The role of management accounting practices in the success of small and medium-sized enterprises in Durban

Abstract

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) of the country as a whole. Nonetheless, the high rate of SME failure in South Africa is largely attributable to lack of management skills by owners and managers of these SMEs. This study investigated the role of management accounting practices in the success of SMEs in Durban. The objectives were to identify the types of management accounting practices used in SMEs, to examine factors that affect the use of management accounting practices by SMEs, to examine the extent to which management accounting practices are used by SMEs and to examine the impact of management accounting practices in SMEs’ success. A quantitative approach was adopted in a form of self-administered questionnaires which were mailed to respondents. Data were analyzed using descriptive statistics to summarise the opinions of the respondents from the data collected. The findings were analysed using the Statistical Package for Social Sciences (SPSS) version 25. The findings of the study indicate that although the management accounting practices were not often used, the most used costing system was traditional costing as well as process costing. In terms of the decision support and investment appraisal tools, the most used tool was the accounting rate of return followed by the payback method and relevant cost and revenues. Planning and control techniques such as the sales budget and production costing were also used by SMEs in Durban. Factors that affect the use of management accounting practices are the lack of management accounting knowledge, lack of education and skills and the cost to employ management accountants. Management accounting practices were found to have a positive relationship with planning and performance. Challenges faced by SMEs are financial challenges, human resource challenges as well as technological challenges. The study recommended that SMEs’ owners and managers should attend management accounting training, employ management accountants or outsource the management accounting function. Implementing management accounting practices by SMEs may improve their business management in terms of cost controls and decision-making