KWAME NKRUMAH UNIVERSITY OF SCIENCE AND TECHNOLOGY,

KUMASI

COLLEGE OF ARTS AND SOCIAL SCIENCES

SCHOOL OF BUSINESS

COMPUTERIZED RECORD KEEPING AMONG SMALL AND MEDIUM

ENTERPRISES- A CASE STUDY IN SUNYANI MUNICIPALITY.

BY

ANOKYEWAA CHRISTIANA

(PG 9604013)

Thesis Submitted to the Department of Accounting and Finance, Kwame Nkrumah

University of Science and Technology in partial fulfillment of the requirements for
the degree of

MASTER OF BUSINESS ADMINISTRATION

(ACCOUNTING)

NOVEMBER, 2015
 DECLARATION

I hereby declare that this submission is my own work towards the award of the MBA and

that, to the best of my knowledge, it contains no material previously published by

another person nor material which has been accepted for the award of any other degree

of the University, except where due acknowledgement has been made in the text.

Research Prepared by:

Name: Anokyewaa Christiana …………………………. ……………

(PG 9604013) Signature Date

Certified by:

Name: Kingsley Opoku Appiah (Phd ………………………….. ……………

(Supervisor) Signature Date

Certified by:

Name: Kingsley Opoku Appiah (Phd) …………………………. ……………

Head of Department Signature Date

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 ABSTRACT

In developing countries like Ghana, Small and Medium Enterprises (SMEs) constitute

about 90% of all businesses and occupy a central part of the Ghanaian economy as the

main driver in terms of its contribution to income, employment generation and ultimately

economic growth. However, over the years, many SMEs have folded up shortly after

their establishment due to many factors; both environmental and internal. Key among

these factors is poor accounting and financial record keeping. The study therefore

examines the effect of computerized record keeping among SMEs in the Sunyani

Municipality. The specific objectives were: to assess the types of record keeping systems

employed by SMEs; to examine the extent to which SMEs use computerized record

keeping in their business activities; to investigate the benefits and challenges with the use

of the computerized record keeping system. The study adopted a case study research

design. The data collected was analysed quantitatively and qualitatively. The researcher

used purposive and random sampling techniques to reduce the possibility of research

limitations. The primary data collected were analyzed using the Statistical Package for

Social Science (SPSS) and the Excel computer software. The analyzed results are

presented into graphical and descriptive representations such as tables, percentages,

charts and graphics. The study found out that the form of record keeping by SMEs in the

Sunyani Municipality is manual. Again, the study discovered that majority of SME

operators in the Municipality do not employ computerized record keeping systems in

their operations. It also revealed that computerization have positive effects on the

operations of SMEs. Finally, the study found out that SMEs faced major challenges in

adopting and implementing computerized record keeping systems in the municipality.

Based on the findings the study concludes that the inability of SME operators to use

computerized record keeping systems in their daily record keeping activities leads to

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negative effects on their operations. The researcher therefore recommend that for better

decision making and improved performance of SMEs, the National Board for Small

Scale Industries (NBSSI) should collaborate with other benevolent NGOs to set up

training organizations to offer basic ICT training skills and development programme to

SMEs operators at affordable cost. This will help them acquired basic ICT skills to

enable them keep records of their business activities.

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 DEDICATION
I dedicate this work first to Almighty God for His protection and too my dear husband

and daughter, Francis Asiedu and Nana Akua Asiedu for their and cooperation. It is also

dedicated to my wonderful mum Miss Comfort Boateng and my siblings especially my

elder brother BernardAgyei who supported me throughout my education.

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 ACKNOWLEDGEMENT
I am very grateful to the Almighty God for seeing me throughout my education pursuit

effortlessly.

I wish to express my heartfelt thanks to Dr. K.O. Appiah, my supervisor and lecturer at

Accounting and Finance Department of Kwame Nkrumah University of Science and

Technology for his directions, motivation, suggestions, guidance and corrections.

I also appreciate the assistance given to me by Mrs Martha Owusu Agyemang and family

members for their support.

My special thanks go to Mr Frank Mensah, friends and all my MBA colleagues

especially my study group members for their experience and encouragement.

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 TABLE OF CONTENTS
DECLARATION ...................................................................................................... ii

ABSTRACT .............................................................................................................. iii

DEDICATION .............................................................................................................v

ACKNOWLEDGEMENT ......................................................................................... vi

TABLE OF CONTENTS ......................................................................................... vii

LIST OF TABLES .......................................................................................................x

LIST OF FIGURES ................................................................................................... xi

ABBREVIATIONS .................................................................................................. xii

CHAPTER ONE ..........................................................................................................1

INTRODUCTION .......................................................................................................1

1.0 Background of the Study .......................................................................................1

1.1 Problem Statement and Justification .....................................................................4

1.2 Objectives of the Study..........................................................................................6

The objectives of the study are classified as general objective and specific
objectives. ....................................................................................................................6

1.2.1 General Objective ...............................................................................................6

1.2.2 Specific Objective ...............................................................................................6

1.3 Research Questions ................................................................................................6

1.3.1General Research Question..................................................................................6

1.4 Significance of the Study .......................................................................................7

1.5 Scope of the Study .................................................................................................7

1.6 Limitation of the Study ..........................................................................................8

1.7 Organization of the study.......................................................................................9

CHAPTER TWO .......................................................................................................10

LITERATURE REVIEW ..........................................................................................10

2.0 Introduction..........................................................................................................10

2.1 Overview of SMEs ..............................................................................................10

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2.2 Importance of SMEs to the Ghanaian Economy .................................................11

2.3 Record Keeping Systems of SMEs ......................................................................13

2.4 Types of Accounting and Financial Record Keeping Systems of SMEs ............14

2.4.1 Types of Conventional/Manual Record Keeping Systems ...............................16

2.5 Computerized Record Keeping System ...............................................................17

2.6 Benefits of Computerized Record Keeping System for SMEs ............................18

2.7 Challenges of Use of Computerized Record Keeping System of SMEs .............20

2.8 Effects of the Challenges of Computerized Record Keeping Systems on SMEs

Operations ..................................................................................................................22

2.9 Empirical Evidence of Computerized Record Keeping System of SMEs ...........23

RESEARCH METHODOLOGY ..............................................................................25

3.0Introduction...........................................................................................................25

3.1 Profile of the study Area ......................................................................................25

3.2 Research Design ..................................................................................................26

3.3 Population of the Study .......................................................................................27

3.4 Sample Size and Sampling Technique ................................................................28

3.6 Data Collection Tools and Techniques ................................................................29

3.7 Data Processing and Analysis ..............................................................................30

3.8 Ethical Consideration...........................................................................................30

CHAPTER FOUR .....................................................................................................31

PRESENTATION OF RESEULTS AND DISCUSSION ........................................31

4.0 Presentation of Results ........................................................................................31

4.0.1 Socio-Demographic Characteristics of Respondents........................................32

4.1 Type of Ownership of SMEs in Sunyani .............................................................33

4.1.1 Categorization of SMEs in Sunyani Municipality ............................................34

4.1.2 Number of Years of SMEs Operation ..............................................................35

4.2 The Type of Conventional Record Keeping Systems Employed by SMEs in

Sunyani Municipality.................................................................................................36

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4.3 Benefits of Computerized Record Keeping Systems over
Traditional/Conventional Book Keeping ...................................................................41

4.4 Challenges facing SMEs with the use of Computerized Record Keeping
Systems ......................................................................................................................44

4.5 Effects of the Challenges of Computerized Record Keeping Systems on SMEs

Operations ..................................................................................................................45

CHAPTER FIVE .......................................................................................................47

SUMMARY, CONCLUSION AND RECOMMENDATION ..................................47

5.1 Introduction..........................................................................................................47

5.3 Conclusion ...........................................................................................................48

5.4 Recommendation .................................................................................................49

REFERENCES ..........................................................................................................51

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 LIST OF TABLES

Table 4.1: Socio-Demographic Characteristics of Respondents ..................................... 32

Table 4.2: Categorization of SMEs in Sunyani Municipality........................................... 35

Table 4.3: Common Bookkeeping Systems...................................................................... 37

Table 4.4: Type of Conventional Financial Record Keeping Practices Employed

by ...................................................................................................................................... 37

Table 4.5: Extent of Computerized Record Keeping Systems in Cash Management ...... 39

Table 4.6: Extent of Computerized Record Keeping Systems to Prepare Accounts ........ 39

Table 4.7: Extent of Computerized Record Keeping Systems in inventory ..................... 40

Table 4.8: Extent of Computerized Record Keeping Systems to Preparing

Financial ........................................................................................................................... 41

Table 4.9: Benefits of Computerized Record Keeping Systems ...................................... 42

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 LIST OF FIGURES
Figure 1: Diagram Organization of the study ..................................................................... 9

Figure 2: Map of Sunyani Municipality ........................................................................... 26

Figure 4.1: Type of Ownership of SMEs in Sunyani Municipality .................................. 34

Figure 4.2: Number of Years of SMEs Operation ............................................................ 36

Figure 4.4: Challenges facing SMEs with the use of Computerized Record
Keeping ............................................................................................................................. 45

Figure 4.5: Effects of Computerized Record Keeping Challenges on Operations of

SMEs................................................................................................................................. 46

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 ABBREVIATIONS
CAS: Computerized Accounting System

CRKS: Computerized Record Keeping Systems

DBMS: Data Base Management System

FDIC: Federal Deposit Insurance Corporation

GDP: Gross Domestic Product

GEDC: Ghana Enterprise Development Commission

GSS: Ghana Statistical Service

ICT: Information and Communication Technology

NBSSI: National Board for Small Scale Industries

NGOs: Non Governmental Organization

PWC: Price Waterhouse Coopers

RPED: Regional Project on Enterprise Development

RPEDG: Regional Project on Enterprise Development Ghana

SBA: Small Business Administration

SMEs: Small and Medium Enterprises

SMME: Small, Medium and Micro Enterprise

SPSS: Statistical Package for Social Science

U.S.: United State

UK: United Kingdom

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 CHAPTER ONE

INTRODUCTION

1.0 Background of the Study

Small and Medium Enterprises (SMEs) have been the builder of most economies. They

are the largest employers of workers both in developing and developed industrial

economies. They are seen as resourceful and productive employment avenues, the power

of big businesses and the driver of national economic locomotives (Carsamer, 2009).

SMEs enhance the effectiveness of a countries market and make creative use of limited

resources, thus enhancing long-term economic advancement.

In Ghana, 90% of businesses are small and medium enterprises which make the pivot of

the counry (Acolatse, 2012). They are essentially the drivers of the Ghanaian economy

through their contribution to income, employment generation and ultimately economic

growth. A survey conducted by Aryeetey (2001) reports that SMEs represent the

production force of Ghana. They contribute about 85% of the manufacturing

employment of Ghana. They are noted to provide 70% to Ghana GDP and represent

about 92% of enterprises in Ghana.

Small and Medium Scale Enterprises face an assortment of challenges and these

challenges can be summed up to lack of knowledge since most SMEs lack knowledge in

keeping records of business operations (services, 2011). This menace has caused the

folding up of most SMEs especially in the Sunyani municipality in the Brong Ahafo

Regiion of Ghana.

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Record keeping is an integral part of business accounting. It entails accumulating,

analyzing and classifying of financial data in the accounting system on a daily basis.

(Hagenimana, 2008). Accounting records include entries from day to day transactions

that involves receipts and expenditure and in some cases a list of organizational assets

and liabilities. This document helps to evaluate the performance of the business within a

particular period of time usually at the end of a financial period. Proper record keeping

provides evidence of how the transaction was handled and substantiates the steps that

were taken in order to comply with business standards (Reed, 2010).

According to Longenecker, Moore, Petty, & Palich (2006), an accounting system must

offer accurate and all-inclusive report of business activities and transactions, offer easy

assessment between current and previous years data. It makes the financial statement

easy to be used by bankers, potential creditors; management and it ease filing of reports

and tax returns to government regulatory agencies. Keeping proper accounting record

help minimize the degree of error, waste, theft, employee misconduct and do

significantly contribute to the growth and sustainability of SMEs.

Over the years, the traditional way of keeping business records or accounts has been by

use of calculators, pen and a set of books, which worked fine for the businesses at that

time (Sam, Hoshino & Tahir, 2012). Keeping financial record has now been made easier

and simple through the use of information technology (IT). The current improvement in

information technology is converting computer resources into a necessity. Thus, business

owners have now accepted the adoption of information technology as business enabler to

support business processes (Runge & Lee, 2002). This current advancement in

information technology have subsequently given birth to Computerized Accounting

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Systems in businesse to help present a faithful representation of financial reports for

management and external users in making decisions (Greuning, 2006)

Computerized Accounting System uses computer accounting software to prepare and

give results of business activities. Accounting software is computer application software

that records, process and retrieves information in a form of report of an entity on a daily

basis. The accounting software could perform business functions such as payroll, account

receivable, account payable and trial balance. These software applications makes it

possible for the whole business cycle and operations to be carried out on a computer

which gives it the name Computerized Accounting System.

According to Fast Track, Computerized Accounting system has revolutionalized record

keeping practices of businesses. Most developed economies have benefitted from this

system. However the Ghanaian economy has been adopting it gradually in most

businesses especially small and medium enterprises which constitute the majority of

businesses in most cities and towns and Sunyani Municipality is no exception. The

Sunyani Municipality being the capital of the Brong Ahafo Region of Ghana covers

2,488 square kilometers and shares boundaries with Sunyani West District to the West

and North, Asutifi District to the South and Tano North District to the East (Sunyani

Municipal Assembly Quarterly Report, 2013, October, 15th, P.15)

The municipality is now opening up rapidly due to the setting up of new tertiary

institutions coupled with rural urban migrations. This situation has attracted many small

and medium enterprises to the municipality. To be able to measure whether the SBOs in

the Sunyani Municipality are doing well in terms of their business operations, it is crucial

that these SMEs have in place computerise record keeping system.

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1.1 Problem Statement and Justification

Over the years, many SMEs have folded up soon after their establishment. This problem

could be attributed to an array of factors which include poor accounting record keeping.

The importance of keeping proper records to promote the growth and sustainability of

small scale businesses has been researched in earlier research on small business growth

and development (Abor & Biekpe, 2006). Keeping proper financial records have been

identified by many researchers. Some other studies have found lack of keeping proper

financial records as the most serious obstacle to growth of small businesses. Bowen

(2009) observes that a strong link exist between how a business performs especially in

business finance record keeping.

Studies indicates high failure rate for small and medium businesses especially those in

developing countries like Ghana (Arinaitwe, 2002). Previous statistics conducted in

Kenya indicates that 60% of businesses fail within the first few months of operation

(Kenya National Bureau of Statistics, 2007). Similarly, Kamunge, Njeru & Tirimba

(2014) stated that the rate of mortality of SMEs is high within the first two years, only

44% of them survive at the first four years. Many environmental and internal factors are

attributed to this problem among SMEs. Walton (2000) supports that poor record

keeping and inappropriate utilization of accounting information to help financial

management has generally been observed as a major cause of the small and medium size

enterprises’ failure.

Again, Longenecker, (2006) cited inadequate planning, inappropriate financing,

ineffective accounting and management practices as the major causes of failure of SME

management. This assertion is affirmed by Germain (2009) who noticed that failure to

record business financial transactions have resulted in the collapse of business within

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few month of its establishment. Also, McCannon (2002) indicated that, many SMEs fail

because owners could not make appropriate and key managerial decisions as a result of

non availability of records.

SMEs face problems in the adoption of accounting standards. When accurate records of

financial transactions are not kept it will this give room for fraud. Poor record keeping of

businesses limits their chance of assessing institutional credits. Proper record keeping is

at the pivot of growth and development of SMEs. Proper accounting record keeping has

become an indispensable necessity for SMEs since when records are not kept

ascertaining the profit made within a period is difficult. As a result, it is possible that the

tax authorities may turn to overstate the tax liability of the business owner.

Casual observation of records keeping of some SMEs in Sunyani coupled with frequent

interactions with most of them revealed that majority of them lacked adequate

knowledge and skills to keep complete and reliable records of their business activities.

Most small and medium enterprises in Sunyani also complain of challenges associated

with the adoption of computerized record keeping system. These challenges include high

maintenance and installation cost, risk of being hacked, failure of electricity power,

losing information through viruses and system breakdowns. It is based on this situation

that this study seeks to investigate computerized record keeping among small and

medium enterprises in Sunyani Municipality.

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1.2 Objectives of the Study

The objectives of the study are classified as general objective and specific objectives.

1.2.1 General Objective

The study explores the use of computerized record keeping among small and medium

enterprises in Sunyani Municipality.

1.2.2 Specific Objective

The specific objective of the study includes;

i. To assess the types of record keeping systems employed by SMEs operating in

the Sunyani municipality

ii. To examine the extent to which SMEs use computerized record keeping in their

business activities in the municipality

iii. To investigate the benefits with the use of computerized record keeping system

by SMEs in the municipality

iv. To determine the challenges facing SME Operators with the use of computerized

record keeping system in the municipality

1.3 Research Questions

1.3.1General Research Question

The study answers the following questions to meet the research objectives.

i. What are the types of record keeping systems employed by SMEs operating in

the Sunyani municipality?

ii. What is the extent to which SMEs use computerized record keeping in their

business activities in the municipality?

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 iii. What are the benefits/advantages with the use of the computerized record keeping

system by SMEs in the municipality?

iv. What are the challenges facing SME Operators with the use of the computerized

record keeping system in the municipality?

1.4 Significance of the Study

The contribution of SMEs to the expansion of the markets of developing countries

cannot be underestimated. For this reason, record keeping is a pivotal growth

determinant factor of the profitability of businesses. Conventional manual record keeping

systems over the years have proven to be cumbersome, prone to errors and sometimes

unreliable when it comes to information processing, storage and/or retrieval. This poses

serious challenge to the business owner in monitoring and evaluating the growth of the

business over time.

Findings of this study would provide information to SME operators towards finding long

term solutions to their business record keeping challenges. It would also provide SME

operators and stakeholders with information on value of quality record keeping as a pillar

for sound business decision-making and subsequent good performance. Again, it would

add to the existing pool of knowledge on performance and thus stimulate further research

in both record keeping and performance in SMEs in Ghana.

1.5 Scope of the Study

The study covers small and medium enterprises within Sunyani municipality. This

includes Agriculture and agro-processing, artisans, textile and leather works, food

processing, creative and art works, clothing and fabric designing among others.

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For the purpose of this study, a small entities are those that have less than ten (10)

employees, including the owner whilst that of the medium entities ranges between ten to

fifty (10-50) employees including the owner.

The study focuses on the financial record keeping systems used by the various SMEs

operating in the municipality, the use of computerized record keeping system, the

advantages and disadvantages of these record keeping systems, and the challenges that

these firms encounter with the application of this computerized record keeping system.

1.6 Limitation of the Study

In carrying out this study, the following challenges were encountered; nevertheless, these

limitations did not in any way bias the outcome of the present study.

Access to information: it is a challenge getting information from some respondents.

Despite being made aware of the purpose of the study, some were reluctant to offer the

needed information. Also, some relevant information required from stakeholder

institutions like NBSSI is absent due to improper record keeping. Some vital information

are sourced from the internet and other classified sources.

Time of study: Time for conducting the research, academic commitments and other

personal commitments are difficult to manage. It is quite a challenge collecting data from

respondents since research period coincided with the active academic period.

Finance: financing the study is a challenge. Money for data collection and or

procurement, analysis to final printing and binding of the study report involved a high

amount of financial commitment.

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1.7 Organization of the study

The study is organized in five chapters. Below is a diagramme that illustrate the

organization of the study.

Figure 1.1: Diagram Organization of the study

CHAPTER ONE: INTRODUCTION

Background to the study
Problem Statement
Research Objectives
Research Questions
Justification
Scope
Limitation
Organization of Study

CHAPTER THREE: RESEARCH METHODOLOGY

CHAPTER TWO: LITERATURE REVIEW Study Area
Theoretical Framework Study Design
Conceptual Framework Study Population
Empirical Framework Sampling Techniques
Analytical Tools
Ethical Consideration

CHAPTER FIVE: SUMMARY, CONCLUSION AND

CHAPTER FOUR: RESULTS PRESENTATION AND RECOMMENDATION
DISCUSSIONS
Summary
Results Presentation
Conclusion
Discussions
Recommendation

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 CHAPTER TWO

LITERATURE REVIEW

2.0 Introduction

This chapter appraises other studies conducted on the subject matter and related areas. It

deals with the breakdown review of various aspects of the subject under study. It focuses

on the review of relevant literature concerning the research objectives and also provides

explanation to the relevant themes captured in the research. All research findings,

reports, publications that are applicable to the study were duly consulted and reviewed.

2.1 Overview of SMEs

Defining SMEs is quite challenging, even though several attempts have made to define

it. Different jurisdictions and economies classify a firm as SME or otherwise considering

a varied number of factors; mainly the size of the economy and its micro and macro

development indicators. Some of the definitions are based on the capital employed, level

of technology among others. SMEs in Africa are defined according to the economic

activities within a specific geographical (Beyene, 2000; Hallberg, 2004).

For the purpose of this study the operational definition of small enterprises are those that

have less than ten (10) employees, including the owner whilst medium enterprises ranges

between ten to fifty (10-50) employees, including the owner.

According to the National Board for Small Scale Industries (NBSSI, 1990) a small-scale

enterprise is a firm which does not have more than nine workers, and has plant and

machinery (which does not include land, buildings and vehicles) not exceeding GH¢10

million and micro which has employees less than five. The Regional Project on

Enterprise Development Ghana manufacturing survey has grouped firms into: micro

10
enterprise, less than five employees; small enterprise, 5 -29 employees; medium

enterprise, 30- 99 employees; large enterprise, 100 employees and above (Teal, 2002).

Hallberg (2004) explains SMEs in two distinct ways. According to his viewpoint SMEs

are different groups of firms that operate in different markets. Some of the firms are

innovative, growth oriented and others are dynamic in their operations. The Ghana

Statistical Service (GSS) categorizes businesses having less than ten workers as small

scale enterprises whilst others with more than ten workers are categorized as medium

and large size enterprise.

Another criterion used for defining SMEs is the value of fixed assets. Ten million Ghana

cedis have been used as the upper limit for plant and machinery (Ghana Enterprise

Development Commission). They however indicate some flaws with this definition.

There are challenges in valuation of fixed asset and the frequent depreciation of the local

currency as against main trading currencies.

2.2 Importance of SMEs to the Ghanaian Economy

Globally, SMEs have contributed significantly to the growth and advancement of

national economies. Small businesses are noted to be the pivot of advancement of many

developed economies such as Russia, United Kingdom and Germany (Carsamer, 2009).

Recent studies conducted in developed market indicate that small business account for

the highest number of registered companies. Hence they significantly add to the growth

and development of an economy (eServices, 2011). Even when considers the situation of

both developed and developing economies, SMEs are still a significant tool to the growth

and development of an economy.

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Researchers like Beyene (2004), Snodgrass and Biggs (1996) reports that SMEs

contribute significantly create completion in the market, create employment, innovation

and thus generate economic wealth. Hence it is noted to be the device for the

development of many nations in the emerging and developing nations. Small businesses

are the employers of majority of the labour force in most developing nations. In the same

Kuratko (2001) suggests that small and medium enterprise in South Africa constitute

42% of GDP to the economy.

SMEs plays important role in employment creation, add to the number of establishment,

make value added share and accumulation of human resources with skills and managerial

abilities in both developed and developing countries as well as the seedbed of industrial

development (Liedholm and Mead, 1999; Hamilton, 2007). In Ghana, SMEs constitute

about 85% of manufacturing works, offer 70% to GDP of Ghana. Hence they have a

significant impact on the growth, income and employment of the country (eServices,

2011).

Aryeetey (2001), reports that small enterprises in Ghana have characteristics of

production landscape. Hence they offer about 85% of manufacturing employment of

Ghana. The Ghana Statistical Services projections indicate that 69% of the Ghana’s

workforce is employed in SME sector. The sector offer work opportunity for large

number of people in both rural areas as well as cities (GSS, 2007).

PWC (2013) projected the Ghanaian economy to grow by 8% in 2013 and 8.7% in 2014.

A major indicator of a thriving country is a strong small and medium enterprise with

their contributions to GDP of the economy. SMEs contributed about 49% to Ghana’s

GDP in 2012. Hence they contributed to the employment, income and economic growth

of the country.

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2.3 Record Keeping Systems of SMEs

The Federal Deposit Insurance Corporation (FDIC) and U.S. Small Business

Administration (SBA) describe record keeping as an organized routine practice of

keeping business records. One key responsibility of a business owner is record keeping

which is major ingredients for business success. The success of business lies on adopting

and maintain an effective record keeping system be it sole proprietorship, partnership or

corporation. Records can be kept in the form of simple manila folder filing systems to

complex on-line electronic systems. Irrespective of its form, a record system must

provide adequate storage and retrieval of records and it must be easy to use. The type,

size, and complexity of the business and it’s available resources, is what determines the

better record keeping system appropriate for the business (FDIC and SBA Financial

Education Curriculum, n.d).

Record keeping practices among businesses vary with size and capacity of the business

and its location. Thus, as Howard (2009) indicates that record keeping system used to

record information may vary from business to business, but the principles are the same.

According to William, Susan, Mark, Bettriel, & Carcello (2008), record keeping cycle

involves a process that is followed by Accountants and book keeping staff in processing

raw financial data into output information in the form of financial statements. The

process ranges from creation of business transactions, analyze and record the

transactions in the journals by account name, post transactions from journals to ledgers,

ascertain the trial balance, make journal adjustment, post adjustments from the journal

to the ledger, prepare an adjusted trial balance, journalize closing entries, post closing

entries from the journal to the ledger, ascertain the trial balance, and prepare the financial

reports

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According to Amid, Effah and Abor (2011) record keeping is the basic step of

accounting; as a system it serves as a way that SME owners, managers and operators

adopt to get information for use in the measuring business performance and business

growth. As opined by Maseko and Manyani (2011) Micro and Small business record

keeping is the backbone of the business. As much as it seems to be a laborious task for

many, it makes or breaks a business, thus, keeping accurate records is actually what

creates a profitable business. This is supported by Germain (2010) who reported that

most SMEs operators view record keeping as a chore practice that must be done to

simply get back some much needed cash at the end of a particular period of time for

example after a year. Thus in order for SMEs to survive, owners and managers need

updated, accurate and timely accounting information (Lohman, 2000; Amidu and Abor,

2005

2.4 Types of Accounting and Financial Record Keeping Systems of SMEs

Hagenimana (2008) reports that, accounting records for SMEs can be a simple manual

one. For instance the general journal, general ledger and other journal used in daily

business activities like the purchase, payment, sales receipts, and payroll journals.

Alberta Economic Development and Tourism Agency has reported that the type of

records kept by small scale business include daily cash records, Account receivable

ledger, Account payable ledger, petty cash records and person staff records, customer

service records, business safety records and inventory records.

Ademol, Samuel & Ifedolapo (2012) has recommended that an enterprise must have

many distinct daybooks which are a descriptive and orderly record of daily accounting

transactions. Entries in the day books are properly entered in the journals before posting

to the ledgers. The research stated that the transaction any organization must keep

14
include: Accounts receivables, Accounts payables, Accounts inventory records, Bank

records, Sales records, Payroll records, Personnel records, Cash records, Purchase

records. These books according to Wood & Sangster (2011) comprise Sales book which

records all sales invoices, Sales credits book to record all sales credit notes, Purchases

book which records all purchase invoices and purchase credit books to record purchases

credit notes.

In a related study, Reed, (2009) indicates that for small scale businesses to succeed,

they have to keep these prime documents; invoice , receipt and bank statements which

are recorded in subsidiary books, purchases and sales day books, preparation of trial

balance and the final financial reports.

McChlery, Godfrey & Meechan, (2005) in their review of financial records in small

firms concludes that financial records of SMEs should include; sales journal, purchase

journal, cash receipt book, cheque payment book, petty cash book, general journal,

nominal ledger, sale’s ledger and purchases’ ledger.

2.4. Conventional/Manual Record Keeping System of SMEs

Tavakolian (1995) stated that the manual record keeping systems involve the use of

paper ledgers, the use of typewriters and calculators. Manual record keeping systems

imply that workers carry out the whole accounting information process manually on a

intermittent basis: they prepare trial balances, journalize transactions, and prepare

financial statement reports. Prior to the arrival of personal computers, businesses were

restricted to adopt manual approaches for recording financial information. Typewriters

were used to type invoices and cheques, and all computations were done with the use of

calculators. This approach needs more time, capital and effort in big businesses. It also

15
needs trained accountants to prepare the financial record of business transactions, thus

manual record keeping systems take much time. Among the merits of conventional

manual record keeping systems include comparatively cheap labour force and resources,

consistency, free from machines, availability of skilled workers.

However, this system has some demerits like working at a slower pace, much effort of

accountants, comparatively slower internal control reporting and many more. Again, it

was possible for errors to be brought into the data with this system, and these errors

could go unnoticed for a long time. Most SMEs usually prefer manual record keeping

systems without injury to quality while big corporate bodies adopt computerized record

keeping systems which cost huge amount of money but the consequence from their

application is far above the effort, cost incurred and the prospects.

2.4.1 Types of Conventional/Manual Record Keeping Systems

Two common types of conventional/manual record keeping systems usually known as

bookkeeping systems are applied by businesses entities in their operations. These are the

single entry and double entry systems (Abdul-Rahamon & Adejare, 2014).

Single-entry bookkeeping system: the single entry book keeping approach keeps one

sided accounting entry to take account of business transactions. Many household SMEs

adopt this kind of record keeping. According to Ademola, et al., (2012) the main single

entry bookkeeping record kept is the cash book. It records the income and expenses in

the cash book and then posts them to the income and expenditure account. Different

records of account are kept for petty cash, accounts payable and receivable, and other

pertinent transactions like inventory and travel expenses. Kuriawati and Hermawan,

(2010) observes most SMEs maintain single entry accounts unless important transactions

which both records in logbooks and subsidiary books.

16
Double-entry bookkeeping system: with the use of this approach every transaction is

recorded twice in the books. That is the account to be debited and the account to be

credited. This system takes into account the source and nature of every financial

transaction. In this system, every transaction is recorded two times in the accounts. For

instance to record an increase in asset, the asset is debited and a corresponding credit

entry is made in the other account.. If all transactions are recorded correctly, the account

books would ‘balance’ because the total credit entries would be equal to the total debit

entries.

2.5 Computerized Record Keeping System

Amidu, Effah and Abor (2010) describes computerized record keeping as a means of

keeping financial reports by the use of computer technology for recording and processing

financial data in businesses. Computerized record keeping system uses computer

software to keep financial records. It computes and records faster but it will not know

what to do unless clear instructions are given. The computer then processes the

information automatically by a request. With these systems, computers are used to make

more precise computations and instant reports but it takes much skills, resources and

effort. Also it is tedious to measure which accounting type is faster and economical.

Thus computerized accounting system refers to any accounting system that relies on

Information and Communication Technology (ICT) for carring out its information

functions.

Computer based record keeping system refers to total assembling of business

information that involves entire inputs , gathering and reporting of financial transactions.

This system setup is used to back the processing and delivery of accounting information

17
system. The information system is use to collect and store data which are transactions

with the aim of producing meaningful output for decision making. The main aim of

CRKS is the collection and recording of financial data and information regarding events

that have an economic influence on businesses and how to maintain process and

communicate such information to internal and external stakeholders (Stefanou, 2006).

Similarly, computerized record keeping system offer improved internal control report

system for an organisation within a specific period. Computer can monitor several

numbers of indicators simultaneously. It then sends notifications to the appropriate

departments, sectors or employees if an indicator is not corresponding to the normal

working condition. But this is a very simplified view about the computerizes record

keeping system due to the fact that transactions are normally in a complex form which

includes not only sales or acquisitions, but depreciations, premiums and wages

calculation, dividends among others. Thus computerized record keeping system requires

accountants who can use specific computer software program which usually have a

higher cost as compared to the conventional /manual record keeping system. Moreover, a

good computerized accounting system can cost thousands and even millions of dollar,

dependant on how complex the organization is, and its size.

2.6 Benefits of Computerized Record Keeping System for SMEs

The benefits of computerized record keeping system over manual record keeping for

small businesses have been reported by studies (Magloff, 2015).Computerized

accounting systems have many merits over manual system. The system can be bought at

affordable price for use by businesses. Thus the software system enable businesses to

know the company’s financial position immediately so that they could make the

18
necessary corrections to the business. Computerized record keeping systems offer

immediate reports on stock evaluations, profit and loss, customer accounts and payroll

and sales analysis, Also, it permit quick adjustment to be made in your accounting

system. In addition to that transactions are input into the system once and, with some

training, any employee in the business can input the data.

Computerizes accounting systems save time. Thus, accounting software permits quick

data entry as against manual accounting system, and permits documents like invoices,

purchase orders and payroll to be collected and printed faster and accurately. Due to its

efficiency and ease of use, computerized accounting systems also permit you to enhance

inventory control and payment collection, it saves time and improves cash flow. Since a

computerized system provides automatic update, time is saved during updating and

account details are normally current Maloff (2015).

Computerized record keeping practices improves the production process of a business

which in turn increases overall productivity. It also streamlines work process, decrease

data redundancy and error in reconciliation, it aid financial management practices for

small and large businesses. According to Hadler(2014), computerized accounting

systems offer benefits like speed and accuracy of business operations, and it provides the

opportunity to see the companies actual financial standing.

Pettir has opined that for SMEs, computerizing accounting or recording systems presents

enormous benefits. For instance, automation reduce time as against long manual

processing, avoids human involvement in certain stages of accounting process, limits

errors caused by human involvement or multiple manual processing, provides

continuously up-to-date reports among others. This results in increase efficiency and

accuracy. This finally leads to saving time and money. This is supported by Weber

19
(2015) who noted that computerized record keeping systems have higher advantages

over manual system due to high speed and mobility of reporting, reliability, less tedious

routine work, improvement in accuracy, better internal control system that increases

productivity, better back up and restoration of records.

Computerized record keeping system facilitate the decision making process in the

enterprise (Laudon & Laudon, 2010). With the use of transaction support system,

decisions can be made readily available due to the availability of report. Transaction

support system which is a type of computerized record keeping system is a system which

records the daily routine transaction necessary to conduct business like: Sales order entry

using point-of-sales (POS) machines, where bar codes of products are scanned by

customers for payment. Employee records keeping in the Data Base Management

System (DBMS): and payroll services. With this system, preparing reports of business

transactions can easily be generated.

Again, noted by Sam, Hoshino & Tahir (2012) that with the advent of new technology

and more user friendly software, computerized system appears to reduce the problems

associated with book record keeping practice. Therefore, without the use of technology

like computerized accounting system, it would be more tedious for the SMEs to make a

good decision.

2.7 Challenges of Use of Computerized Record Keeping System of SMEs

The use of a computerized accounting systems have some set of problems like

protection of the system against loss of data due to power fluctuations or viruses, and the

danger of hackers stealing data Magloff(2015). The demerits include: extremely high

20
costs on developing, introducing and using the system, special trainings for personnel,

high training cost of employees, dependence on machines and so on.

Barriers to ICT implementation by SMEs can be grouped into internal and external.

Internal barriers could further be categorized into personnel, organizational barriers and

cost and return on investment. It has been noted that most SMEs are confronted with

internal barriers such lack of adequate ICT skills on the part of workers and high

adaptation cost to management.

One of the major challenges to the use of computerized record keeping system is the

inadequate knowledge of SME operators in ICT. For instance Knol & Stroeken (2001)

reported that the lack of adequate skills on the use of computer technology and the low

level of computer literacy constitute the poor adaptation of computer technology.

Panagariya (2000) also observed lack of awareness; doubt about the benefits of ICT; lack

of human resources and skills; setup costs and pricing issues and security matters are the

most major barriers to ICT adoption in the SME sector.

Cloete et al (2002) indicated in a research conducted on SMEs in South Africa that the

implementation of ICT is highly influenced by factors in the organization. Among the

factors is inability to get access to computer software, other hardware, and high cost of

computer software, security concerns and uncertain benefits from ICT. Another study

conducted in China revealed higher cost of internet access, low number of computers and

a lack of online payment processes, as some of the challenges in the implementation of

ICT by SMEs.

21
2.8 Effects of the Challenges of Computerized Record Keeping Systems on SMEs

Operations

Dinh, Mavridis & Nguyen (2010) reported that in 2002 the major obstacles that affect

SME growth in Kosovo, were strong competition which affects taxation. However, the

main barriers can be found at the informal economy and public services. The intensity of

these barriers is the same through to the end of the period. Due to the fact that most

SMEs are not able to keep proper records of their business operations, they face intense

competition from foreign investors or firms who poses a threat to the survival and

growth of such firms. Many local businesses operate with low resources and technology

and hence foreign companies with relatively higher resource base and technology will

have a higher competitive advantage in terms of productivity and profitability. This

coupled with other factors have eventually led to reduced market share, limited or no

expansion/low production levels, hiring of limited and cheap/ incompetent labour which

have consequently pushed local SMEs to their early graves. The key features of SMEs

worldwide are their vulnerability to low survival (Obamuyi, 2008).

However, competition is a threat to SMEs existencel; it is the competition that moves

businesses to enhance the productivity of their organisation which in turn improve

economic growth. Thus in order for SMEs to survive, owners and managers need

current, accurate and timely accounting information (Lohman, 2000; Amidu and Abor,

2005).

In conclusion, computerized record keeping systems are adopted for analyzing and

monitoring the financial condition of SMEs, it is used to prepare financial reports

necessary for taxation purposes, it provides information to assist the many other

organizational functions such as production, marketing, human resource management,

22
and strategic planning. Without a computerized record system it will be very difficult for

SMEs to determine performance, identify customer and supplier account balances and

forecast future performance of the organization. Therefore it is very vital to adopt a

computerized record keeping systems to help SMEs to survive and expand in Ghana.

2.9 Empirical Evidence of Computerized Record Keeping System of SMEs

Noor et. al. (2003) observed that in northern region of Malaysia, most SMEs adopt a

computerized record keeping systems within the first six years or less. This finding is

substantiated by Powell & Xiao (1996) and Duchinsky & Dunn (1998) who mentioned

that UK small and medium companies adopts a computerized record keeping systems

and are limited to fundamental accounting components.

Again, a study conducted by Josept & Janggu (2003) in Kuching Sarawak found that the

rate of adoption of computerized accounting system is minimal 52%. This emphasized

that most SMEs do not adopt computerized systems in their business operations.

Similarly, Maseko, & Manyani (2011), discovered that most SMEs in Zimbabwe do keep

subsidiary books of accounts, especially to capture on operating expenses as evidenced

by a few number of SMEs keeping books to record expenses. However, they do not

adopt computerized record systems in their operations.

In Ghana, Amidu, Effah and Abor (2011), found that most SMEs put in place accounting

software to generate their financial information. Mbroh, (2011) also in a study on the

methods of accounting practices by small business owners within the Cape Coast

Metropolitan area of Ghana, concluded that, 34% of his respondents who studied did not

practise any form of accounting in addition to a seeming problem with specific types of

accounts frequently kept by the SMEs. Recently, Ntim, Oteng and Fianu (2014) in study

of accounting practices and control systems of SMEs in Techiman in the Brong Ahafo

23
Region of Ghana, found that 72% of the sampled firms engaged the services of full-time

accounting personnel in their organization.

24
 CHAPTER THREE

RESEARCH METHODOLOGY

3.0Introduction

This chapter highlights the materials and methods applied in the study. It gives a

background of the study area, outlines the research design and study variables. It also

gives details about the population, samples and sampling approaches and the research

instruments used in collecting data for the study. The chapter also discusses the data

collection approaches and tools for data processing and analysis. It also deals with the

ethical considerations taken into account in the conduct of the study as well as

constraints or limitations of the study.

3.1 Profile of the study Area

The study was conducted in the Sunyani Municipality, which lies between latitudes

between Latitudes 70 20’N and 70 05’N and Longitudes 20 30’W and 2010’W.

25
Figure 3.1: Map of Sunyani Municipality

Source: Sunyani Municipal Assembly Revenue Department Report, 2014

3.2 Research Design

This research adopts a descriptive survey through which views and opinions of SME

owners are sampled. To Ary, Jacobs and Rezavieh (2002), survey allows researchers to

gather information from a sample of people comparatively quickly and cheaply. This is

used to identify and assess the factors that influence or control the growth of Small,

Medium Scale Enterprises (SMEs). The descriptive survey was further considered the

most apt design for carrying out this research since it is the approach which deals with

things as they currently are (Creswell, 2012). Information obtained from the descriptive

survey research could be meaningful in analyzing a situation since it involves describing,

recording, analyzing and interpreting conditions that exist. Again, Crewell (2002) has

indicated that a survey can be done within a short time in which investigators administer

a survey to a sample or the entire population of people in order to describe the attitudes,

opinions, behaviors or characteristics of the population. The survey is also apt for the

study as the current views, attitudes and opinions of SME owners are sampled. Since the

26
study mainly seeks to assess the use of computerized record keeping systems, cross

sectional study design afforded the researcher to capture the relevant information from

almost all the key stakeholders within the industry across the municipality to be able to

do a critical assessment impact of its application to ensuring good record keeping in the

firms that ensure sound business decision making and their impact on the success or

otherwise of SMEs in the municipality. This study type aims at obtaining information

from a representative selection of the population and from that sample the researcher is

able to present the findings as being representative of the population as a whole.

3.3 Population of the Study

The study population involves various SMEs in the Sunyani municipality. entrepreneurs

and business owners or managers engaged in the sector; agriculture and agro-processing,

artisans, soaps and detergents making; weaving fabrics; cloth designing and tailoring;

textiles and leather works; brewing beverages; food processing and baking; creative and

art industry, wooden /furniture processing; assembling electronic products, chemical

based products among others will form the population for the study. According to

Parahoo (1997) research population is defined as the total number of units from which

data can be collected, such as individuals, artifacts, events or organizations.

Again, Burns & Grove (2003) describe population as all the elements that meet the

criteria for inclusion in a study. The number of SMEs in the Sunyani municipality as at

the time of the study was not readily available at the registry of the NBSSI. This could be

attributed to the lack of registration of most of the SMEs in the municipality coupled

with ineffective record keeping.

27
3.4 Sample Size and Sampling Technique

The study employed purposive and simple random sampling techniques for selecting the

participants for the study. The SME owners or managers are purposively sampled

because they have adequate knowledge and experience in the management of SMEs and

also based on the objectives of the study. Creswell (2002) stated that, in purposive

sampling, researchers intentionally select individuals and sites to learn or understand a

phenomenon. According to Cohen, Manion and Morrison (2003) purposive sampling

enables researchers to handpick the cases to be included in the sample on the basis of

their judgment and typicality.

Again, Polit et al (2001) define a sample size as a proportion of a population. Therefore a

total of 180 SME owners/managers are sampled for the study. In this way, the researcher

builds up a sample that is satisfactory to specific needs. Purposively, the study limited

itself to only SMEs in the municipality which have been in operation for three (3) or

more years were purposively sampled for the study. These are categorizing under

manufacturing, retail services, service providers/ hospitality.

3.5 Source of Data

Data used for research work can be sourced from two main ways, namely primary data

and secondary data (Saunders et al, 2007). For this study both primary data and

secondary data were adopted to achieve the objectives.

3.5.1 Primary Data

Interview guide and structured questionnaires were the main research instruments used to

gather the primary data for the study. The guide helps the interviewer to pace the

interview and make interview more systematic and comprehensive. The structured

questionnaire was used to gather the views and opinions of respondents.

28
3.5.2 Secondary Data

A number of secondary data were also used to obtain additional information on the

subject to support responses gathered from the interview and the questionnaire used. The

secondary source of data includes published and unpublished articles, thesis, journals,

books and other reports.

3.6 Data Collection Tools and Techniques

Both primary data and secondary data are collected for the study within a period of

twelve (12) weeks. The study employed mainly both open and close ended questionnaire,

formal and informal interviews, desktop study to solicit information from owners and or

operators, regulatory institutions and stakeholders engaged in SMEs. The study made use

of both qualitative and quantitative methods to purposively obtain primary data through

the use of questionnaires and/or interviews of targeted SMEs in the municipality.

According to Ary, Jacobs and Rezavieh (2002), interview and questionnaire are the two

basic ways in which data are gathered in survey research.

Questionnaire/ Interview guides: The main data collection instrument was an interview

guide (refer to Appendix I). The guide had both semi-structured and structured items.

The open ended items gave the respondents a greater freedom of expression of ideas,

opinions, and suggestions and so on and the closed items enabled the researcher to get

specific responses from the respondents. All the sampled entrepreneurs are interviewed

with the aim of collecting data on their skills of recordkeeping, their attitudes towards

bookkeeping and the implications of recordkeeping on the success and stability of their

enterprises. Orodho (2005) asserts that interview guides have the ability to collect a large

amount of information in a reasonable quick space of time.

29
3.7 Data Processing and Analysis

The primary data which are obtained through the survey method from the response of

individuals and institutions engaged in SMEs in the Sunyani municipality are analyzed

through the use of Microsoft computer software such as Excel and Statistical Package for

Social Science (SPSS). This is to help reduce the data into descriptive statistics

representations such as graphs, charts, ratios, frequencies, among others.

3.8 Ethical Consideration

The study is sanctioned by the school of graduate studies and KNUST Business School.

An informed, verbal consent letter is obtained from each respondent before questionnaire

is administered. Ethical courtesies and moral standards such as respect for protocols,

culture and human rights are strictly adhered to. Respondents are assured of non-

disclosure and non- usage of information for any parochial interest rather than for

academic purpose.

30
 CHAPTER FOUR

PRESENTATION OF RESEULTS AND DISCUSSION

4.0 Presentation of Results

A total of 180 semi-structured questionnaires are distributed to various SMEs in the

Sunyani Metropolis. These SMEs were categorized into three major sectors such as retail

SMEs (supermarkets, boutique and second hand clothing shops, building materials and

hardware shops, licensed pharmaceuticals and agrochemical shops), manufacturing

SMEs (soap and detergent making shops, bakery, restaurants, metal fabricators,

carpentry and furniture making shops in cottage industry, real estate and building

contractors, dress making) and service SMEs ( hairdressing, law firms, insurance agents,

business consultants, secretarial services). The response rate is 93.8% which indicates

that out of a total of 180 semi-structured questionnaires that are distributed to various

SMEs in the Sunyani Metropolis, 169 were returned and completely answered for the

purpose of data analysis. With relevant collected data, analysis is then conducted based

on the research objectives and conclusions drawn.

31
4.0.1 Socio-Demographic Characteristics of Respondents

Table 4.1: Socio-Demographic Characteristics of Respondents

Demographic Characteristic Frequency Percentage (%)
Age Distribution 18-25 33 19.5
26-35 48 28.4
36-50 65 38.4
51-60 18 10.7
Above 60 5 3.0

Gender Male 92 54.4

Female 77 45.6

Educational Level Tertiary 23 13.6

SHS 34 20.1
MSLC/JHS 63 37.3
Primary 22 13.0
None 27 16.0

Marital status Married 88 52.1

Single 41 24.3
Divorced 25 14.8
Separated 15 8.9

Religion Islam 78 46.2

Christianity 56 33.1
Traditional 27 16.0
Other 8 4.7
TOTAL 169 100.0
Source: Researcher’s Survey, 2015

From Table 4.1 above, it can be seen that majority (92) of respondents representing

54.4% are males whiles the remaining 77 representing 45.6% are females. This

emphasizes the fact that majority of SMEs operators are males. In terms of age

distribution, it is notice that majority of respondents fall within the active working age

bracket of 18-60. As can be seen from Table 4.1.1 above, 65 (38.4%) of the respondents

fall within the age group of 36-50 years, followed by (48) 28.4% and (33)19.5% that fall

32
between the ages of 25-35 and 18-25years respectively. Again, 18 and 5 representing

10.7% and 3.0% fall within the age brackets of 51-60 and above 60 years in that order.

With regard to the level of education of operators of SMEs, it is observed that 63

(37.3%) forming majority of the respondents have attained MSLC/JHS level of

education. This is followed by 34 (20.1%) and 22 (13.0%) who have attained SHS and

Primary level of education. However, a significant number 27 (16.0%) of the

respondents have not attained any level of education qualification. This outcome implies

that majority of SMEs operators in Sunyani have attained an appreciable level of basic

education that enables them to read and write which is very vital to the businesses.

Also, it can be seen that majority of the respondents 88(52.1%) are married whiles

41(24.3%) are singles. Twenty five (25) and 15 representing 14.8 and 8.9% are divorced

and separated respectively. In terms of religious affiliations, it can be seen that majority

of SMEs operators are Muslims 78(46.2%) whilst 56 (33.1%) and 27(16.0%) are

Christians and Traditional believers respectively. Eight (8) representing 4.7% are

affiliated to forms of religions.

4.1 Type of Ownership of SMEs in Sunyani

With regard to the type of ownership of SMES in Sunyani, it is observed that majority

(39%) of SMEs in the Sunyani municipality are sole proprietorship ownership type of

business. This is followed by Cooperative SMEs (37%) and Partnership type of SMEs

(16%). Also, Limited Liability type of SMEs forms 8% of the types of SMEs ownership

in Sunyani as captured by Figure 4.1 below.

33
Figure 4.1: Type of Ownership of SMEs in Sunyani Municipality

Type of SMEs Ownership in Sunyani

Frequency Percentage

66 62

39.1% 36.7%
27
14 16.0%
8.3%

Sole Limited Cooperative Partnership

Proprietorship Liability SMEs SMEs SMEs
SMEs
Source: Researcher’s Survey, 2015

4.1.1 Categorization of SMEs in Sunyani Municipality

Again, with respect to the categorization of SMEs by industries, it can be observed (see

Table 4.2 below) that majority (49.1%) of all SMEs in the Sunyani Municipality falls in

Services providing/Hospitality industry. This category include Hairdressers, Law Firms,

Micro-finance and insurance Agents, Business consultants and Secretarial services.

Thirty two (32) and 54 representing 18.9% and 32.0% fall within the manufacturing and

retail service industry. The manufacturing SMEs identified include soap and detergent

making shops, bakery shop, restaurants, metal fabricators, carpentry and furniture

making shops, real estate and building contractors and dress making. The retail service

industry also involves Supermarket owners, Boutique and second hand clothing shops,

Building materials and Hardware shops, Licensed Pharmaceuticals and Agrochemical

shops among others. This outcome implies that most of the SMEs in the Sunyani

Municipality are Service Providers.

34
Table 4.2: Categorization of SMEs in Sunyani Municipality
Industry Frequency Percentage (%)

Manufacturing SMEs 32 18.9

Retail service SMEs 54 32.0

Services Providers/Hospitality SMEs 83 49.1

Total 169 100

Source: Field Survey, 2015

4.1.2 Number of Years of SMEs Operation

In an attempt to determine the numbers of years of SMEs operations in the Sunyani

Municipality, it is observed that majority 69(41.1%) of SMEs operators have been in

operation between 3 to 5 years. 49 representing 27.2% and 22 (15.6%) have been in

operation for 6 to 8 years and 9 to 12 years respectively. The remaining 21(11.7%) and 8

(4.4%) have been in operation for 13 to 15 years and above 15 years respectively. This

outcome means that majority of SMEs in Sunyani Municipality have not been operating

for long and are still in their developmental ages. This information is shown in Figure 4.2

below.

35
Figure 4.2: Number of Years of SMEs Operation

Number of Years of SMEs Operation

69
70
60
49
50 41.1%
40
27.2%
30 22 21
20 15.6% 11.7%
8
10 4.4%

0
3years to 5 6years to 8 9years to 12 13years to 15 Above 15
years years years years years

Frequency Percentage

Source: Researcher’s Survey, 2015

4.2 The Type of Conventional Record Keeping Systems Employed by SMEs in

Sunyani Municipality

Research objective one attempt to identify the conventional financial record keeping

systems employed by SMEs in managing their books and records, the outcome of the

responses is captured in various tables below.

As can be seen in Table 4.3 below, majority 112(66.3%) of the SME operators employed

the Single-entry bookkeeping system of traditional record keeping as against 57(33.7%)

who used the Double-entry bookkeeping. This confirms a recent findings by Abdul-

Rahamon & Adejare (2014) who find that the Single-entry bookkeeping system is the

most widely known and used bookkeeping system adopted by household SMEs. The

Single-entry bookkeeping system of traditional record keeping is used for petty cash,

36
accounts payable and receivable, and other relevant transactions such as inventory and

travel expenses.

Table 4.3: Common Bookkeeping Systems

Common Bookkeeping Systems Frequency Percentage

Single-entry bookkeeping 112 66.3

Double-entry bookkeeping 57 33.7

Total 169 100

Source: Field Survey, 2015

Also, after majority of the respondents have identified the Single-entry bookkeeping

system as the major book keeping, they were asked to specifically identify the type of

conventional financial record keeping practices they employ in keeping records. The

outcome has been captured in Table 4.3.

Table 4.4: Type of Conventional Financial Record Keeping Practices Employed by

SMEs

Types of Financial Yes Frequency No Frequency Total Ranking

Records (%) (%) (%)
Daily Sales/Cash 146 (86.4) 23 (13.6) 169 (100) 1st
Receipts Book
Daily Purchases Book 141 (83.4) 28 (16.6) 169 (100) 2nd

Petty Cash Book 118 (69.8) 51 (30.2) 169 (100) 4th

Debtors’ and 133 (78.7) 36 (21.3) 169 (100) 3rd

Creditors’ Ledger
None 16 (9.5) 153 (90.5) 169 (100) 5th

Source: Field Survey, 2015

37
From the results as shown in Table 4.3 above, it can be seen that Daily Sales/Cash

Receipts Book is ranked first as the most widely use types of financial record keeping

systems. This was confirmed by the majority 146(86.4%) of the respondents who

answered that they do employed the daily sales (cash receipt) book as the highest

financial record keeping system. However, 23(13.6%) answered in the negative that the

daily sales (cash receipt) book is the highest financial record keeping practice they

employed. This implies that most of the SMEs in the Sunyani Municipality practise the

daily sales (cash receipt) financial record keeping.

Again, the results show that the next major financial record keeping system is the Daily

Purchases Book which ranked second. This was also affirmed by 141 (83.4%) of the

respondents who answered Yes that the Daily Purchases Book is the next financial

record keeping practices they employed. The Debtors’ and Creditors’ Ledger was ranked

as the third most widely used type of financial record system. This was confirmed by

78.7% of the respondents who answering Yes. The next type of financial record system

is the Petty Cash Book which is ranked fourth with 69.8% of the respondents confirming

in the affirmative that they employed this type of financial record keeping system. This

outcome implies that majority of SMEs in the Sunyani Municipality do employ the daily

sales (cash receipt) book as the highest financial record keeping practice they employed

in operations of their businesses.

4.3 Extent to which SMEs use Computerized Record Keeping Systems

38
Table 4.5: Extent of Computerized Record Keeping Systems in Cash Management

Procedures

Do you use computerized record keeping Frequency Percentage (%)

systems in cash management procedures?

Yes 28 16.6

No 141 83.4

Total 169 100

Source: Field Survey, 2015

From the results in Table 4.4 above, it can be seen that majority of the respondents

141(83.4%) indicates that they do not use computerized record keeping systems in their

cash management procedures. However, a handful 28(16.6%) of the respondents

affirmed that they do use computerized record keeping systems in their cash

management procedures. This findings means that majority of SME operators in the

Sunyani Municipality, do not employ computerized record keeping systems in their cash

management procedures. The results also confirms similar findings of Grablowsky

(1978) and Grablowsky and Lowell (1980) who discovered through a survey that cash

management practices among SMEs were inadequate in Norfolk, Virginia.

Table 4.6: Extent of Computerized Record Keeping Systems to Prepare Accounts

Receivables

Do you use computerized record keeping Frequency Percentage (%)

systems to prepare accounts receivables?
Yes 28 16.6
No 141 83.4
Total 169 100
Source: Field Survey, 2015

39
Another, significant extent of the use of computerized record keeping systems is in the

use of preparing accounts receivable. From the results obtained, it can be observed that

the bulk (83.4%) of the respondents engaged in SMEs do not employ computerized

record keeping systems in preparing accounts receivables. Nevertheless the remaining

16.6% confirmed that they have been using computerized record keeping systems to

prepare accounts receivables. This gives a generalization that almost all of SME

operators do not employ computerized record keeping systems in preparing accounts

receivables.

Again, the results as seen in Table 4.5 below, shows that most (146) representing 86.4%

of the total SMEs sampled confirmed that they do not use computerized record keeping

systems in their inventory management activities. Conversely, 23 representing 13.6%

opposed to the question, which implies that majority of people in SMEs businesses, do

not employ computerized record keeping systems in their inventory management

practices. Again, this finding confirms to the findings of Grablowsky and Rowell (1980)

who found that use of computerized record keeping systems in preparing accounts

receivables was poor among small shoe and plastic manufacturing industries in Canada.

Table 4.7: Extent of Computerized Record Keeping Systems in inventory

management practices

Do you use computerized Record Keeping Frequency Percentage (%)

Systems in inventory management
practices?
Yes 23 13.6
No 146 86.4
Total 169 100
Source: Field Survey, 2015

40
Finally, it can be seen that a chunk (153) representing 90.5% of the respondents who are

engage in SMEs do not employ computerized record keeping systems to prepare

financial their reports. This is against 16(9.5%) which affirmed in the positive that they

employ computerized record keeping systems to prepare their financial reports. This

result implies that most SME operators in the Sunyani Municipality do not use

computerized record keeping systems to prepare financial reports.

Table 4.8: Extent of Computerized Record Keeping Systems to Preparing Financial

Reports

Do you use computerized record keeping Frequency Percentage (%)

systems to prepare financial reports?

Yes 16 9.5
No 153 90.5
Total
Source: Field Survey, 2015

4.3 Benefits of Computerized Record Keeping Systems over

Traditional/Conventional Book Keeping

Table 4.9 below illustrates the responses of SME operators on the benefits of

computerized record keeping systems over the conventional in the Sunyani Municipality.

The selected SMEs in the Sunyani Municipality responded to five statements for which

the following analyses are made. This section of the questionnaire was designed to seek

the views of operators on the benefits of employing computerized record keeping

systems to the management of their SMEs.

41
Table 4.9: Benefits of Computerized Record Keeping Systems
STATEMENT SA A U D SD
F (%) F (%) F (%) F (%) F (%)
1. Computerized record keeping 69 57 12 22 9
systems makes it easier and (40.8) (33.7) (7.2) (13.0) (5.3)
quicker in making business
decisions
2. Computerized record keeping 74 63 8 21 3
systems help in better use of (43.8) (37.8) (4.2) (12.4) (1.8)
resources and time
3. Computerized record keeping 74 63 8 21 3
systems help in keeping accurate (43.8) (37.8) (4.2) (12.4) (1.8)
record and reducing multiple
errors
4. Computerized record keeping 77 68 7 11 6
systems help to reduce staff time (45.6) (40.2) (4.1) (6.5) (3.6)
doing accounts and reduce audit
expenses
Source: Field Survey, 2015

KEY

S. A. = Strongly Agree, A = Agree, U = Uncertain, D = Disagree, S.D. = Strongly

Disagree, F = Frequency, % = Percentages.

From the Table 4.9, 69 and 57 of all SMEs operators representing 40.8% and 33.7%

strongly agreed and agreed to the statement that computerized record keeping systems

makes it easier and quicker in making business decisions as opposed to 22(13.0%) and

9(5.3%) who strongly disagreed and disagreed to the same question. However, 12

respondents which is a representation of 7.2% remained uncertain about the statement.

This finding implies that the adoption of computerized record keeping systems by SMEs

will make their operations to be easier and quicker especially when they have to make

42
business decisions. This finding is line with the statement of Thong (1999) that show IT

adoption in small firms are growing and that the usage of IT in supporting decision is

very paramount. Therefore SMEs must adopt a good computerized record keeping

systems to enable them to have accurate information to make pragmatic decisions.

Again, many more respondents (74 and 63) representing 43.8% and 37.8% strongly

agreed and agreed to the second statement which states that computerized record keeping

systems help in better use of resources and time. On the flip side, 3 and 21 representing

(1.8%) and 12.4% of the respondents strongly disagree and disagreed to the statement

with just 8 (4.2%) remaining uncertain about their decision on this statement. The study

outcome is also in line with the work of Chan and Kevin (1990) who reported that

computers are used to improve efficiency and to produce quality products or services at

the lowest costs hence the need for SMEs to adopt computerized record keeping systems

to help make efficient use of resources and time.

In response to the statement on the use of computerized record keeping systems helping

in keeping accurate record and reducing multiple errors, it was observed that 63(37.8%)

and 73(43.8%) agreed and strongly agreed respectively to the statement. On the other

hand, 3 and 21 representing 1.8% and 12.4% of the respondents strongly disagreed and

disagreed to the statement. While 8(4.2%) remained uncertain about the statement. This

also implies that if SMEs adopt and successfully implement a good computerized record

keeping systems, they will be able to keep accurate record and reducing multiple errors

in their operations.

43
Finally, a total of 145(85.8%) as against 17(10.1%), respondents agreed with the

statement that computerized record keeping systems help to reduce staff time doing

accounts and reduce audit expenses. Seven representing 4.1% remain uncertain about the

statement which implies that majority of the respondents believes and agreed that

computerized record keeping systems help to reduce staff time doing accounts and

reduce audit expenses. This finding is in line with the finding of Temtime, Chinyoka &

Shunda, (2003) who noticed that the innovation of computer technology nowadays has

made the tasks of managers of SMEs to become easy and straightforward to be

accomplished. This emphasized that the adoption of a good computerized record keeping

will have positive effects on the financial record keeping of SME operators which

subsequently improving business operations.

4.4 Challenges facing SMEs with the use of Computerized Record Keeping Systems

Figure 4.3 below, revealed that, out of the 169 respondent sampled, 61(36.0%) of the

respondents indicated that lack of human resources and skills in ICT is a major challenge

facing SMEs in the use of Computerized Record Keeping. The next major challenge

identified is Setup Costs and Pricing ICT Issues which was affirmed by 42(24.9%) of the

respondents. The result also reveals that 39(23.1%) and 27(16.0%) of the respondents

indentified excessive disclosure requirements and Uncertainty about the Benefits ICT

respectively as the next major challenge facing SMEs in their use of Computerized

Record Keeping.

44
Figure 4.4: Challenges facing SMEs with the use of Computerized Record Keeping

Challenges facing SMEs

Frequency Percentage

61

39 42
36.1%
23.1% 27 24.9%
16.0%

Excessive Uncertainty Lack of Setup Costs

disclosure about the Human and Pricing
requirements Benefits ICT Resources and ICT Issues
Skills in ICT

Source: Researcher’s Survey, 2015

4.5 Effects of the Challenges of Computerized Record Keeping Systems on SMEs

Operations

On the effects of the challenges facing SMEs in the use of computerized record keeping

systems, it can be observed as shown by Figure 4.4 below that there was a general

negative effect on the operations of SMEs. As can be seen, majority of the respondents

identify reduced profits 58(34.3%), reduced market 37(21.9%), limited or no

expansion/low production levels 36(21.3%) and hiring of limited and cheap/ incompetent

labour 38(22.5%). This outcome is line with the work of Goltz (2011) who noted that

poor accounting is one of the top ten reasons why small-scale businesses fail. This

implies that effective record keeping helps SMEs to be efficient in keeping track of their

business operations and helping them to survive as stated by Jones (2012).

45
Figure 4.5: Effects of Computerized Record Keeping Challenges on Operations of
SMEs

Effects of the Challenges of Computerized Record

Number of Respondents
Keeping Systems on SMEs Operations

60
50
40
30
20
10
0
Reduced Reduced Limited or no Hiring of
profits market expansion/lo limited and
w production cheap/
levels incompetent
labour
Series1 58 37 36 38
Series2 34.3 21.9 21.3 22.5

Source: Researcher’s Survey, 2015

46
 CHAPTER FIVE

SUMMARY, CONCLUSION AND RECOMMENDATION

5.1 Introduction

This chapter looked at an overview of the research problem and methodology, summary

of major findings, conclusion, recommendation and suggestions for further studies.

5.2 Summary

The findings of the research are summarized below based on the objectives of the study:

Concerning the type of record being kept, it was realized that manual form of keeping

financial record is being employed by SMEs in managing their books and records. Most

of the SMEs operators confirmed that the most widely used form of financial record

keeping systems is the daily sales (cash receipt) book.

Again, the study discovers that that majority of SME operators in the Sunyani

Municipality do not employ a computerized record keeping systems in their cash

management procedures, preparing accounts receivable, inventory management activities

among other financial recording keeping. Also the study reveals that most SME

operators do not use computerized record keeping systems to prepare financial reports

which do have negative effects on their operations.

On the question of the benefits of computerized record keeping systems over

traditional/conventional book keeping, it was revealed by the study that majority of SME

operators do believe and are in agreeable terms that computerized record keeping

systems make it easier and quicker in making business decisions, help in making

efficient and effective use of resources. It also helps in keeping accurate record and

47
reducing multiple errors and helps reduce staff time doing accounts and reduce audit

expenses. All these are discovered in the study to have positive effects on the operations

of SMEs if they would adopt ICT in keeping their financial and accounting records.

However, the study also finds that SMEs are faced with major challenges of adopting

and implementing computerized record keeping systems in the Sunyani municipality.

Among these major challenges include that lack of human resources and skills in ICT,

Setup Costs and Pricing ICT Issues, excessive disclosure requirements and Uncertainty

about the Benefits ICT. These challenges therefore call for more effort to be put in place

to increase awareness about the benefits of adopting computerized record keeping

systems in managing SMEs operations.

5.3 Conclusion

The findings made so far from the study suggest several important conclusions.

Firstly, it was apparent from the findings that the well known form of record keeping by

SMEs in the Sunyani Municipality is manual, that is cash receipt book and financial

record keeping system. Also the study reveals that most SME operators do not use

computerized record keeping systems to prepare financial reports which do have

negative effects on their operations. Secondly, this study has established that despite the

benefits of a computerized record keeping systems, majority of SMEs operators in the

Sunyani Municipality, do not employ a computerized record keeping systems in their

cash management procedures, preparing accounts receivable, inventory management

activities among other financial recording keeping. Moreover, the study was been able to

recognize challenges that impede the operations of SMEs in the Sunyani Municipality.

These challenges including inadequate financial management skills, perception of

excessive disclosure requirements, and time constraints among others were deduced to

48
have adverse effects on the operation of SMEs. Poor perception of excessive disclosure

requirements and time constraints for example were noted to have resulted in lack of

information for taxation preparation and securing loan facilities which have impeded

SMEs’ capacity to grow. Therefore, it is worth concluding that the inability of SME

operators to use computerized record keeping systems in their daily record keeping

activities leads to negative effects on their operations.

5.4 Recommendation

The study proposed the following pragmatic recommendations based on the deductions

and implications from the findings of the study;

First, the Association of Chartered Accountants and other Business consulting firms in

Ghana should device appropriate mechanism that would enable and encourage SMEs to

access their services. They should work on their charges to avoid scaring SMEs away

from accessing their services.

Second, the National Board for Small Scale Industries (NBSSI) should collaborate with

other benevolent NGOs to set up training organizations to offer basic ICT training skills

and development programmes to SMEs operators at affordable or no price to acquire

basic ICT skills to enable them keep records of their business activities especially

financial records.

Third, the Association of Ghana Industries (AGI) and other research institutions (the

universities and polytechnics) must be encouraged in conducting further in-depth

research on the adoption and fully integration of a computerized Based Record Keeping

System for SMEs across the country.

49
Forth, SMEs should be encouraged to endeavor to consult specialized accountants

regularly to be able to maintain high and generally accepted accounting practices

50
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60
 APPENDIX I

QUESTIONNAIRE FOR SME OPERATORS

This questionnaire is to help complete a study on the topic ‘‘Computerized Record

Keeping among Small and Medium Enterprises’’. The provision of an honest, objective

and accurate answer would therefore be well appreciated. This is purely an academic

exercise, so please note that your bio-data would be kept as confidential, thank you.

Please tick where appropriate

SECTION A: PERSONAL INFORMATION

1. Please indicate your age.

A. 18- 25 B. 26-35 C. 36-50 D.51-60 E. Above 60

2. Please indicate your sex.

Male Female

3. Please indicate your marital status.

Single Married Divorced Separated

4. Please indicate your educational Status

Tertiary SHS MSLC/JHS Primary None

Others specify……………………………………………………………….

5. Please indicate your religious affiliation

Christianity Islamic Traditional

Others specify……………………………………………………………….

61
SECTION B: TYPE OF CONVENTIONAL FINANCIAL RECORD KEEPING

PRACTICES EMPLOYED BY SMES IN THE SUNYANI MUNICIPALITY

1. What Type of Ownership is your SME?

A. Sole Proprietorship B. Partnership C. Limited Liability type

D. Cooperative SMEs

2. How long has your SME been in Operation?

A. 3-5 years B. 6 to 8 years C. 9 to 12 D. 13 to 15 years E.

above 15 years

3. What is the Common Bookkeeping Systems that you use in keeping records?

A. Single-entry bookkeeping B. Double-entry bookkeeping

4. What is the most Conventional Financial Record Keeping Practice Employed by your

SME?

A. Daily Sales/Cash Receipts Book B. Daily Purchases Book C. Petty

Cash Book D. Debtors’ and Creditors’ Ledger

SECTION C: THE EXTENT TO WHICH SMES USE COMPUTERIZED

RECORD KEEPING SYSTEMS

1. Do you use computerized record keeping systems in cash management

procedures? Yes No

2. Do you use computerized record keeping systems to prepare accounts

receivables? Yes No

3. Do you use computerized Record Keeping Systems in inventory management

practices? Yes No

4. Do you use computerized record keeping systems to prepare financial reports?

Yes No

62
SECTION D: BENEFITS OF COMPUTERIZED RECORD KEEPING SYSTEMS

OVER TRADITIONAL/CONVENTIONAL BOOK KEEPING

Instructions: Please kindly answer the questions in this questionnaire using the scales

assigned to each statement, indicate by ticking (√) the appropriate bracket that answers

the questions. Please tick [√] the correct response from the options given.

SA= STRONGLY AGREE, A=AGRE, U=UNCERTAIN D=DISAGREE,

SD=STRONGLY DISAGREE

S/N QUESTIONS SA A U D SD

1 Do you agree that computerized record keeping systems

makes it easier and quicker in making business decisions

2 Do you agree that Computerized record keeping systems

help in better use of resources and time

3 Do you agree that Computerized record keeping systems

help to reduce staff time doing accounts and reduce audit

expenses

4 Do you agree that Computerized record keeping systems

help in keeping accurate record and reducing multiple

errors

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SECTION E: CHALLENGES FACING SMES WITH THE USE OF

COMPUTERIZED RECORD KEEPING SYSTEMS

S/N CHALLENGE YES NO

1 High cost of preparing financial statements

2 Excessive disclosure requirements

3 Inadequate Financial Management skills

4 Time Constraints

SECTION F: EFFECTS OF THE CHALLENGES OF COMPUTERIZED

RECORD KEEPING SYSTEMS ON SMES OPERATIONS

S/N EFFECTS YES NO

1 It leads to reduced profit margins

2 It leads to low production levels

3 It leads to limited or no expansion

4 It leads to reduction in market share

Thank You for Answering This Questionnaire

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