The Impact of Accounting Information Systems on Small and Medium-Sized Enterprises (SMEs)
Chapter One
Objective of the Study
The main objective of the study is to evaluate the impact of accounting information systems on SMEs. While the specific objectives are to;
- Examine the benefits derived by SMEs from the adoption of accounting information systems.
- Examine the relationship between the adoption of accounting information systems and the profitability of SMEs.
- Examine the relationship between the adoption of accounting information systems and the overall performance of SMEs.
CHAPTER TWO
LITERATURE REVIEW
Introduction
This work has embarked upon this literature review under the following headings; conceptual issues/reviews, theoretical reviews and empirical reviews of financial management practices. Conceptual reviews enhance the description of basic concepts relating to SMEs and SMEs financing. Theoretical reviews x-ray theories relating to accounting practices, bank-SME financial relationship and emergent SME financing needs. Empirical Reviews explore submissions posited by scholars as a result of empirical investigations undertaken by them.
Conceptual Issues/Reviews
The concept of SMEs
Small and Medium-Scale Enterprises are generally privately owned organisations set-up for the purposes of producing goods or services for profit. The criteria for classifying business enterprises under SMEs differ from country to country (Aremu & Adeyemi, 2011). The identifiable and predominant criteria across the globe include: size of capital invested, number of staff or employees, size of turnover or sales volumes and value of assets (Ezeh, 1999; Bureau of statistics, 2001).
The reliance on the criteria identified above for the categorisation of business enterprises under SMEs still varies across the globe (Ezeh, 1999; ICAN, 2010). There is no compromise as to the exact number of employees, size of capital employed, sales volumes or value of assets that qualify a business enterprise an SME. Relying on the number of employees/staff criterion for instance, some countries describe all enterprises that have less than 100 employees as SMEs, others are in favour of 50 employees and some expand the net to include all firms who have less than 200 employees (Stanley, 1956; Ekenyon, 1989; ABS, 2001; Ojeka & Mukaro, 2011).
Besides the controversy in defining the SME using the number of employees, there exist difficulties in other criteria. It becomes apparent that for SME to be defined using the criteria; employees, sales volumes, assets employed, capital invested or a combination of the above, care must be exercised to overcome these inherent difficulties. This view was supported by Ezeife (1988) who pointed out that definition based on number of workers may be misleading because owing to improvement in technology, so much money may be involved (say up to I billion naira) when only few people are employed. Ezeife (1988) also pointed out that definition based on capital should consider the time and the place. What is regarded as a large firm today may be actually an SME in the very near future and what is considered an SME in developed countries like United States of American may be a large firm in developing countries like Nigeria.
To buttress this fact, we refer to SME definition by the European Union as follows: ‘the new category of small and medium-sized enterprises (SMEs) is made up of enterprises which employ fewer than 250 persons and which have an annual turnover not exceeding 50 million euro, and/or an annual balance sheet total not exceeding 43million euro (Gunter, 2005). The definition by European Union combined the criteria; number of employee, turnover/sales volume and capital employed. Also relying on the same criteria as the European Union, the UK defined SMEs as business organisations which have sales turnover between 6.5m pounds and 25.9m pounds, Net assets between 3.26m pounds and 12.9m pounds and number of employees between 50 and 250 (Lucas, Prowle and Lowth, 2013).
CHAPTER THREE
RESEARCH METHODOLOGY
Introduction
This chapter sets out research approach used in achieving at the study’s objectives. It sets out the method used in selecting respondents, collecting data and analyzing the same. The chapter is thus structured into sections; Section 3.2 analyses the research design, 3.3 present’s the target population and the sampling design, 3.4 are the data collection instruments and data collection procedures and section 3.5 data analysis entailing the conceptual and analytical models.
Research Design
A research design encompasses the methodology and procedures employed to conduct scientific research. The design of a study defines the study type. The researcher employed a case study approach which allows for intensive observations and investigation of salient factors in the units of study (Kothari, 1990). On the whole, this research design facilitates a better understanding of the impact of accounting information systems towards organizational effectiveness.
The design of the study is descriptive research method. In addition both qualitative and quantitative methods were applied in data collection and analysis. The descriptive design is found to be suitable because it addresses major objectives and research questions proposed in the study adequately.
Population and Sample
The target population for this study was the 5 major SMEs in kwara state. A sample size of 75% was used. Probability sampling scheme was employed where every unit in the sampling frame has a chance (greater than zero) of being selected. This probability can be accurately determined through self weighting by the researcher. Simple random sampling was used, it gives equal chance to all subsets in the population and estimates are easy to calculate.
CHAPTER FOUR
DATA ANALYSIS, RESULTS AND DISCUSSION
Introduction
This chapter involves data analysis, results & discussions of findings. It is thus structured into several sections; Section 4.2 involves summary of the statistics, section 4.3 analysis the empirical model, section 4.4 involves chapter discussions and section 4.5 gives a conclusion on the chapter.
CHAPTER FIVE
SUMMARY AND CONCLUSION
Introduction
This chapter consists of a brief summary of findings that were obtained. It also presents the deduced conclusions and offers recommendations on how to improve the present situation. The research implications are discussed and suggestions of opportunities for further research presented. Section 5.2 is the summary of the study, section 5.3 gives the conclusion, 5.4 outlines the limitations of the study & section 5.5 outlines recommendations for further research.
Summary of the Study
The aim of the study was to find out the impact of Accounting Information Systems on the SMEs. The study measured the effectiveness of the Accounting Information Systems based on the various dimensions, including, system quality, information quality, service quality, system use, user satisfaction and net benefits of the AIS.
The findings of the study indicated that the AIS used in the automobile industry in kwara state are quality systems. The researcher evaluated various characteristics of an information system. These characteristics included ease of use, system flexibility, system reliability, ease of learning, as well as system features of intuitiveness, sophistication, flexibility, and response times. The findings further indicated that the quality of information was guaranteed. The results indicated that the outputs from AIS were clear, accurate, and timely.
The results of the study indicated that staff and customers utilize the capabilities of AIS. The results show that the web sites of the automobile companies are updated regularly and contain accurate information. The findings further indicated that AIS contribute to the success of individuals, groups, organizations, industries, and nations. Some of the benefits included improved decision-making, improved productivity, increased sales, cost reductions, improved profits, market efficiency, consumer welfare, creation of jobs, and economic development.
The study sought the challenges faced when using the AIS. The findings indicated that the major challenges were lack of proper training and lack of proper system documentation as some of the challenges they face. Further, the results indicated that high staff turnover is a major challenge of using the AIS. The results indicated that when the staff turnover is high, some of super trained staff leaves the organization and they happen to be having more information about the AIS than the normal users of the AIS. Other shortcomings included lack of finances and risk of obsolescence.
The findings of this study indicate that AIS is an important mechanism of an organization that is vital for effective management decision-making and controlling organization. The results are consistent with empirical reviews which indicated that there exist a relationship between AIS and organizational performance. AIS are an effective decision-making tool for controlling and coordinating the activities of an organization. The findings also indicate that an effective AIS increase system integration and improve internal communications throughout the organization. The top management team with various planning and management information system influences on strategic performance of the organization.
Conclusion
Accounting information systems are critical to the production of quality accounting information on a timely basis and the communication of that information to the decision makers. Existing literature offers evidence of the relationship between these AIS and organizational effectiveness; though it is important to highlight that an in-depth study is required to examine other factors that may influence this relationship. The information value generated by AIS to shareholders and stakeholders in making investment decisions is invaluable. Financial managers need the financial and accounting data provided by AIS to evaluate the firm’s past performance and to map future plans.
This study showed that there is strong relationship between accounting information system and organizational effectiveness, which means access to accounting information, will lead to organizational effectiveness. Therefore, it can be concluded that accounting information systems have an impact on the effectiveness of automobile companies in Kenya.
Recommendations
Throughout working on this study, some suggestions concerning the expansion of the present study have arisen. First, in terms of data collection, I would suggest to collect data from different sources. This would include further case studies, interviews or face-to-face communication, and secondary data analysis.
Secondly, I would suggest similar studies to be done in more companies in order to compare the findings with the findings of this study. A survey would shed more light than just a case of selected companies in the industry.
Finally, a similar study could be carried out focusing on the effectiveness of accounting information systems in enhancing the organizational effectiveness. Similarly, a similar study could also be carried out focusing on factors influencing implementation of accounting information systems or even challenges faced during implementation of accounting information systems in the automobile industry in Nigeria .
REFERENCES
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- Boulianne, E. (2007). Revisiting fit between AIS design and performance with the analyzer strategic-type, International Journal of Accounting Information Systems, 8 (16).
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- Campbell, J.P. (1977) “On the Nature of Organizational Effectiveness.” In: P.S. Goodman & J.M. Pennings (Eds.), New Perspectives on Organizational Effectiveness, 36-41.
