Small and medium-sized enterprises (SMEs) account for a considerable part of economic activity in most countries, and their role varies according to the development of the economy. Precisely because of their importance in the economy, special accounting standards have been adopted for small and medium-sized enterprises. The aim of the paper is to understand the problems and challenges that Croatian entrepreneurs face in the preparation of financial statements. Since small and medium-sized enterprises face numerous challenges, it is necessary to provide them with support and assistance in terms of financial reporting. Some of the challenges relate to limited resources, mainly in the form of financial resources, but there are also problems with the workforce and technological infrastructure. The activities of individual companies are subject to the national regulations of the state, its legal frameworks and standards. Economic management and reporting for SMEs is often a challenge, creating a need for support and strategies that would facilitate the operations of SMEs and promote their growth. National and international accounting standards are currently not fully adapted to the specific needs of SMEs, especially those operating in foreign markets. In the European Union (EU), there is a common accounting framework, which applies to most member states. However, despite the common framework, not every member state is obliged to use the same accounting standards. The facts suggest that a variety of national and international accounting solutions point to the problem that the existing accounting system is not fully adapted to the needs of small and medium-sized enterprises. The European Union is trying to solve these challenges through cooperation between Member States and harmonisation of accounting standards. The Croatian Accounting Standards Committee is actively working on aligning national standards with international ones, seeking harmonisation to facilitate the integration of SMEs on the European and global market. The harmonisation of accounting is a key step towards achieving consistency and comparability of financial statements in the field of financial reporting.