A Survey On Financial and Management Accounting Practices Among Small and Medium Enterprises in Malaysia

Abstract

In the current business environment, firms are faced with intensifying competition locally and globally, and fast changes in customers and technologies. In this environment it is vital that small and medium enterprises (SMEs) are equipped with appropriate and modern financial and management accounting practices in order for them to survive and remain profitable. One of the factors that determine the performance of a business organization is effective use of financial and management accounting reports. However, thus far very little published evidence on accounting practices among SMEs in Malaysia is found. This study aims to examine the financial and management accounting practices among SMEs in Malaysia and to investigate perceived usefulness of accounting reports for decision making. A survey was carried out using the SMEs in manufacturing listed by SMIDEC, as the sampling frame. A total of 76 usable questionnaires were used for the final data analysis. The findings from the survey provide pertinent and useful insights into the current financial and management accounting practices and the level of perceived usefulness of the accounting reports among SMEs. The results of the study indicate that a majority of the firms surveyed prepare their financial and management accounting reports on a monthly basis. With regards to the purpose of financial accounting reports, the results show that preparing tax returns rank first, followed by providing information to shareholders, and providing information to government agencies. Management accounting reports provide the most useful information for planning and control, followed by product pricing and lastly, employee performance evaluation. Financial accounting reports were perceived to be more useful than management accounting reports. Among the financial accounting reports, profit and loss statement was considered as most useful, followed by cash flow and balance sheet. Among the management accounting reports, production report was rated highest in terms of usefulness, followed by budget and variance analysis.

The domination of financial accounting on managerial accounting information

“…They ranked the managerial information as a second source of information needed for internal decision making. These results coincide with the study of Isa et al (2007) which found that financial accounting reports were perceived to contain important information needed for management purposes. The study also shows that business type is an influential variable behind respondents' views of the influence of financial accounting on management accounting information.…”

“…In such a business environment, managers need relevant “management accounting” information in order to make value‐adding decisions (Atkinson, 1987; Agbejule, 2005). Consequently, the management accounting system has attracted significant attention since it is the system that supplies appropriate information enabling managers to continually adjust their business activities in response to their corporations' environment (Drury and Tayles, 2005; Isa et al , 2007).…”

Women’s Micro-Enterprises: Factors Influencing Business Performance

“…Micro and small entrepreneurs have been acknowledged by the world, because they play a very important part in the development of a country regardless of whether it is a developed or a developing country (see Cassells and Lewis 2011;Isa et al, 2008;Hairuddin et al, 2012;Rasiah, 2002). There is no specific definition for micro and small enterprises (MSEs) because the definition depends on many factors (Kushnir, 2010).…”

Financial Management Practices, Firm Growth and Profitability of Small and Medium Scale Enterprises (SMEs)

“…While it has been established that the use of appropriate bookkeeping, financial reporting and management accounting, Practices are important to the survival of SMEs (Bowen, 2009;Isa, Saleh & Sapiei, 2007), scarcely will you find sufficient reported research on the subject in the sector, particularly in Ghana where just a handful of studies has been reported in recent times. Studies on SMEs in Ghana have focussed on some aspects of financial management practices like bookkeeping, and to a lesser extent working capital management without comprehensively examining the entire financial management practices of SMEs and how these can affect their growth and profitability.…”