Human Resource Competence, Financial Literacy and Internal Control: Determinants of Financial Management Quality in MSMEs of West Java

Abstract

Background and Objectives: Micro, Small, and Medium-Sized Enterprises (MSMEs) are strategically important to the Indonesian economy because of their role in creating jobs and boosting regional economies. This study aims to analyze and examine the influence of Human Resource Competence, Financial Literacy, and Internal Control on the Quality of Financial Management of MSMEs in West Java Province. Despite the strategic role of MSMEs in supporting economic growth, many MSMEs still face challenges related to financial transparency, weak internal controls, and limited managerial capacity. This study addresses the gap between theoretical standards of financial management and actual practices implemented by MSMEs. The findings are expected to provide insights for MSMEs and local governments in formulating strategies to strengthen financial management capacity and support business sustainability and competitiveness. Research Design: This study employs a quantitative research design with a causal associative approach to examine the causal relationships between Human Resource Competence, Financial Literacy, and Internal Control and the Quality of MSME Financial Management. Research Location and Duration: The research was conducted among MSMEs operating in West Java Province during 2025, using primary data collected within a single research period to capture the actual condition of MSME financial management practices. Methodology: This study uses a quantitative approach with primary data obtained through the distribution of questionnaires to MSMEs in West Java Province. Sampling was determined using the Slovin formula with a 10% margin of error, resulting in 100 respondents. Prior to data analysis, the research instrument was tested using validity and reliability tests to ensure data quality. Data analysis was conducted using SPSS with multiple linear regression methods to examine the effect of Human Resource Competence, Financial Literacy, and Internal Control on the Quality of MSME Financial Management. Model testing includes classical assumption tests, partial hypothesis tests, and coefficient of determination. Results: The results show that Human Resource Competence, Financial Literacy, and Internal Control have a positive and significant effect on the Quality of Financial Management of MSMEs in West Java Province, as indicated by regression coefficients of 0.517, 0.595, and 0.688, respectively, with a significance value of 0.000. These findings confirm that improvements in managerial competence, financial understanding, and internal control implementation directly enhance MSME financial management quality. Conclusion: This study concludes that strengthening human resource competencies, improving financial literacy, and implementing effective internal control systems are essential for improving MSME financial management quality. Practically, the findings suggest that local governments and supporting institutions should prioritize internal control training and financial management mentoring programs to achieve greater improvements in MSME governance and long-term sustainability.