Small and medium enterprises (SME´s) make over 99 % of all industrial enterprises in Croatia. Very similar percentage of SME´s can be found within Croatian wood processing and furniture manufacturing companies. The aim of this research was to establish the actual situation in production management systems of SME´s in Croatian wood processing. Total of 30 small and medium companies from different areas of Croatia were surveyed trying to establish the advantages and problems in their production management systems, with the goal to propose the model to create better systems within SME´s in Croatian wood processing branch, which could help companies to achieve better production and business results. Because of the small number of employees, they are not able to meet all of the conditions and to implement all the parameters they would like to. So, they concentrate to those parameters they consider are the most important – product price, product quality, customer demands, fast delivery of finished product.