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The Impact of Management Accounting Practices on the Performance of small and medium size enterprises in the Buea Municipality

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This study was designed to examine the Effect of Management Accounting Practices (MAPs) on the performance of Small and Medium Sized Enterprises (SMEs) in Buea Municipality. It had as specific objectives to identify the various MAPs used by SMEs in Buea Municipality, the extent to which these management Accounting practices (MAPs) affect the profit of small and medium size enterprises (SMEs) and to identify the challenges faced by SMEs in Buea in adopting MAPs. Data was collected using questionnaires administered to 40 SMEs in Buea which indicated that they make use of at least an accounting system. Results were presented on tables and charts using frequencies and percentages.

According to the findings, majority of SMEs in Buea make use of MAPs like costing system, budgeting system, Decision Support Systems and Strategic Management Accounting. Most of these businesses use these Management Accounting Systems to effect product costing, compute budgeting for planning and control, compute capital expenditure appraisal techniques and calculate short-term decision.

This helps the SMEs in decision-making, accessing new market and maximizing profits as well as facilitate the organizational financial management plan of the business. This notwithstanding, most SMEs in Buea find it challenging implementing MAPs because of financial constraints which limit the institutions’s ability to implement effective management accounting system, lack of adequate expertise and lack of proper accounting systems.

As such, the study recommends that efforts should be made by SMEs on regular basis through in-house training schemes to provide a forum for accountants to acquaint themselves to the available MAPs and Standards and to train the accountants and other staffs to understand the accounting system in operation in SMEs.


1.1 Background of the Study
Small and Medium Size Enterprises (SMEs) make up the vast majority of the business population in most counties in the world. Therefore they constitute a vital force in modern information base economies (Mitchell and Reld, 2000).

In Cameroon the SMEs population comprises approximately 90 percent (90%) of all Cameroonian businesses therefore this sector plays a cruder role in the economic as an engine to generate economic growth in Cameroon. SMEs also contribute to the economic in other ways.

Since the 1960s to date, small and medium sized enterprises (SME) have been given due recognitions especially in the developed nations for playing very important roles towards fostering accelerated economic growth, development and stability within several economics (Yitzhaki, 2006).

They make-up the largest proportion of businesses all over the world and play tremendous roles in employment generation, provision of goods and services, creating a better standard of living, as well immensely contributing to the gross domestic products (GDP) of many countries (OECD, 2000). Over the last few decades, the contributions of the small and medium sized enterprises sector, the development of the largest economics in the world have beamed the searchlight on the uniqueness of the SMEs; and this have succeeded in overruling previously held views that SMSs were only “miniature versions” of larger companies (Al-Shaikh 1998; Gaskill et. 1993).

And although small and medium sized enterprises have been at the center of the policy debate for quite some time both developed and developing countries, little analytical work has been undertaken in this area. The death information that exists among researchers on small and medium sized enterprises however provides a sense of how important this sector is for sustainable development in emerging economics (Medina, 2001). For instance, recent studies conducted by United Nation Industrial Development organization (UNIDO) concur that small and medium sizes enterprises are: labor-intensive, providing more opportunities for low-skilled workers, correlated with lower income distribution inequality, necessary for agriculture-dependent nations transitioning to ab industrial and service oriented economy, excellent sites for innovation and initiatives due to their inherent flexibility and risk taking ability (Patricoff & Sunderland, 2005).
Cook (2001) highlighted some of ways; they encourage entrepreneurship, greater likely hood that small and medium sized enterprises (SMEs) will utilize labor intensive technology and thus have immediate impact on employment generation, The ability of SMEs development to encourage the process of both inter and intraregional decentralization and nation that they may become a counter veiling force against the economic power of large enterprise. More generally the development of small and medium sized enterprises (SMEs) is seen as accelerating the achievement of wider economic and socio- objectives including poverty alleviation.
In addition of the advantage stated above. Mitchell and Reld (2000) argued that part of the reason for stressing the importance of small and medium sized enterprises (SMEs) is that their flexibility makes them well suited to the niche opportunities which are so characteristics of the new economy. Thus SMEs plays a key role in stimulating economic expansion. In light of both their significant contribution and potentials. There is growing focus in this sector by policy makers in most country.
In Cameroon, small and medium sized enterprises (SMEs) became more important after the 1990’s. The country learnt not to be over dependent on foreign direct investment (FOI) in stimulating its economy and used SMEs as a new machine for generation the growth of its economy. The governments have been called upon to put clear policies strategies and implementation matrixes to develop their sector through integrated approach.
Consequently, various initiatives have been set in motion to build the capacity and capability of small and medium sized enterprise (SMEs). For example there have being efforts to improve the management and business method in accounting among Cameroonians since there is no specific reference to the use of MAPs (Management Accounting Practices). Management accounting Previous research has suggested that, management accounting practices (MAP), are important tool through which management can promote efficiency and potential haven important influence on performance (Mitchell and Reld, 2000).
Management accounting is an indispensible part of management function, which is defined as planning, organization, implementation and control of business activities, is one of the greatest helpers of business management in decision making. For business managers, management accounting techniques has been one of the important tools in establishing strategic goals and achieving those goals. One of the most important tools of enterprises competitive management approaches is measurement of the enterprises’ performance in an environment, where the level of competition on a global scale rises every day and conscious consumer behavior
gets improved. From this perspective, performance management and measurement is important in terms of both following, developing of the inner management capability of enterprises and ensuring the compliance of them with the business environment.
Companies use Management Accounting techniques to assess their operations. These include budgeting, variance analysis and breakeven analysis. These methods help organizations to plan, direct and control operation costs and to achieve profitability. It is recognized that management accounting practices are important to the success of the organization (Horngren, et al., 2009). Management accounting is the application of appropriate techniques and concepts in processing the historical and projected economic data of an entity to assist management in establishing a plan for reasonable economic objectives and in the making of rational decision with a view towards achieving these objectives.
Management accounting is a of set practices and techniques aimed at providing managers with financial information to help them make decision and maintain effective control over corporate resources. These include the method and concepts necessary for effective planning, decision making (choosing among alternative business actions and controlling through the evaluation and interpretation of performance).
Although good Management Accounting Practices (MAPs) may not guarantee success or poorly implemented practices which may significantly reduce the firm competitive advantage from the MAPs use. It is important to promote knowledge and awareness of MAPs among small business in Cameroon so that, the firm may benefit advantages that has been highlighted above.
This system traditionally apply a variety of techniques including the standard costing of products, absorption costing and budgeting to provide timely and accuracies information’s to managers which will assist them in cost measurement and improving productivity and this ensures the achievement of business goals. According to modern business management approach, performance measurement and management plays a very important role in today’s competitive business environment, which is characterized by scarcity of resources. To succeed in global competition, enterprise have to realize adaptation behavior by closing the gap between enterprises and the environment element through working to increase their productivity and performance (Kadarova, Durkacova, Teplicka, & Kadar, 2015, p. 1503).
Finally, small and medium sized enterprises (SMEs) also require adequate and sophisticated management accounting to better manage scare resources and enhance customers and managers values.

1.2 Problem Statement

Much has been written about small scale businesses and in particular about small business failure rate (Watson and Everett, 1996). Richard (2000) state that there are many reasons for the failure rate of start up business including lack of adequate capital, poor market section and rapidly changing external market conditions. However, the most significant reason for the high failure rate is the instability of the small and medium size enterprises (SMEs) to make use of adequate essential business and management practices. Many small firms fail to develop an initial plan, and those that do establish a plan fail to continually adjust and use it as a bench making tool.
Adelegan (2001) carried out a study on companies in developing country of Nigeria. The study found that management accounting in the country was still concerned with the process of cost determination and management planning and control through the use of decision analysis and responsibility accounting. Nandan (2010) who also argued that like larger firms SMEs also require adequate and sophisticated management accounting techniques and system to better manage scare resources and enhance the firm’s value. Although SMEs may have some constraints in utilizing fully management accounting practices due to their relatively small size limited resources, like larger firms SMEs face similar forms of complexities, uncertainties and are more prone to failures.
As today’s business environment becomes increasingly competitive, business organization are becoming more aggressive and dynamic in identifying strategies that will ensure profitable existence. Competition may be attributed to business innovation advancement in technology and the changing demand of customers. Competition amongst business organization may compel the management to develop business techniques and strategies that would guide an organization towards the maximization of profit. This may be achieved through increased sales and reduce cost of production. The optimization of profit and maximization of cost may enable the organization to create a competitive advantage in its industry. Certain management accounting practices provide strategies that can influence a large number of customers to have a lasting preference for a company’s products. Thompson, Strickland and Gamble (2009) are of the view that the adoption of management accounting techniques may provide an organization with a sustainable competitive advantage over its rivals.
Management accounting practices have moved from reporting historical information, especially on variance analysis, to taking part in the strategic planning process of an organization (Kiesler and Sproull, 1982). These authors contend that management accounting skills are actively applied in the business environment where both market intelligence is sought, evaluated and strategic decision are made and competitive strategies put in place. These are factors which Ittner and Larker (1997) argue that they enable an organization to gain an advantage in the ever demanding competitive business environment where innovative management accounting practices need to be employed. The management accounting, especially those in the manufacturing sector, should therefore be at the forefront in the search and development of innovative competitive strategies that may enable an organization to remain profitable and competitive.
This notwithstanding, the literature published about Cameroon small and medium size enterprises (SMEs) and information systems is only related to Accounting Information Systems (AIS), Computerized Accounting Systems (CAS), etc while little or no information is mentioned on management Accounting practices (MAPs) use by small and medium size enterprises (SMEs) in the country. This therefore creates a major gap that this study seeks to address. Hence, this study is designed to examine the impact of Management Accounting Practices (MAPs) on the Small and Medium Sized Enterprises (SMEs) in Buea Municipality. Based on this, the following research questions will be addressed:
i. What are the Management Accounting Practices (MAPs) used in small and medium size enterprises (SMEs) in Buea Municipality?
ii. What is the extent to which these management Accounting practices (MAPs) affect the profit of small and medium size enterprises (SMEs)?
iii. What are the challenges faced by Small and Medium Size Enterprises (SMEs) in adopting Management Accounting Practices (MAPs).

1.3 Objectives of the Study

The objective of study comprises of the Main Objective and Specific Objective
1.3.1 Main Objective
The main objective of this study is to examine the effect of Management Accounting Practices (MAPs) on the growth of Small and Medium Sized Enterprises (SMEs) in Buea Municipality.
1.3.2 Specific Objectives
The specific objectives considered in this study are to;
1) Identify the various management Accounting practices (MAPs) used by small and medium size enterprises (SMEs) in Buea Municipality
2) Determine the extent to which these management Accounting practices (MAPs) affect the profit of small and medium size enterprises (SMEs) in Buea municipality.
3) Identify the challenges faced by Small and Medium Size Enterprises (SMEs) in adopting Management Accounting Practices (MAPs).



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