The sustainability of small and medium-sized enterprises (SMEs) in South Africa is important, mainly because of their contribution to the gross domestic product (GDP) and their creation of work opportunities. The high rate of SME failure in South Africa is largely attributable to the lack of management skills by their owners and managers.
The objective of the study was to examine owners and managers of Durban SMEs’ perceptions of the use of management accounting practices (MAPs) and the factors affecting its use. In addition, the challenges faced by SMEs were also investigated.
Although the use of MAPs has been investigated in other parts of South Africa, research on Durban SMEs’ use of MAPs and factors affecting its use is lacking in KwaZulu-Natal, which is an important contributor to South Africa’s GDP. If MAPs are not being used, what strategies could be recommended to advance their use? This important question provided further motivation for this study.
The research adopted a quantitative approach in the form of a self-administered questionnaire, which was e-mailed to SMEs.
Management accounting practices were perceived to be used mainly in assisting planning and in assessing business performance. Factors affecting the use of MAPs were the lack of management accounting knowledge and education and skills. Challenges faced by SMEs were identified as being mainly financial and human resource challenges. Small and medium-sized enterprise owners and managers supported the recommendation that they should go for management accounting training.
The study recommended that SMEs’ owners and managers should attend management accounting training. Bodies such as government agencies or educational institutions should ensure that training aimed at SMEs is offered.
The study provides new information about the perceptions of owners and managers of SMEs on the use of MAPs, factors affecting its use of MAPs and other challenges. It further provides impetus for the need to provide management accounting training aimed at SMEs
Small and medium-sized enterprises (SMEs) account for an overwhelming number of businesses worldwide and they contribute considerably to gross domestic product (GDP), employment and growth (Rundora & Selesho
In South Africa, Berry (
Small and medium-sized enterprises are central to South African economic development (Agbenyegah
There is, therefore, a need to understand whether MAPs are used by SMEs, and whether there are some factors preventing their use and any other challenges, which SMEs are facing. The objective of this study is therefore to determine owners and managers of SMEs’ opinions on the use of MAPs within their businesses, factors affecting its use and other challenges that they may be experiencing as SMEs. If SMEs are not using MAPs, what recommendations could be made to increase MAPs’ usage? Whilst studies have addressed the need for MAPs and factors affecting the use of MAPs in other regions, the SMEs in this study are contractors on the database of a large municipality and this particular area is under-researched.
In the following section the article presents the theoretical framework, which is followed by the literature review. Firstly, the literature review focuses on the uses of MAPs by SMEs before examining the factors affecting its use and other challenges. After this, the research methodology is explained followed by the presentation and discussion of the results. Finally, the conclusion, limitations and areas for further research are provided.
Waweru (
This study focuses on SMEs that have characteristics different from that of large organisations; they, nevertheless, ‘face similar forms of complexities’ (Nandan
Management accounting systems are internal information systems that provide an organisation with relevant information to add value to the organisation as whole (Nuhu, Baird & Appuhami
Studies have focused on a range of uses of MAPs such as assisting in decision-making and planning, controlling costs, yielding an advantage over competitors, assisting in choosing the best investment opportunities, ensuring profitability, sustainability, performance and growth and assisting management in running the business successfully, financial reporting and in developing business strategies. The discussion that follows is aligned to the uses outlined here.
Studies have emphasised the use of MAPs for decision-making and planning. In Kenya, Mbogo (
Studies have emphasised that MAPs can help in controlling costs (Cuzdriorean
Studies have highlighted that using MAPs may yield an advantage over competitors by helping in choosing the best investment opportunities. Ramljak and Rogošić (
Research has also focused on MAPs and its wider use in achieving profitability, sustainability, performance, growth and success. In other words, focusing on a narrow use of MAPs may be insufficient to ensure the success of an SME and a more comprehensive approach to its use should be adopted. In South Africa, Berry (
Although this study was conducted in a specific region in South Africa, the link between MAPs and profitability and success has also been established in studies outside South Africa. Karanja, Mwangi and Nyaanga (
In summary, studies both within and external to South Africa have found links between the use of MAPs and profitability, sustainability, performance, growth and success. The next discussion focuses on the use of MAPs in the financial reporting function and in helping to develop business strategies.
The financial reporting function is assisted by MAPs as Sunarni (
Expressing a contrary point of view on the use of MAPs, Abogun and Fagbemi (
Although working capital management practices (WCMPs) and their effect on profitability and growth were not investigated specifically in this study, two studies on WCMPs are detailed. Musah, Gakpetor and Pomaa (
To summarise the use of MAPs by SMEs, the following observations are drawn from the literature. Management accounting practices have positive and important influences on decision-making, are critical for SME survival, have an influence on financial performance, improve decision-making, assist in monitoring and in planning and cost control. Management accounting practices also play an active role in supporting strategies and competitiveness. However, SMEs face challenges that may impact their use of MAPs.
Although studies have indicated that there are many uses of MAPs for SMEs, studies have also indicated that SMEs face challenges in implementing MAPs. López and Hiebl (
The lack of management skills as a factor affecting the use of MAPs has been cited by a number of studies. Giroux (
The skills gap was also identified in studies external to South Africa. In Thailand, Sumkaew, Liu and McLaren (
Small and medium-sized enterprises in Mwanza and Benedict’s (
Kefasi (
The previous discussion has outlined factors affecting SMEs use of MAPs. Because the studies were focused on SMEs and in specific industries or businesses, the studies tended to avoid the impact that size, industry and nature of the business may have on the use of MAPs. For example, Kefasi (
Small and medium-sized enterprises face other challenges with respect to their survival and profitability. The following section highlights these other challenges.
Small and medium-sized enterprises’ failure rates have increased over the years to a point where many researchers have felt the need to investigate the challenges facing SMEs (Agbenyegah
Cant and Wiid’s (
In Malaysia, Isa, Saleh and Sapiei (
Agwu and Emeti’s (
Shipulwa (
The literature suggests that managerial competencies have a great influence on SMEs’ failure (Agwu & Emeti
To sum up, SMEs face many challenges to using MAPs and to their continued existence. The lack of management skills, education and training, financial challenges, access to management accounting systems or technology to manage their businesses, finance for capital and investments, the retention of skilled labour, technical advice, technical skills and management accounting information and experience amongst SME owners and managers were all highlighted as challenges. Limited access to international markets, inflation and interest rates, the location of the business, crime and unemployment, low demand for products and competitiveness in the SME sector are further challenges faced by SMEs and are not always within the SMEs’ control.
A positivist quantitative methodology was chosen using a census sampling strategy and a self-administered questionnaire. The questionnaire was designed to ascertain respondents’ opinions on the uses of MAPs within the enterprise, factors affecting the use of MAPs, challenges faced by the SMEs and recommendations, which would facilitate the adoption and usage of MAPs. All the statements were posed using a Likert scale of 1 (strongly disagree) to 5 (strongly agree). In addition, the definitions of the various MAPs and other key words or phrases for the purposes of the study were shown in an appendix to the questionnaire and cross-referenced to relevant wording in the questionnaire.
After pretesting the questionnaire, getting ethical clearance and the receipt of a signed letter of informed consent, it was emailed to 163 contractors on the database of a large municipality, which actively provides support to SMEs in its municipal area. As these contractors are supported by the municipality with financial opportunities, technical skills and information communication technology, these SMEs were more likely to be using MAPs than SMEs, which do not have any external support.
Survey size and response rate.
Survey size | Number of respondents | % |
---|---|---|
Number of contractors in database | 163 | 100 |
Undelivered emails | 15 | 9.2 |
Delivered questionnaires | 148 | 90.8 |
No response | 46 | 28.2 |
The quantitative data were first entered into a Microsoft Excel spreadsheet. It was then checked for accuracy before being uploaded into the Statistical Package for the Social Sciences (SPSS) Version 25 for data analysis.
As a measure of the internal consistency of the response scale of the questionnaire, Cronbach’s alpha was used.
Cronbach’s alpha for
Key questions | Number of items | Cronbach’s α |
---|---|---|
Use of MAPs ( |
12 | 0.885 |
Factors affecting the use of MAPs ( |
8 | 0.794 |
Challenges facing SMEs ( |
6 | 0.742 |
MAP, management accounting practice; SMEs, small and medium-sized enterprises.
According to Tavakol and Dennick (
Content validity was addressed by including definitions of the items used in the questionnaire and by having the questionnaire checked by a person skilled in questionnaire development and a management accounting expert. To ensure construct validity, the questionnaire was developed using existing literature. In addition, the questionnaire was examined by a statistician who confirmed that suitable statistical tests could be generated to measure the concepts, which were intended to be measured.
The article adhered to all ethical standards to comply with research integrity. Ethical approval was obtained from a public university (Ethical clearance number REC 116/16) on 02 March 2018).
A number of background questions were asked. To ensure that the respondents were knowledgeable about their business, they were first asked about their position in the business. The responses revealed that the respondents were either the owner of the business (18 respondents), the manager (31 respondents) or were both owner and manager of the business (53 respondents). This confirmed that these respondents would be able to provide reliable answers to the questionnaire.
A question was also posed asking respondents about the form of the business. The purpose of this question was to ensure that the respondents were small businesses and that it was likely that the owner or manager would have first-hand knowledge of the operations of the business. These results are shown in
Respondents’ form of business.
Form of business | Number | Percentage |
---|---|---|
Sole trader | 53 | 52.0 |
Partnership | 35 | 34.3 |
Close corporation | 8 | 7.8 |
Co-operative | 4 | 3.9 |
Franchise or private company | 2 | 2.0 |
Respondents’ number of years in existence.
Years | Number | Percentage |
---|---|---|
1–3 years | 18 | 17.6 |
4–9 years | 55 | 53.9 |
10–13 years | 16 | 15.7 |
14–19 years | 11 | 10.8 |
20 years or more | 2 | 2.0 |
The SMEs are prone to failure (Aren & Sibindi
The study first investigated the opinions of the SME managers and owners on their use of MAPs within their business. A number of uses of MAPs derived from the literature were listed. Respondents were asked to rate the following uses of MAPs on a scale of 1 (strongly disagree) to 5 (strongly agree). Respondents were also asked to list any other uses of MAPs and rate accordingly. These results are shown in
Respondents’ use of management accounting practices.
MAPs … | Strongly disagree |
Disagree |
Neither agree nor disagree |
Agree |
Strongly agree |
Total No. | Mean | s.d. | |||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
% | % | % | % | % | |||||||||
Assists in decision-making | 3 | 3.6 | 12 | 14.5 | 26 | 31.3 | 34 | 41.0 | 8 | 9.6 | 83 | 3.39 | 0.97 |
Helps to control costs | 4 | 4.7 | 4 | 4.7 | 27 | 31.8 | 36 | 42.4 | 14 | 16.5 | 85 | 3.61 | 0.98 |
Assists in planning | 2 | 2.0 | 1 | 1.0 | 11 | 11.1 | 25 | 25.3 | 60 | 60.6 | 99 | 4.41 | 0.88 |
Yields an advantage over competitors | 6 | 7.1 | 17 | 20.2 | 43 | 51.2 | 12 | 14.3 | 6 | 7.1 | 84 | 2.94 | 0.96 |
Assists in choosing the best investment opportunities | 8 | 9.6 | 15 | 18.1 | 37 | 44.6 | 15 | 18.1 | 8 | 9.6 | 83 | 3.00 | 1.07 |
Ensures profitability | 0 | 0.0 | 12 | 14.5 | 30 | 36.1 | 31 | 37.3 | 10 | 12.0 | 83 | 3.47 | 0.89 |
Ensures sustainability | 0 | 0.0 | 10 | 12.7 | 26 | 32.9 | 30 | 38.0 | 13 | 16.5 | 79 | 3.58 | 0.91 |
Assists in assessing business performance | 1 | 1.2 | 4 | 4.7 | 20 | 23.5 | 22 | 25.9 | 38 | 44.7 | 85 | 4.08 | 0.99 |
Ensures business growth | 5 | 6.8 | 15 | 20.3 | 31 | 41.9 | 15 | 20.3 | 8 | 10.8 | 74 | 3.08 | 1.06 |
Assists in running the business successfully | 7 | 9.0 | 10 | 12.8 | 36 | 46.2 | 13 | 16.7 | 12 | 15.4 | 78 | 3.17 | 1.12 |
Assists in financial reporting | 4 | 5.3 | 5 | 6.7 | 34 | 45.3 | 23 | 30.7 | 9 | 12.0 | 75 | 3.37 | 0.97 |
Helps in developing business strategies | 9 | 11.8 | 21 | 27.6 | 28 | 36.8 | 10 | 13.2 | 8 | 10.5 | 76 | 2.83 | 1.14 |
Notes: Not all respondents indicated a response to each statement.
MAP, management accounting practice; s.d., standard deviation.
No additional uses of MAPs were suggested by the respondents.
Although
A comparison of these results with that of prior literature confirms the use of MAPs for planning (Armitage et al.
The respondents were then asked to rate the factors affecting the use of MAPs. These statements were posed using a Likert scale of 1 (strongly disagree) to 5 (strongly agree). Respondents were also asked to add any other factors they felt affected the use of MAPs and rate them accordingly. These results are shown in
Factors affecting the respondents’ use of management accounting practices.
Statements | Strongly disagree |
Disagree |
Neither agree nor disagree |
Agree |
Strongly agree |
Total | Mean | s.d. | |||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
% | % | % | % | % | |||||||||
The industry where your business operates | 7 | 6.9 | 15 | 14.9 | 3 | 3.0 | 55 | 54.5 | 21 | 20.8 | 101 | 3.67 | 1.17 |
The nature of the business | 7 | 7.0 | 13 | 13.0 | 9 | 9.0 | 43 | 43.0 | 28 | 28.0 | 100 | 3.72 | 1.21 |
The size of the business | 5 | 5.2 | 16 | 16.5 | 10 | 10.3 | 50 | 51.5 | 16 | 16.5 | 97 | 3.58 | 1.11 |
Lack of education and skills | 3 | 3.1 | 4 | 4.1 | 9 | 9.2 | 21 | 21.4 | 61 | 62.2 | 98 | 4.36 | 1.02 |
Lack of technology | 3 | 3.6 | 9 | 10.7 | 31 | 36.9 | 23 | 27.4 | 18 | 21.4 | 84 | 3.52 | 1.06 |
Cost to employ in-house management accountants | 5 | 5.9 | 7 | 8.2 | 12 | 14.1 | 42 | 49.4 | 19 | 22.4 | 85 | 3.74 | 1.08 |
Lack of management accounting knowledge | 2 | 2.0 | 1 | 1.0 | 1 | 1.0 | 28 | 28.0 | 68 | 68.0 | 100 | 4.59 | 0.75 |
Cost to outsource MAPs | 3 | 3.3 | 7 | 7.7 | 7 | 7.7 | 45 | 49.5 | 29 | 31.9 | 91 | 3.99 | 1.01 |
Notes: Not all respondents indicated a response to each statement.
MAPs, management accounting practices; s.d., standard deviation.
No additional factors were suggested by the respondents.
The ‘cost to outsource MAPs’ (
Lastly, there was some indication that technology was not the most important factor affecting the use of MAPs (
Small and medium-sized enterprises were then asked to rate a number of challenges, which their businesses may be facing. The statements were posed using a scale of 1 (strongly disagree) to 5 (strongly agree). Respondents could also add other challenges that they may be experiencing, which were not included in the question and rate them accordingly. These results are shown in
Respondents’ rating of challenges facing small and medium-sized enterprises.
Challenges | Strongly disagree |
Disagree |
Neither agree nor disagree |
Agree |
Strongly agree |
Total | Mean | s.d. | Rank |
|||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
% | % | % | % | % | ||||||||||
Financial | 6 | 7.1 | 3 | 3.6 | 11 | 13.1 | 55 | 65.5 | 9 | 10.7 | 84 | 3.69 | 0.97 | 1 |
Human resources | 13 | 13.4 | 11 | 11.3 | 9 | 9.3 | 46 | 47.4 | 18 | 18.6 | 97 | 3.46 | 1.29 | 2 |
Technology | 14 | 15.2 | 12 | 13.0 | 16 | 17.4 | 26 | 28.3 | 24 | 26.1 | 92 | 3.37 | 1.40 | 3 |
Security | 15 | 18.3 | 11 | 13.4 | 15 | 18.3 | 22 | 26.8 | 19 | 23.2 | 82 | 3.23 | 1.43 | 4 |
Regulatory | 19 | 23.5 | 12 | 14.8 | 21 | 25.9 | 15 | 18.5 | 14 | 17.3 | 81 | 2.91 | 1.41 | 5 |
Environmental | 19 | 22.9 | 15 | 18.1 | 19 | 22.9 | 22 | 26.5 | 8 | 9.6 | 83 | 2.82 | 1.32 | 6 |
Notes: Not all respondents indicated a response to each statement.
s.d., standard deviation.
, Rank is based on the mean scores.
No additional challenges were suggested by the respondents.
The results in
The challenges of security, regulatory and environmental were not rated highly. It is possible that regulatory and environmental challenges would become more challenging as the SME grows. For example, SMEs are required to register for value-added tax with the South African Revenue Service (SARS) once its turnover is R1 000 000 or more. Should the SME have employees, it would be also be required to register as an employer with SARS. Thus, as an SME grows, it encounters more regulations, especially those related to tax compliance.
The final area probed asked the respondents to rate a number of recommendations derived from the literature, which would facilitate the adoption and use of MAPs. These recommendations were posed using a Likert scale of 1 (strongly disagree) to 5 (strongly agree). Respondents could also add additional recommendations and rate them accordingly.
Recommendations by small and medium-sized enterprise owners and managers.
Statements | Strongly disagree |
Disagree |
Neither agree nor disagree |
Agree |
Strongly agree |
Total | Mean | s.d. | |||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
% | % | % | % | % | |||||||||
SMEs should employ management accountants | 4 | 4.4 | 2 | 2.2 | 14 | 15.4 | 49 | 53.8 | 22 | 24.2 | 91 | 3.91 | 0.94 |
Owners and managers should go for management accounting training | 1 | 1.0 | 0 | 0.0 | 0 | 0.0 | 39 | 38.6 | 61 | 60.4 | 101 | 4.57 | 0.61 |
SMEs should outsource the management accounting function | 5 | 5.7 | 15 | 17.0 | 19 | 21.6 | 37 | 42.0 | 12 | 13.6 | 88 | 3.41 | 1.10 |
Note: Not all respondents indicated a response to each statement.
The suggested recommendations were posed using a Likert scale of 1 (strongly disagree) to 5 (strongly agree).
s.d., standard deviation; SMEs, small and medium-sized enterprises.
No other recommendations were suggested by the respondents.
The aim of this article was to examine the use of MAPs by SMEs in Durban. To achieve this aim, a survey was administered to SME contractors on a municipality’s database. With reference to the use of MAPs, this study found that the three most supported uses of MAPs were ‘assists in planning’, ‘assists in assessing business performance’ and ‘helps to control costs’. All three uses of MAPs could be considered crucial to the performance of the SME and confirm the findings of prior research. The main factors limiting the use of MAPs were the ‘lack of education and skills’ and ‘lack of management accounting knowledge’. The costs of implementing MAPs (i.e. cost to employ an in-house management accountant or the cost to outsource the management accounting function) were also considered factors affecting the use of MAPs.
Challenges facing SMEs were that of financial and human resources. Technology is seen as less of a challenge as its mean tended towards neither agree nor disagree. Compared with prior studies, technology is perceived as being less of a challenge for these SMEs. Security, regulatory and environmental matters were not seen to be challenges affecting the SMEs currently; however, as these SMEs grow, these latter challenges may become more important.
The main recommendation concerning the use of MAPs was that SME owners and managers should go for management accounting training. Educational institutions and government agencies should ensure that they offer training in management accounting aimed at SMEs. Training on entrepreneurship should ensure that MAPs are included in the course content and different ways of delivering the training should be explored.
This article makes two important contributions. Firstly, it has contributed to the literature on MAPs and SMEs as it focused on a specific under-researched area in South Africa, and secondly, it has identified a need for training in management accounting aimed at SMEs. However, this study cautions that the training should meet the specific needs of the target audience. As the respondents were on a municipal database, it would seem short-sighted if this municipality did not address this need for training. However, the training could be offered by agencies that have been set up specifically by the government to assist SMEs or other educational institutions.
A limitation of the study is that only SMEs on a municipal database were targeted and this means that other geographical regions were not represented. Therefore, these findings cannot be generalised to other areas. However, these findings could be used for comparison to other studies or as support for interventions such as training to assist SMEs in using MAPs in their businesses. A further limitation is that it is possible that some of the statements probed areas in which the respondents may have had limited knowledge, which may have affected their responses. Future research could use larger samples focusing on different geographical regions and industries to investigate whether respondents in different areas or industries have similar or dissimilar views on the use of MAPs and factors affecting its use.
The authors have declared that no competing interest exists.
S.C. was the researcher of the original dissertation from which this article is substantially derived. L.J.S. was responsible for the first version of this article. Later versions of the article were substantially edited and additional research was added by both L.J.S. and C.J.N. Both L.J.S and C.J.N. were the co-supervisors of the original dissertation.
This research received no specific grant from any funding agency in the public, commercial or not-for-profit sectors.
Data sharing is not applicable to this article as no new data were created or analysed in this study.
The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position or any affiliated agency of the authors.