An investigation into the of use of accounting information in the growth of small businesses in Kenya
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Date
2013-08-26
Authors
Gerishon, David Muchungu
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Abstract
The use of accounting information on the growth of small businesses in Kenya
remains largely unknown. This is despite significant knowledge available in many
other jurisdictions linking the growth of small businesses to the use of accounting
information in the management of small businesses. Available literature indicates that
accounting information is an important tool in tracking the indicators that measure
business growth. These indicators are used by business managers to take timely
corrective actions to achieve planned growth targets. For purposes of this study three
indicators selected as measures of small business growth are profitability, turnover
and number of employees. Empirical fmdings indicate that through accounting
information, industry averages for various indicators of business growth have been
established, and many businesses that plan for growth benchmark their performance
to these industry averages. Theoretical literature indicates that many businesses start
at micro-levels and progress through an organic growth to small, medium and large
enterprises. Managers depend heavily on accounting information in monitoring and
guiding this organic growth. Effective use of accounting information especially in the
small business sector is hindered by such constraints as, low literacy levels,
inadequate resources to generate accounting information and owner-management
styles, among others. The overall objective of this study was to provide additional
knowledge on the impact of accounting information on the growth of small businesses
in Kenya This additional knowledge has been obtained through a comparative study
of the business growth attributes between small businesses that apply and those that
do not apply accounting information in their management processes. The study
targeted small businesses within Nairobi and its environments. Since the study
involved linking attributes of business growth to application of accounting
information, a descriptive research approach was used. The study introduced
accounting information in Kenya, as a key factor of business growth. The expectation
is that the findings of this study will influence regulatory policies on small businesses
to promote their growth and effectively enable them contribute to the national
development. The findings of this research strongly suggest that maintaining business
accounting records and preparing financial statements and reports there from among
small businesses, largely depends on the type and age of the organization among other
factors. However the extent of use of this accounting information for purposes of
business decision making process appears significantly, limited to decisions
concerning the cash asset. A lot of accounting information is on the other hand
prepared for use in meeting the statutory business obligations such as VAT, PAYE
among others. Since majority of the respondents blamed business failures on poor
decision making, my recommendation is that there is need to find out through further
studies, why small businesses only use accounting information in making business
decisions to a limited extent.
Description
Department of Business Administration, 57p. The HD 62.7 .G4 2012
Keywords
Small business --Management --Kenya, Small business --Accounting --Kenya