A.,
one advice I'd give you is about your friendship:
seek for understanding each other.
I believe it is great that she is outspoken, and sincerely tells you what she feels, even if it is disastrous to hear: she trusts you enough to tell you her feelings.
Now, going from this fortunate point, what if you two girls (one big and one little) sit down and look into each other's eyes.
A good start is to invite HER to be your advisor:
tell her you need her help, and share what problems you have about her behavior that you need to discipline her (maybe this is not exactly the right way to discipline her, maybe some other options would be better - sorry i do not know exactly how you discipline). So, tell her what AND WHY disappoint you in her behavior, and say that you are so sad, you do not know how to make your life together happier, and you need her advice as to what to do if she does not behave. Ask for her help in deciding what means should you use to REMIND her not to do wrong things.
Say that when she does not want to be her daughter then you cry and you want to be her friend forever, and on your side you will try to make things so that she will be a happy daughter, BUT you need her help: she cannot do or say bad things either: this is a work to do from BOTH sides.
Ask her also what kind of mommy does she need, and assure her that you will try to match her dream.
also, tell her what is her dream-daughter, and in this, point out very many things of how she already is, with the one lacking thing of her occasional misbehaviors...
Now, she is 7, but A. dear, she will be 17, and very soon. I am sure you want her as a friend for a lifetime, including her teenagers (the hardest for girls) time.
I speak from own experience: my girl is 17, and I had some hard time with her when she came to teenager's time, but you know, we won both, exactly as i suggest you to start unwrapping this situation right now: we are great friends, and if anything bothers her, she comes to talk to me, not to her friends of her age, because she knows Mom (me) is a SAFE PLACE to talk: mom will sit down and help thinking how to get over the problem, solve what seems unsolvable, will give advice without nagging, quarreling and directing as to what needs to be done. A girl needs a safe haven, and this safe spot is Mama. This is what we need to keep in kind, at all times. We as mamas succeed when we at all times remember to respect and value the individuality of this growing soul.
A child definitely has to follow the parent's regulations, and there definitelyh need to be the fences set up, as they are not capable to see all the dangers of their misbehavior, but our kids also need to learn to make decisions.
One thing what all my children liked with me, is this:
they ALWAYS KNEW THE CONSEQUENCES of their misbehavior, and they were the ones who helped me to set these consequences up. It was like if we signed an agreement:
you have your homework not done: you miss an hour of TV (or whatever she likes). You get a bad grade for not accomplishing the work - you do not go to the party this Saturday. You backtalk: you do not get an ice cream for a week.
Of course, these are just broad examples,
and for a 7 years old, you cannot set up BIG longterm goals: the misbehavior should immediately be followed by the consequences of locing something, not like Monday she did something wrong and then weekend she does not go to the movie: you need to adjust to the age all the time, and little ones are not capable to memorize these connections for several days.
My point is, A.: if she helps you to set up the rules ("honey, if you backtalk to me, then how should I remind you not to do it again, as it is not nice: you don't watch TV, or you cannot go play outside for an hour, and this does not change until you think it over and come to apologize" - give her a choice!), she won't be able to say that YOU punished her!!!, because it was an agreement between you two
then.
Whatever you decide,
please watch for the fact that you need to establish a safe happy environment where you are both friends, A., as right now it is not a big deal, but it might become in her teenager's time. You are a great mom that you are concerned, and as I say: this is not a disaster, this is a working situation, and please take care, dear ones!!!
M.