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Business Process Management in the Finance Area of Small- and Medium-

Sized Enterprises

Article in Társadalom és Gazdaság · January 2015

DOI: 10.21637/GT.2015.4.01.

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 DOI: 10.21637/GT.2015.4.01.

Business Process Management in the Finance Area of

Small- and Medium-Sized Enterprises

Okręglicka, Małgorzata1 – Lemańska-Majdzik, Anna 2

ABSTRACT: Business processes management is a recognized approach to im-
plementation of the objectives of an enterprise. The identification of key pro-
cesses occurring in companies enables a more effective management of a busi-
ness entity and becomes the key to the market success. Each element of the ac-
tivity of an enterprise should be subject to an effective management. This applies
particularly to the area of corporate finance, which is crucial for the efficient
functioning of the company. At the same time, it is an activity area in which
activities are combined in standardized processes, which should be managed and
continuous improved. This article presents the results of an empirical research
(the survey) conducted in 2015 on a group of 138 enterprises in Poland. The
main aim of the article was to identify and analyze the level of BPM advance-
ment in enterprises, especially in the area of finance, both in current finance, as
well as in long-term finances. We focus on the SME sector and compare it to
large companies.
KEYWORDS: business process management, corporate finance, financial man-
agement, enterprises, SMEs
JEL codes: M21, L10, L25, G30

Introduction
Business process management (BPM) is a comprehensive approach to re-
alizing efficient and effective business processes in an organization
(Schmiedel–Brocke–Recker, 2014). As Singh (2012) emphasizes, that
business processes are necessary for enterprises to be able to be competi-
tive on the market, as the awareness of identification of business processes
give then a chance of economic success. Various empirical researches

1
Małgorzata Okręglicka, Czestochowa University of Technology, Częstochowa, Po-
land, [email protected]
2
Anna Lemańska-Majdzik Czestochowa University of Technology, Częstochowa, Po-
land, [email protected]
6 Gazdaság & Társadalom / Journal of Economy & Society – 2015. 4. szám

clearly indicate that there is a positive correlation between process man-

agement and business success (Trkman, 2010), what make BPM a valua-
ble research area.
BPM refers to a number of areas of a company's operation, such as
production, logistics or finances of enterprises. Process management ori-
entation of an enterprise in the financial area has an impact on its efficient
functioning and is part of strategic management of an enterprise. As
stressed by Liu (2010), strategic management in this area refers to the the-
ory of finance management, according to which finances of an enterprise
should be run in the most appropriate way and managed in the most effec-
tive way, which can be ensured by using process management in enter-
prises.
SME sector is an important group of enterprises, which until recently
have shown a general tendency not to include elements of process man-
agement in their strategy of action (Zimmerer–Scarborough, 2005). Fail-
ure to identify the existing business processes in finances and make efforts
to effectively manage them may represent a threat to this sector of com-
panies (Salazar–Soto–Mosqueda, 2012).

The selected aspects of business processes management

in enterprises
Processes can be defined as a sequence of tasks performed within an or-
ganisation (Schulte et al., 2015). A business process consists of a set of
activities that are performed in coordination within an organizational and
technical environment (Gómez-López–Gasca–Pérez-Álvarez, 2015).
Elzinga et al. (1995) define BPM as a systematic, structured approach
to analyse, improve, control and manage processes with the aim of im-
proving the quality of products and services. BPM is a comprehensive
approach to the implementation of an organization’s goals and its aim is
to increase the efficiency and effectiveness of organizational processes
through improvement and innovation (Sipa 2010). BPM refers to aligning
processes with the enterprise’s strategic goals, designing and implement-
ing process architectures, establishing process measurement systems that
align with organizational goals, and educating and organizing managers
to manage processes effectively (Brudan, 2010).
Business Process Management in the Finance Area of SMEs 7

BPM can speed up organizational processes, reduce used resources,

improve productivity and efficiency, and indirectly competitiveness of the
organizations. Although BPM has been a business concept for a long time,
its strategic and operational roles within organizations are still an im-
portant issue requiring investigation from various perspectives (Bititci et
al., 2011).
Every element of the activity of an enterprise should be subject to an
effective management. From this perspective, business process manage-
ment can be defined as all efforts in an organization to analyze and con-
tinually improve fundamental activities such as manufacturing, market-
ing, communications and other major elements of company’s operations
(Zairi, 1997). The approach of describing organizations in terms of busi-
ness processes not only helps organizations to be more responsive to en-
vironmental changes but also helps them to overcome the problems due
to functional differentiation (Melao–Pidd, 2000; Tomski, 2011). To de-
velop within the organization, BPM requires top management understand-
ing and involvement, process-aware information systems, well-defined
accountability and a culture receptive to business processes (Smith and
Fingar, 2003).
Very often, an enterprise may need to perform a dynamic analysis of
their business processes so as to simulate and evaluate different sets of
processes that could ensure the efficiency and effectiveness of the busi-
ness process flow as well as improve the overall performance of the en-
terprise (Alera–Borrajoa–Camachoa–Sierra-Alonsob, 2002; Gorzeń-Mit-
ka, 2013). In every area of an enterprise’s activity, including management
of finances, BPM involves a detailed analysis of an organization, and thus
a change to the organizational structure (Guha–Kettinger, 1993). BPM re-
fers to a collection of tools and methods for achieving an understanding
of, managing, and improving an enterprises’ process portfolio (zur Mueh-
len–Indulska, 2010). The knowledge of the application of BPM tools and
methods in the organization can indicate the improvement directions and
solutions.
One of the key elements SMEs should adopt to survive for a long
term, in a global environment is prudent but efficient financial manage-
ment. Financial management is concerning with the creation and mainte-
nance of economic value or wealth (Norasikin–Norailis–Izlawanie, 2014).
It is suggested that financial management consist of six components: fi-
nancial planning and control, financial accounting, financial analysis,
8 Gazdaság & Társadalom / Journal of Economy & Society – 2015. 4. szám

management accounting, capital budgeting and working capital manage-

ment (Mohd Amy Azhar et al., 2010).
As most problems of SMEs have a financial nature (Karadag, 2015),
bad management of a company's finances may lead to problems in the
operation of this sector (Jindrichovska, 2013). Particularly lack of finan-
cial management knowledge combined with uncertainty of the business
environment often leads SMEs to face serious problems regarding finan-
cial and overall performances, which can even threaten the survival of the
enterprise (Kaya–Alpkan, 2012). A chance and challenge in this sector is
the process approach in the areas of financial analysis of an enterprise,
cost management in an enterprise and management of profitability, liquid-
ity and financial control.

Business processes in managing finances of enterprises in

empirical studies
Research description and methodology
The aim of the authors' own research was to was to identify and analyze
the level of BPM advancement in enterprises, especially in the area of
finance, both in current finance, as well as in long-term finances and with
a special focus on the SME sector. The survey used purposive sampling.
It was conducted in 2015 on a group of 138 enterprises classified, accord-
ing to the size of employment, as small, medium-sized and large enter-
prises. A survey questionnaire was addressed both to production compa-
nies and services companies. The research sample was not fully repre-
sentative, but the size of the research sample certainly allows the authors
to draw initial conclusions and identify regularities that can be verified
during the further studies. The results presented below represent only a
fragment of the empirical studies conducted.
The dominating group among the enterprises surveyed comprised
small companies employing from 10 to 49 people, which accounted for
69% of all the companies surveyed. The second dominating group com-
prised medium-sized enterprises employing from 50 to 249 people, which
accounted for 20% of all the enterprises surveyed, whereas 11% of those
surveyed were large enterprises, employing over 250 people. The largest
group of companies (65.7%) has operated on the market for over 10 years;
18.6% of them declared functioning on the market for 5 to 10 years,
Business Process Management in the Finance Area of SMEs 9

whereas the remaining companies have conducted their business activit y

for a year to 5 years. The enterprises surveyed did not include companies
entering the market, i.e. those functioning for a period shorter than 1 year.
Among the enterprises surveyed, almost 55% declared good current finan-
cial condition, and over 23.5% assessed their financial condition as very
good. Only 3% of all the respondents assessed their current financial situ-
ation as very poor or poor (more: Lemańska–Majdzik–Okręglicka, 2015).
The survey shows that the average score in the assessment of
knowledge on process management in an enterprise is 3.49 on a five-point
scale. In over half of all the enterprises surveyed, business processes re-
sulting from managing an enterprise are set in both directions, both top-
down and bottom-up. The most frequent problem in identification of busi-
ness processes, according to the enterprises surveyed, was difficulty with
defining such processes.
Identification of business processes in management of finances of
enterprises
The level of advancement the business processes implemented in the com-
pany may be quite different, ranging from random, variables and not man-
aged processes to consistent, effectively managed processes, enrolling in
company strategy. According to McCormack et al. (2009), it should be
understandable that processes have life cycles or developmental stages
that can be clearly defined, managed, measured and controlled throughout
time.
To the need to this article, business process advancement was deter-
mined using a 5-point scale, where the particular levels mean:
1. processes in the company are accidental – lack of awareness that busi-
ness activities can take the form of process;
2. business processes exist but are not documented – there is awareness
that subsequent activities comprise the coherent process;
3. processes in the company are documented and repeatable – there are
descriptions of each action within the processes;
4. processes are analyzed and evaluated with regard to their efficiency –
a system of measuring outcomes and costs within individual processes
is introduced;
5. there is a conscious process management (business process optimiza-
tion) – processes are consciously shaped for the purpose of the compa-
ny's strategy; measuring the process effectiveness provides information
to managers that are needed to their continuous improvement.
10 Gazdaság & Társadalom / Journal of Economy & Society – 2015. 4. szám

Financial control
Management of financial liquidity
Management of profitability
Management of financial costs
Management of administration costs
Management of production costs
Management of employment costs
Analysis of financial liquidity
Analysis of the value of a company
Analysis of a company's costs
Analysis of a company's revenue
Financial planning

3,0
. 3,2
. 3,4
. 3,6
. 3,8
. 4,0
. 4,2
. 4,4
. 4,6
.

large medium-sized small

Figure 1.: Assessment of business processes advancement in selected

area of corporate finance according to the size of enterprise
Source: Own work based on a survey.

The results of the survey clearly show that the most statistically sig-
nificant dependencies appear regarding to the size of enterprise. The re-
search shows that the processes in the area of corporate finance are on the
above average level of advancement, but there are significant differences
between small business entities and the bigger ones (Fig. 1.). Generally
speaking, the smaller enterprise is the simpler and less structured pro-
cesses have. Additionally, the greatest difference in the advancement of
processes occurs in the areas of analysis of financial liquidity, financial
planning and management of production cost.
The relationship between the variables: number of employees, period
of functioning of the company and current financial situation of the enter-
prise and the answers to the questionnaire questions on rank scales (grad-
able), in the areas of financial analysis of an enterprise, cost management
in an enterprise and management of profitability, liquidity and financial
Business Process Management in the Finance Area of SMEs 11

control, were analyzed by computing Kendall's tau correlation coeffi-

cients. Test probability at the level of p<0.05 was accepted as significant,
whereas test probability at the level of p<0.01 was accepted as highly sig-
nificant.

Table 1.: Diagnosis of business processes in the areas of financial

analysis of enterprises
Period of Current
Number of
activity of the evaluation of the
employees in
company on the financial
the company
market situation
tau p tau p tau p
Financial planning 0.2321 <0.0001 0.0338 0.5533 0.1507 0.0082
Analysis of a company's
0.2531 <0.0001 0.2074 0.0003 0.0767 0.1790
revenue
Analysis of a company's
0.2048 0.0003 0.0724 0.2047 0.1138 0.0461
costs
Analysis of the value of a
0.2085 0.0003 0.0776 0.1735 0.2083 0.0003
company
Analysis of financial
0.2138 0.0002 0.0363 0.5243 0.1313 0.0214
liquidity
Source: Own work based on a survey.

Own research shows that the use of process management in the areas
of financial planning, (i.e. development of plans), analysis of revenues and
costs of an enterprise, analysis of an enterprise value and financial liquid-
ity are statistically highly relevant (p<0.01) and positively correlated at a
moderate level with the number of employees, i.e. the bigger the number
of employees in a company, that is the bigger the enterprise, the bigger
the awareness of business processes in the areas of financial analysis of
the activity of an enterprise.
As far as the period of the functioning of a company is concerned,
this relationship was found only when analyzing revenues of a company,
which may indicate that enterprises that have been functioning on the mar-
ket for a longer period of time have to have business processes and process
management in place, if they want to operate effectively and be competi-
tive on the market (Table 1.). Summing up, the research showed that the
size of an enterprise mattered during business process management in the
area of corporate finances, which is conducive to effective management.
12 Gazdaság & Társadalom / Journal of Economy & Society – 2015. 4. szám

Table 2.: Diagnosis of business processes in the areas of

managing costs of enterprises
Number of Period of activity Current
employees in the of the company evaluation of the
company on the market financial situation
tau p tau p tau p
Management of
0.2939 <0.0001 0.0928 0.1038 0.1518 0.0078
employment costs
Management of
0.1844 0.0012 0.1517 0.0078 0.1379 0.0157
production costs
Management of
0.0416 0.4656 0.1124 0.0488 0.1046 0.0666
administration costs
Management of
0.0765 0.1802 0.0638 0.2634 0.1773 0.0019
financial costs
Source: Own work based on a survey.

The survey also showed that among the areas of cost management, only
management of production costs is statistically highly relevant, at a low
level with the number of employees in an enterprise, period of functioning
of an enterprise and evaluation of the current financial activity of a com-
pany. Thus, the bigger the enterprise, the longer it has been functioning on
the market and the better its financial situation, the more frequently business
processes are identified during managing production costs (Table 2.). The
other cost management positions present statistically significant dependen-
cies to one or two characteristics of the research group.

Table 3.: Diagnosis of business processes in the areas of

managing profitability, liquidity and financial control
in enterprises
Number of Period of activity Current
employees in the of the company evaluation of the
company on the market financial situation
tau p tau p tau p
Management of
0.2483 <0.0001 0.0346 0.5445 0.1140 0.0457
profitability
Management of
0.1241 0.0296 0.0305 0.5926 0.2314 0.0001
financial liquidity
Financial control 0.2000 0.0005 0.1964 0.0006 0.1038 0.0687
Source: Own work based on a survey.
Business Process Management in the Finance Area of SMEs 13

The survey shows that financial control in the enterprises analyzed is

statistically highly relevant and positively correlated with all the charac-
teristics of enterprises, which means that in enterprises that are larger,
have been functioning on the market for a longer period of time and have
a better financial evaluation, BPM occurs more often within financial con-
trol of a company and there is more awareness of the necessity of using
process approach in this area of management of finances of enterprises
(Table 3.). This seems justified, as bigger and older companies, having
more experience and resources, both financial and human ones, pay more
attention to the development of business processes during management of
an enterprise.

Conclusions
The aim of the survey conducted on a group of enterprises carrying out
business activity in Silesian Province (Poland) was to identify and analyze
BPM orientation of enterprises, especially in the area of finance, both in
current finance, as well as in long-term finances and with a special focus
on the SME sector against large companies. The questionnaire survey
shows, among other things, that:
 the size of an enterprise matters during process management in the
area of finances of enterprises, as the bigger an enterprise, the big-
ger awareness of occurrence of business processes in the areas of
financial analysis of an enterprise’s activity;
 business processes and process management are necessary for en-
terprises that have been functioning on the market for a longer pe-
riod of time, if they want to operate effectively and be competitive
on the market;
 the bigger an enterprise, the longer it has been functioning on the
market and the better its financial situation, the more often busi-
ness processes occur during management of production costs;
 in enterprises that are larger, have been functioning on the market
for a longer period of time and have a better financial evaluation,
BPM occurs more often within financial control of a company and
there is more awareness of the necessity of using process approach
in this area of management of finances of enterprises.
14 Gazdaság & Társadalom / Journal of Economy & Society – 2015. 4. szám

It is worth considering conducting similar studies on a bigger popu-

lation to identify regularities and present recommendations to enterprises
that identify business processes within management activity.

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