Between September and October, the Brazilian Federal Revenue Service (Receita Federal) notified 1,121,419 individual micro-entrepreneurs (MEI) and 754,915 micro and small businesses that had debts with the Simples Nacional tax regime. They face the risk of being excluded from this tax regime starting next year if they do not regularize their outstanding debts. This scenario of default may be strongly influenced by a lack of financial organization, as shown in a recent survey conducted by Ceape Brasil (Center for Support to Small Businesses) to understand how financial literacy is present among micro-entrepreneurs. According to the survey, 69.7% of respondents reported having difficulty meeting their business's commitments, which includes paying suppliers or employees. When this is possible, family expenses take a back seat, as stated by the remaining 29.3%.
"The Brazilian macroeconomic scenario in itself is challenging for Brazilian entrepreneurs. We still have a high interest rate and low economic growth. But the main challenge is the entrepreneur's own preparedness. Often, people do not control their revenues and expenses and lack basic financial knowledge to make strategic decisions that can lead to the longevity or failure of the business," explains Claudia Cisneiros, executive director of CEAPE Brasil, which specializes in granting productive microcredit, combining loans with financial education for borrowers.
Another interesting finding from the survey is that only 54.1% of entrepreneurs usually separate their personal and business accounts. Of the total sample, 5.4% of respondents stated that they see no point in the separation. Another 25.2% said they sometimes need to reallocate personal funds to the company and vice versa, and another 15.4% observed that "they do what they can," meaning they cannot maintain two distinct management systems because the numbers don't add up.
Claudia Cisneiros believes that, in general, Brazilian entrepreneurs already understand the importance of having good financial education to sustain a business, but much is still done in a disorganized way. "It sounds cliché, but the concept of 'making do' is very present when we talk about small business administration. Before, it was more common for people not to keep a daily balance of their expenses and to desperately try to 'close the books' in the last days of the month. Today, most already understand that it's important to do this control as a form of prevention, but they discard the help of an accounting professional, for example," she says.
Self-criticism
The diagnosis of the majority (33.5%) is that the lack of organization for making payments is their main financial mistake, followed by payment conditions that were not properly evaluated (27.7%). 22.7% have faced problems by "buying things impulsively" without evaluating the future impact. The remaining (16.1%) pointed out that the wrong choice of payment or financing source has already caused inconvenience.
Regarding the control of revenues versus expenses, the data obtained shows a worrying situation: 9.1% of entrepreneurs state that they control everything by memory, and another 7.9% say they don't use any control at all. Among those who try to monitor their cash flow more carefully, 7% rely on what their accountants tell them, 14.5% use spreadsheets, and another 61.6% use a notebook to balance their accounts.
The survey was conducted with 242 micro and small entrepreneurs who are clients of Ceape Brasil. Present in Maranhão, Pará, Tocantins, Ceará, Piauí, Pernambuco, Alagoas, São Paulo, Bahia, and Rio Grande do Sul, the institution has 21,000 active clients, meaning those with ongoing loans. Ceape specializes in granting productive microcredit, which combines loans with financial education for borrowers, and has already granted over R$ 7.4 billion in credit, benefiting approximately 1.5 million entrepreneurs, primarily in the Northeast region.
