME’s

Abstract

SME’s represent a very significant force in the Hungarian economy; it is important to be familiar with the state, development, strengths and weaknesses of the sector. The rating of the SME’s has changed a lot recently. In 2004 and 2005 they increased the limits for determining the classification (annual net income, total assets). That is why lots of companies' situations have changed; formerly medium-sized enterprises now qualify as small businesses. Nowadays there is no single key to survival; several business factors must be considered. Companies must identify deteriorating conditions in time, accept the need for change, effect a quick response, provide continuous monitoring, and adopt a planning and controlling perspective. Domestic firms typically face liquidity problems; daily tasks and taxation issues cause a lot of trouble. They often feel that they are unable even to manage their own operations, let alone prepare a financial plan. The crisis has changed the style of leadership; usual labor relations have transformed. The acquisition of orders and reasonable cost reduction became an extensive „task,” one that is no longer solely the boss’s responsibility and interest. Because SME's have become quite heterogeneous, it is hard to define to whom the method presented in this study or this way of thinking should be recommended. In my opinion, the size of the investigated firms is not so important. The important thing is that those companies that rejected such a way of thinking should consider their activities and start using financial planning tools.Keywords: SME, financial planning, crisis, liquidity, effectiveness