The research study focused on evaluating the use of accounting systems by Micro Small Medium Enterprises (MSMEs). The objective of the study was to investigate the use of accounting systems by SMEs around MAP ML.
NATURE AND SCOPE OF THE STUDY
- Introduction
- Problem statement
- Main problem
- Sub problem: 1
- Sub problem: 2
- Research objectives
- Primary objective
- Secondary objectives
- Research questions
- Expected contribution of the study
- Organisation
- Individual
- Literature review
- Scope of the study
- Field of the study
- Geographical demarcation
- Definition of key words
- Small business
- Maluti-a-Phofung Local Municipality (MAP LM)
- Local municipality
- Research planning
- Layout of chapters
Evaluate the role and function of accounting systems in terms of record keeping and accuracy;. What is the role and function of accounting systems in terms of record keeping and accuracy.
ACCOUNTING SYSTEMS THEORY
- Introduction
- Background discussion
- Accounting
- Role and function of accounting
- Accounting system
- Manual accounting system
- Computerised accounting system (CAS)
- Importance of computerised accounting system
- Time and cost savings
- Record keeping and accuracy
- Storage and speed (Data Collection and Processing)
- Distribution
- Challenges encountered with the use of CAS
- Quality of financial reports
- The influence of CAS on financial statements processing
- Summary
The documented information is used to evaluate and adjust the stakeholders' contracts (Dacosta et al., 2012:9). According to Dacosta et al, computerized accounting systems extend the accounting system for storage and feedback to users and this is illustrated in Figure 2.4 below.
SMALL BUSINESSES AND ACCOUNTING SYSTEMS – THEORY
- Introduction
- Small and Medium and Micro Enterprises (SMMEs)
- Small business success
- Accounting information system in SMMEs
- Importance of computerised accounting system in SMMEs
- Benefits of computerised accounting systems in SMMEs
- Time and cost savings
- Organisation and accuracy
- Storage, speed and distribution
- Summary
Small businesses play an important role in stimulating the economy through means of creating jobs and eradicating poverty. Toth (2012:91) mentioned that within the management information system there is an accounting system that ensures that the numerical figures correspond to the reality of the company's property, financial and profit status. Al Smith mentioned that without an accounting information system, it will be very difficult for SMEs to determine performance, identify customer and supplier account balances and predict the organization's future performance.
2013:262) believe that most small businesses fail due to inadequate business decisions. This chapter has highlighted some of the factors that contribute to the need to implement computerized accounting systems in small and medium enterprises, the advantages of computerized accounting systems in small and medium enterprises, namely: time and cost savings, organization and accuracy, storage, speed and distribution . The purpose of this literature review was to determine the importance of the use of computerized accounting systems by small and medium-sized enterprises in the Maluti-a-Phofung local municipality area.
RESEARCH METHODOLOGY
- Introduction
- Research design
- Target population
- Sample and sampling technique
- Methods of data collection
- Administering the questionnaire
- Data analysis
- Limitations
- Summary
This information was analyzed and used as supporting data for the structure of the study. The availability of participants was also taken into account regardless of the industry in which all these small businesses operate. Heads of finance and accounting departments of various small businesses where the owners were not available.
It should be clarified that as small businesses in the MAP LM Free State considered 52 businesses to have responded in the availability mode, the conclusions drawn may not be representative of the entire population. Willingness of the sample to participate in the research and time frames for completing the questionnaires. The study population was an availability sample and due to the fact that random sampling was not performed, no inferential statistics will be used for interpretation.
PRESENTATION OF FINDINGS AND DISCUSSION
Introduction
Research findings
Participants were presented with several statements to assess the risk of not using CAS (or performing an accounting task in a particular way) versus the benefit of performing an accounting task using CAS. Using a five-point Likert scale, this section discussed ways to make reports available to stakeholders and the time required to use financial information.
Response rate
Reliability and validity
- Construct reliability
- Construct validity
- Mean of constructs
From the table above, it can be concluded that all the Cronbach Alpha coefficient values of the constructs were above 0.6 and according to Field this means that all the constructs were reliable. It is generally known that the Measure of Sample Adequacy (MSA) is one of the statistics associated with factor analysis. It is an index used to measure the adequacy of factor analysis (Tabachnick & Fidell, 2001).
The authors further noted that high values (between 0.5 and 1.0) indicate that the factor analysis is adequate, while values below 0.5 indicate that the factor analysis may not be adequate. This means that all explained variances were above the required 50%, thereby ensuring the construct validity of all constructs. According to Koech and Namusonge (2012:8), a higher mean value generally means that there is a higher level of the measured construct.
SECTION A: Companies' profile
- Distribution of respondents according to its form of ownership
- Industries in which the businesses operate
- The business establishment age
- Indication of path of business ownership
- Capital to start the business
This may indicate that there are more SMEs operating under retail followed by service industry. The researcher in this section sought to find out the distribution of the selected respondents according to the employment conditions of the company. The figure below therefore categorically and clearly shows the distribution of the respondents' companies according to their employment conditions.
It is whether there are any mechanisms in place to provide for managerial succession and dealing with very difficult ownership issues, especially in a family business. The study sought to find out the distribution of respondents in the sample according to the way capital was raised to start the business. There are very few that were funded by donations from relatives, household/spousal contributions and or through capital raised from the sale of another business.
SECTION B: Accounting systems
- Accounting systems used by SMMEs around MAP LM area
- The role and function of the accounting system
- Financial and management information
- Accounting cycle
The researcher wanted to determine the extent of the role of accounting systems applied to record transactions by small businesses around the MAP LM area. Most of the respondents (44%) fully agree that the accounting system applied to record their business transactions helps managers to easily determine the profit or loss for a given period and 18% also agree with the notion. The role and function played by the computerized accounting system for Small Businesses seems to be highly valued by most of the respondents.
When answering the question about the role and function of the accounting system, 48.08% of the respondents are convinced that the system greatly contributes to the preparation of accounts, and 15.38% agree with the idea. In this case, the researcher wanted to determine the ability of the accounting system to produce information for users. 62% of respondents mentioned that the accounts are automatically updated and that accounts are therefore always up to date.
SECTION C:Cost-Benefit analysis of accounting systems
- Financial benefits of using accounting systems
- Non-financial benefits of using accounting systems
- Access to management reports
- The need for accounting systems
- Deciding factors for choosing the type of accounting system
- Computerised accounting system (CAS)
- Challenges of using CAS
- Changing the existing accounting system
Whereas 6% of respondents are not sure whether the initial costs of installing an accounting system influence the decision to choose a system. 45% of respondents agree with the view that worker acceptance has been used to determine when to choose the type of accounting system, while 43% disagree and 11% are not sure. The majority (63%) of respondents agree that the cost of training was considered and the cost of maintenance at 73% and the cost of security features at 71% when choosing the type of accounting system.
The table 5.10 above shows that the majority of the respondents agree to the idea that accounting system benefits the business in terms of timely information (69%), cost savings (65%), prevention of errors (67%), information provision (69%) , effective communication (65%), security of information (63%), storage of information (65%),. The efficiency and effectiveness of the accounting system and the bulky operations of the company were also considered. The study revealed that the respondents considered the efficiency, accuracy and timeliness of the system in providing management with reports.
SECTION D: Reporting
- Reports to the stakeholders
- Quality of financial reports
It found that 4% say reports are sometimes made available to the public or stakeholders. Regarding the last question for the respondents, it was found that 40% say that the business makes reports available upon request, while 25% say that this happens occasionally. Thus, it can be concluded from these findings that most of the SMEs make the reports available to the public or stakeholders through the online business website.
The sample respondents attributed 25% to the fact that financial statements are almost never submitted and accepted without any dispute and 13% said that they are submitted occasionally. Regarding the last question for the respondents it was found that 33% say that the business is able to receive financial assistance using the financial statements produced by the existing accounting system, while 23% say that this happens occasionally. From these findings it can be concluded that most SMEs often and almost always supplement their financial information that is reported to stakeholders after the end of the financial year.
SUMMARY, CONCLUSION, RECOMMENDATIONS AND AREA
Introduction
Summary
Conclusion
Recommendations
Limitations
Area of future research
Forms of ownership
Analysis shows that 38% were from the retail industry; 16% response obtained from services; 10% from manufacturing and construction; 8% accommodation and restaurants; 6% food industry; and 4% were from wholesale trade, transport/distribution and agriculture/forestry/fishing respectively.
Industries
The majority of respondents said that the cost of training, maintenance costs and the cost of security features are part of the factors considered by respondents when choosing which type of accounting system to use. The finding showed that the system advantage was an important factor to be considered by the SMEs when choosing the type of accounting system to be used for financial and operational management of the business. The respondents appreciate the effectiveness and efficiency of the system as well as the volume of work performed before the decision was made regarding which type of accounting system to purchase.
We can conclude from this outcome that the accounting systems used by the SMEs around MAP LM area pose challenges to the operation of the businesses to a certain extent. The finding showed that the system advantage was an important factor considered by the SMEs when choosing the type of accounting system to be used for financial and operational management of the business. Further findings were made that the accounting system used by the SMEs around this area poses some challenges to the operations of the business, although the users are still satisfied with the system.
It is therefore justifiable to conclude that the minority of businesses around the MAP LM area are still in the manual accounting system while the majority decided to use computerized accounting systems. On the other hand, the respondents evaluate the efficiency and effectiveness of the system as well as the volume of work performed before the decision made regarding the type of accounting system to be chosen.
Business age
Path of business ownership
Capital raised
According to 42.31% of the respondents, they strongly agree that expenses incurred can be easily recorded as and when. 21% disagree with the fact that the initial cost of installation is one of the key factors influencing the decision to choose the accounting system. It is the key responsibility of the managers of each organization to provide reports to the owners.
While 65% agree that their accounting system offers the possibility to see the real-time status of the companies. The survey found that the majority of businesses around the local municipality of Maluti-a-Phofung are registered as close businesses and private companies. It was also observed that the computerized accounting systems are able to perform the entire accounting cycle without any problems.
Based on the findings of the study, the following recommendations are offered to the MSMEs around MAP LM area in particular, small businesses in all industries. The results of the study according to table 5.9 showed that the majority of the respondents considered the efficiency, accuracy and timeliness of the system to provide management with reports.
