Sme Development Strategies based on Financial Accounting, and Internationalization Vivanco JESUS. Finance Department Universidad A. de Aguascalientes Aguascalientes C.P.20131 and Oropeza MIGUEL Accounting Department Universidad A. de Aguascalientes. Aguascalientes C.P.20131 and Montalvo MIGUEL Marketing Department Universidad A. de Aguascalientes. Aguascalientes C.P. 20131 Graphic 1 Economic Impact of SME’s

ABSTRACT This research aims to identify strategies to increase performance and development of SMEs and financial strategies like liquidity and leverage sustained in accounting as well as the internationalization of SMEs can help in their development and enable them to stay on the market, since a high percentage of SMEs fail to overcome the barrier of two years, on this research through a survey of 125 SMEs in the State of Aguascalientes Mexico, is demonstrated by statistical analysis such as linear regression and ANOVA [15], a high positive relationship between the administration of the financial aspects such as liquidity and leverage, the internationalization of SMEs with increased performance. Keywords: Financial Strategies, internationalization, SMEs 1.INTRODUCTION. SME’s represents the economic platform of our country, since they currently used 62% of the economically active population, contribute 42% of national GDP and 99% are companies operating in Mexico, which is why our concern to seek development and retention tools, the finance function implies a fundamental factor for its effective operation, this research will address the topic of finance and the internationalization as a means or strategies for the development of SMEs, starting by introducing some informative data representing the perspective of SMEs in Mexico.

150% 100% 50% 0%

Companies Gdp Employment

Sours: Small and medium size enterprises OECD June 2002 As shown in the graph, SME’s represent a significant contribution to the economies of the countries, since their contribution is very high in terms of GDP, employment and number of companies, as this involves the livelihood of millions of families who depend permanence of SME’s to ensure their livelihood and their families Table No. 1 Table of Enterprises Classification by number of employees Industry Commerce Services Micro

0 to 10

0 to 10

0 to 10

Small

11 to 50

11 to 30

11 to 50

Medium

51to 250

31 to 100

51 to 100

Source: Official Journal of Mexican Federation, December 30 2007.

2.OBJECTIVE OF RESEARCH The objective is to identify the influence of the administration of financial aspects such as liquidity and leverage and the internationalization of SMEs in the improvement of their performance Specific objectives. a) .- Identify which of the financial aspects, the liquidity or leverage, have greater influence on improving their performance of SME’s. b) .- To identify if the internationalization of SME's can improve their performance 3. LITERATURE REVIEW Financial aspects supported the development of accounting. The Modigliani and Miller theorem establishes, under restrictive assumptions indeed, that the financial structure has no influence on the value of the company. However, many theoretical works that justify, under more realistic, positive and negative connections between the form of financing and firm performance or efficiency [1], It has been argued also less indebted firms are more efficient in sector al restructuring situations because they have fewer financial obligations to meet and can devote all their efforts to address the necessary changes, [29], Should be considered in any case external financing constraints given in micro and small enterprises, since they are paying less and a higher interest rate [19], but this restriction is reduced to credit when the company is having a greater antiquity [5]. Several researches has been done in Russian, Spanish, American and Canadian small firms, measuring the debt level, liquidity, and their influence on the profitability of the SME’s, through statistics techniques like univariate and multivariate. And the results of these researches shows an strong positive relation between low leverage and high liquidity with a better profitability, [17],[6],[16],[11],[23],[24],[30].

This information helps us to raise the benchmark hypothesis of this research because this goal has been raised to identify the influence of the financial management aspects such as liquidity and leverage and the internationalization of SMEs in the performance of these and following results of the research presented above, there is a strong positive relationship between accounting information and the correct determination of the ratios, analysis of financial information.

Financial aspects to be considered in the development or performance of SME’s liquidity: Liquidity is a term that demonstrates the ability to pay that companies have to meet its short-term and often is measured by working capital. [21], say that is the difference between current assets and current liabilities and is also defined as the portion of assets financed by long-term liabilities in short without liquidity is impossible for a company and especially SMEs can survive, given the low level of capital that for their operations . [34], considering the amount of liquidity to meet capital expenditures over a period of time that can be insured by the initial capital and cash generated from normal operations in a period of time without consider selling assets and obtaining external funding,

In the business management of liquidity, measured by the financial aspects of companies based on indices such as indexes of payments of clients delayed, that better explain the causes of financial problems such as high leverage and lack of liquidity, which have even led to the bankruptcy of companies and especially SME’s by low operating capital, [4]. From this information we can conclude that it is important the culture of payments from employers for healthy business economy, setting priorities according to their ability to pay, in the execution of these, employees, suppliers, tax authorities, etc.. In a study of 607 SME’s in retail trade in the United States, which analyzed 14 different key factors such as liquidity, income, debt and operating efficiency, reflecting the results, which have higher earnings, liquidity and they are less leveraged than previously thought, showing that support the operation itself is better than debt, to achieve higher profits, [9]. The above references tell us that if the operation is supported with the resources generated by the operation itself, it becomes a more sound policy that the use of debt, causing the rising cost of operation, making the business less profitable and decrease your chance of survival. Leverage Better known as debt leverage, defined by.[35], as the proportion of funds that have provided the commercial bank creditors and measured: Total Debt / Total assets and it's recommended that the ratio does not exceed 33%, since otherwise the business starts to be owned by others. SME’s participating in a very significant economic output and employment, but have a high mortality rate and was done a study in the metropolitan area of Cali Colombia from 2000 to 2004 on the main causes of premature death can be, the initial firm size, lack of income and debt, as well as external factors such as economic growth in the sector in which they work, or the geographic location of this, the study revealed that the initial size, its performance financial, economic sector activity, have a positive impact, but exist an inverse relationship between debt and survival of the business, which means that debt is the riskiest factor for the survival of SME’s,[32]. Was performed a study of 99 SME’s in Italy on the effect of the ratio of the number of banks which the Sme's operates and the business performance, and located that the return on assets decreases when the number of banks with which it operates is increased, also was located that the amount of interest expense increases when the number of banks for small businesses increases, mainly by the effect of indebtedness and concludes that the fewer number of banks have in operation, reducing the level of agency problems and eliminates the negative effects of operation that affect the performance of SMEs, by high debt, [7]. They conducted a small study in Brazil, with the aim of identifying how they affect funding sources internal or external, formal or informal business performance and the empirical study revealed that the domestic financing remains a relationship positive business growth and growth has a positive effect with formal financial institutions not with informal sources of financing,[31]. Based on the studies presented in the aforementioned items, you can identify that the indebtedness has been the cause of the high mortality of SME’s and the informal credit management do not

represent a security financing costs, making it very convenient to handle funding levels that allow the control of corporate governance without falling into excesses of leverage to cause the failure by the lack of ability to pay.

The following table presents a comparison of exports of SMEs from different countries, eager to see the trend and location of SMEs in our country (México), compared to other countries Graphic. No 3 Comparison of exporting SMEs

Based on the data mentioned before, you can comment on the importance of SMEs as a means of local development and is presented as an option for development of SMEs, the internationalization.

Exports

Internationalization of SMEs To display an overview of the situation that is reality in the internationalization of SMEs to the national level, is presented the following graph showing the level of internationalization of SMEs in Mexico.

Exports 40%

Graphic No.2 Export Level

Exports Larges Companies

Maquiladoras

6.70%

9.30%

10%

México

Canada

Argentina

Sme´s

5%

Italy

Source: Information Paper on SMEs. Ministry of Economy 2002.

42%

53%

As shown in the graph, of the compared countries, Mexico is the country with the lowest percentage of SME exporters and it´s caused due to the lack of support from governmental levels to ensure the development of SMEs outward providing resources and training to enable the development of our SMEs, du these it’s perennial link between the authorities and SMEs to join efforts to improve this level of exports which is an alternative for the development and retention of Mexican SME´s.

Source: Information Paper on SMEs. Ministry of Economy 2002

As can be seen in the graph only 5% of SMEs in our country achieve export, implying that there is a long gap to go to reach the internationalization of SMEs but this should be a challenge for our country because, according Empirical studies, its have shown which through exports, it is possible to achieve development and performance of SMEs. [27]. conducted a study that examines factors associated with the adoption of strategies of internationalization and its effects on performance and compare it with non-exporting firms and concludes that internationalization is associated with increasing the return on sales, facilitating the development of small businesses. [28],conducted an analysis of 300 SME exporters in Argentina, Chile and Colombia in the period 2001-2004, in order to identify success factors that have enabled these companies to venture into the field exports, and the results of this study indicate that factors, commercial, production, technology and environment, are what make it to affect export levels that based on these results, leads to establish the basic basket export products and to determine the potential of exporting SMEs.

Aguascalientes exporting companies. The number of SMEs exporting in Aguascalientes, is very low but this represents a challenge to promote the SMEs in the State of Aguascalientes and in the whole country, developing the SME´s for reach to achieve the level of quality required for export operations through the economic support of the government authorities. Performance SME´s Performance Factors :Have identified different ways of measuring performance in SMEs that considers different factors that result in successful performance of SMEs raised by several researchers as follows. [12,]reports that measured performance in Spain in terms of competitiveness and survival of SMEs, based on the success factors as innovation, value added, services, technology, quality and the operations systems are able to demonstrate that the degree of innovation in products, processes and management systems have a positive influence on performance. [13], in his investigation "cost management for quality and performance of small and medium-sized enterprises” in the Murcia region of Spain considers as the dependent variable a set

of performance measures, which are: generated resources Operating income, economic profitability, operating margin and financial performance [3], in their research entitled "Factors explaining the competitive success for SMEs in the state of Veracruz Mexico", in their analysis considers as dependent variables to analyze the success of SMEs, the following: The average number of earnings before interest and taxes, Quality of products or services, Introduction of innovations, Productivity of labor, Customer satisfaction with products or services, knowledge and business experience, employees motivation-satisfaction and reputation and image of the company, and found to be most relevant variables in the case of Veracruz; the financial capacity, technological position and innovation, marketing capabilities, management of human resources and technologies information and communication. In this research, were selected as variables to measure performance, set by [3], it was considered appropriate, by taking into consideration aspects that are not purely quantitative, since they consider the qualitative performance such as customer satisfaction, employee satisfaction and reputation and image of the company. 4.HYPOTHESIS The assumptions made in this investigation are: Hypothesis1. With greater financial management of liquidity and leverage, increase performance of SMEs. As suggested by [9], in his research that showed that financial support in the operation itself is more profitable than the financial leverage and generate more liquidity in order to achieve higher profits Hypothesis2. Higher level of internationalization of SMEs, improve performance and as such,[27].derived from their research; conclude that internationalization is associated with increased return on sales, encouraging the development of small businesses 5.METODOLOGY. The research conducted is quantitative, using the method of linear regression analysis, ANOVA and frequency analysis, the research also is transectional, because the surveys are at a point in time of the year 2009 character exploratory correlational descriptive and explanatory, as they look for causal relationships between variables [33]. The design of the research is not experimental, and therefore none of both dependent and independent variables are manipulated For this research were used quantitative tools to achieve test hypotheses on the influence of the administration of financial aspects and the internationalization of SMEs and their influence on the performance of these. The collection of information was directly, through interviews with the owner or responsible of the SMEs, as most of the questions in the collection of information, are only manage by managers of the enterprise; surveys were implemented in the first half of 2009

Final survey instrument was designed based on the literature and indicators of both dependent and independent variables, to achieve the identification of the existence of the influence of the administration of financial aspects and the internationalization of SMEs in the SEM´s performance; based in the response of employers, according with their criteria and identifying the causes of performance of SME's, related to the industry, and according with the responses of the entrepreneurs, using the Likert scale to measure results from 1 to 5, with 1 being completely disagree and 5 totally agree, the questionnaire was applied to a sample of 125 SME's. from different business sectors of Aguascalientes. 6. RESEARCH FINDINGS. For show the results of this investigation, we present the table No.2, that indicates the average of the different aspects of performance measured using a Likert scale, where 1 is the least important and 5 is the most important, which factors stand out as the greatest performance impact observed by employers, the customer satisfaction and quality of products and services.

Table No.2 Media Business Performance DEPENDENT VARIABLE 1.- Quality of product / service 2.- Customer Satisfaction 3.- Image of the company and its products and services 4.- Reduced absenteeism 5.- Speed of adaptation to market needs 6.- Efficiency of internal business processes 7.- Organization of the staff Tares 8.- Reduced Staff Turnover 9.- Increased Productivity 10. Increase in market share 11. Motivation and Satisfaction of Workers 12.-Increase Profitability

MEDIA 4.02 4.02 3.96 3.94 3.93 3.89 3.89 3.82 3.74 3.66 3.63 3.54

Source: Authors' calculations based on the results of SPSS frequency analysis. On a scale of 1 = Not important and 5 = very important

Table No.3 Significance of Variables “Finance Management vs. Performance Independent R R t Sig. Variable Square Finance .436 .190 21,741 .000** Management * Statistically significant differences: (*): p