Abstract

Small and medium-sized enterprises (SMEs) in Iraq face significant challenges in sustaining competitiveness due to political instability, limited access to financing, and underdeveloped institutional frameworks. This paper looks at how financial management practices, including working capital management, risk management, and budgeting, can enhance small and medium-sized businesses' (SMEs) competitive cost advantages in Iraq. The study uses a resource-based view theoretical framework to investigate how these practices might be strategic tools enabling Iraqi SMEs to overcome their particular contextual constraints. This study applied convenience sampling. We applied the SmartPLS method for data analysis. Using survey data from 113 Iraqi SMEs, the study found that risk management highly influences cost advantage by lowering operational losses (p < 0.05). Similarly, the study found that budgeting and effective working capital management can enhance competitive cost advantages through higher profit margins, inventory cycle reductions, improved liquidity, and pricing flexibility. The findings indicate that in demanding business environments like Iraq, where SMEs face infrastructure restrictions, financial constraints, and increased uncertainty, financial management practices should be seen as strategic capabilities rather than only operational activities.