Analysis of effects of management accounting practices on financial performance of small and medium enterprises in Nsangi subcounty, Wakiso district

Abstract

The main objective for this study was to analyze the effect of management accounting practices on financial performance of small and medium enterprises in Uganda. A was descriptive Cross-sectional study was adopted to asses’ effects of management accounting practices on financial performance of small and medium enterprises in Nsangi Sub county, Wakiso district. In the Univariate analysis, majority of the SMEs surveyed were small scale enterprises employing less than 5 employees (61.0%), 50% of the enterprises had only less than 5 years since their establishment, and majority (66%) of the enterprises were retail in nature. Management accounting practices were then grouped and most enterprises had a good costing system (57%), 81% had a good budgeting system, 61% had a good performance evaluation system, 56% had a poor decision-making system, 68% had a good strategic analysis system, and 65% of the enterprises had a good financial performance.In the Bivariate analysis, the relationship between each dependent factor (firm characteristics and management accounting practices) and financial performance was determined using Pearson chi-square test and all factors had a significant relationship with financial performance (p<0.05).In the multivariate stage of analysis, ordinal logistic regression was used and, Performance evaluation system and Strategic Evaluation system had a significant relationship with financial performance of an enterprise. Enterprises with a poor performance evaluation system were 0.716 times less likely to have a high financial performance compared to the enterprises that had a good performance evaluation system (OR = 0.284, P = 0.013). Enterprises with a poor Strategic Evaluation system were 0.835 times less likely to have a high financial performance compared to the enterprises that had a good Strategic Evaluation system (OR= 0.165, P = 0.050).The study identified the need calls for massive implementation of policies that advocate for implementation of management accounting practices and record keeping on all small and medium size enterprises.