Small and medium enterprises are the key driving forces to economic growth in South Africa and the implementation of sound financial principles contributes to the overall growth and survival prospects of such enterprises. Accurate, high quality and up-to-date financial information is essential in order to help business owners make sound financial decisions. Sound financial application enables small and medium enterprises to conduct their financial administration effectively. This study focuses on financial administration issues and processes that are used by the owners of small and medium enterprises. This study evaluates the extent to which financial administration is conducted and attempts to establish whether the information that is obtained through financial administration is used for cash-flow management and forecasting. In this study, we shall also investigate the effect that financial administration has on the tax compliance of small and medium enterprises. The sample consisted of 118 small and medium enterprises in South Africa. Businesses included in the sample frame confirmed to the requirements of a turnover of R2 million and less per annum, and a maximum of 50 employees. The findings highlight that financial administration is conducted, and that tax compliance is influenced by an enterprise’s financial administration. The findings also show that sound financial planning contributes to the overall implementation and success of the principles of financial administration as these are applied by small and medium enterprises in South Africa.