Financial record keeping and business decision making processes of small and medium enterprises (SMEs) in Gulu Municipality, Uganda

Abstract

The study examined the impact of financial record keeping on business decision making process of SMEs in Gulu Municipality, Uganda. Specific objectives included; to assess the impact of safety of financial records on business decision making processes of SMEs, to assess the impact of ease of access to financial records on business decision making processes of SMEs, to assess the impact of completeness of financial records on business decision making processes of SMEs and to assess the impact of nature of financial statements on the relationship between financial record keeping and business decision making processes of SMEs. These were demonstrated using positive accounting theory which suggests that SMEs minimized contract cost by developing appropriate policies. Key problem noted with SMEs are lack of financial records to support decision making processes. It was found that both financial record keeping and SMEs businesses have history way back during industrial revolution and the concept clearly supported development at that time. The descriptive research design was used and complemented with both qualitative and quantitative approach. A population of 208 respondents was identified from which 185 respondents formed the sample. Questionnaires and FGDs were used to aid data collection. A response rate of 79% was obtained. Key findings included all variables namely safety of financial records (.469**), ease of access to financial records (.209**), completeness of financial records (.541**) and nature of financial statements (.365**) were positively related with business decision making processes of SMEs. In light of the discussion held earlier, it is concluded that financial records controls block unauthorized access while immediate filing and backup of financial records curb records mismanagement. In addition, much as using adverts is expensive it attracts more customers. More still, storage of electronic business files and recording of all financial transaction is good information for making decisions. From the discussion held are recommendations for the study namely SMEs owners to purchase storage facilities, there is need for a passwords register. There is also need to prepare general purpose financial statement for stakeholder and consider materiality in preparing financial statement for decision making.