The role of financial accounting on the growth of small and medium enterprises in uganda

Abstract

The objective of the study was to determine the effect of financial accounting on the growth of small and medium enterprises in Mukono district, Ntenjeru Sub-county. Specifically, financing options (borrowing and saving) and book keeping as factors that affect growth on small and medium enterprises were investigated. Primary data was used in this study and it was collected using questionnaires from 120 respondents who were business men and women and analysis was done using frequency distribution tables, Pearson chi square test for independence. Results show that more than half of the respondents (53.3%) were businessmen and business women accounted for 46.7%. 42.5% were aged 40 and above years and 65.8% were married/cohabiting with most of them (37.5%) having attained primary education as the highest level of education. Majority of the respondents (33.3%) were Protestants. Majority of the respondents (41.7%) participated in cottage industry and 30.8% of the respondents reported having been in business for a period of 7-10 years. Findings depict high level of awareness about financial management among business men and women (66.7%) with the most educated being more aware (20.9%, post-secondary, 23.8% secondary education). Findings show that relatively high level of financial accounting (60.4%) by business men and women. Borrowings, savings and book keeping had a significant impact on the growth of the business (P-values < 0.05). Findings show that SMEs are motivated to utilize accounting practices by factors such as enabling them to increase profitability, influences better decision making, reduces on business costs and eases filing of taxes. Based on the findings of the study, the following recommendations can be made. There is need for people in business to properly account for their finances if they are to continuously realize business growth. This is based on the finding that business men and women who were able to account for resources realized business growth. Business men and women need to carryout record keeping for the growth of businesses. This includes recording business sales, inventory, income and expenditure among others. In addition to this, record keeping needs to be done on a daily basis to avoid missing out important information. Business men and women need to establish different financing options such as borrowing and using savings for the growth of their businesses. This is evidenced in the findings as those who had used and properly managed borrowings and savings realized business growth in the recent two years.