Evaluation of the effectiveness of the ‘3-in-1’ financial reporting model in supporting the sustainability of MSMEs

Abstract

Micro, Small and Medium Enterprises (MSMEs) play a crucial role in the global economy, but often face challenges in compiling and understanding financial statements. This study aims to identify effective financial reporting models for MSMEs in supporting the sustainability of their businesses in Indonesia. This qualitative field research focuses on MSME actors in the handicraft sector, household accessories retail, and laundry services. Through interviews, observations, and analysis of financial statement documents, it was found that the “3-in-1” financial statement model that integrates balance sheet, profit and loss, and cash flow in one worksheet provides significant benefits for MSMEs. This model offers a concise, easy-to-understand, and integrated presentation of financial information, allowing MSME actors to comprehensively understand the financial performance of their business. The results show that after 14 months of implementing the “3-in-1” model, the assets of one of the MSMEs increased by more than 1 billion rupiah. In addition, an informant in the retail sector reported a change from a loss of 16 million Rupiah to a profit of 44 million rupiah after improving the pricing procedure based on the “3-in-1” report. In the laundry service sector, the implementation of the “3-in-1” model allows business owners to pay themselves 50 thousand rupiah every day. This model has proven to be effective in supporting the sustainability of MSMEs by providing easy-to-understand financial reports, saving time and resources, and encouraging business growth. This study contributes to improving MSME financial literacy, better business decision-making, and encouraging innovation in financial reporting for the MSME sector.