Improving The Financial Mechanism for Early Detection of Crisis Risk in Small Business Entities

The sustainability of small business entities (SBEs) is increasingly threatened by financial instability, liquidity shortages, and external economic shocks, making early crisis detection a critical issue for economic resilience. The objective of this study is to develop and improve financial mechanisms for the early identification of crisis risks in small business entities by integrating financial ratio analysis, predictive econometric models, and digital monitoring tools. The research design and methodology are based on a mixed-method approach combining quantitative financial analysis and qualitative policy evaluation. The findings of the research indicate that declining liquidity ratios, increasing debt burdens, and unstable cash flows are the most significant predictors of crisis risk in small businesses. The empirical results reveal that businesses implementing digital financial monitoring systems and risk management practices show 18–25% higher resilience compared to those relying on traditional accounting mechanisms.