A critical assessment of management accounting practices in small and medium-sized clothing enterprises in Newcastle, KwaZulu-Natal

Abstract

The aim of this study was to make a critical assessment of the extent of the management accounting practices (MAPs) in small and medium-sized enterprises (SMEs) in Newcastle, KwaZulu-Natal. The objectives of the study were to determine the extent to which MAPs are employed by Newcastle clothing/textile SMEs, to identify the roles played by MAPs in Newcastle clothing/textile SMEs management, to determine the factors that affect the extent of use of MAPs amongst Newcastle clothing/textile SMEs and to consider the role of MAPs in the performance of the SME. The motivation for the study was driven by the lack of research on the extent of use of MAPs by clothing/textile SMEs in South Africa. The forms of MAPs investigated in this study were the costing systems, the budgeting systems, the performance management tools, the decision support systems, and strategic management accounting. These MAPs are thought to be necessary for the survival and success of SMEs in the modern enterprise environment. This is a quantitative descriptive survey of 51 clothing/textile manufacturing SMEs in Newcastle, KwaZulu-Natal using a self-administered questionnaire. The results of this study indicate that budgeting systems were the most used MAPs by Newcastle clothing/textile SMEs and that the strategic management accounting (SMA) and performance measurements tools (PMTs) were the least used of the MAPs surveyed. Newcastle clothing/textile SMEs use traditional MAPs; however, they are endeavouring to integrate the modern or newly-developed MAPs such as the use of the decision support systems into their enterprises’ administration. The results indicated that the most valued role of MAPs was for planning future strategies, tactics and operations. On the other hand, certain roles of MAPs were considered not to be beneficial to Newcastle clothing/textile SMEs. Factors that affected the use the MAPs were the high cost to implement MAPs, the complexity of newly-developed or modern MAPs, that the benefits of the MAPs were too difficult to observe, and the lack of information on affordable accounting services. In respect to the performance of the Newcastle SMEs, the results indicated that the MAPs assessed had a moderate influence on the performance of SMEs. The study recommends that SMEs are apprised of the significance of MAPs. SMEs should liaise with academics, government, and professionals in the commerce field, amongst other initiatives, to implement and monitor their skills development for the success and survival of SMEs in the clothing/textile industry.