Abstract

Failure to document financial transactions (bookkeeping) leads to the firm collapsing within a few months of its inception, and knowledge and abilities in bookkeeping are one key component that influences positively on the sustainability and growth of SMEs.

The purpose of this study is to investigate the impact of bookkeeping on SMEs in the Buea Municipality. The study used a survey research design with a total sample size of 50 SMEs in the Buea Municipality and a stratified random sampling technique.

The study’s primary data was gathered through the use of a 50-question questionnaire. In addition, data was analyzed using SPSS version 21 and displayed in both tables and figures.

The findings found that SMEs operators lack bookkeeping skills, that employing a trained bookkeeper is expensive, that small business owners should participate in educational training, and that bookkeeping has a substantial impact on the performance of SMEs in the Buea municipality.

The investigation came to the conclusion that SMEs have a lack of bookkeeping knowledge. The report also indicated that SMEs operators should undergo educational training because they lack bookkeeping skills and the expense of employing a skilled bookkeeper is considerable.

THE FIRST CHAPTER

INTRODUCTION

1.1 The Study’s Background

The sky is the limit for Cameroon’s optimism in achieving her ultimate aim of being an emerging nation by 2035. Small and medium-sized businesses are critical in achieving this goal since they contribute to the economy and provide a way to lower unemployment.

Small and medium-sized businesses (SMEs) play a vital part in a country’s economic development. Governments have become increasingly concerned in supporting the operations of Small and Medium-Scale Enterprises (SMEs) (Amoako, 2012).

Small and medium-sized firms (SMEs) are thought to be the backbone of many economies around the world (Alhassan et Muazu, 2014; Okoli, 2011) growth and sustainable development of every nation, given their contribution to national growth and economic development (Moore et al., 2008).

Small & Medium Enterprises (SME) have no commonly accepted definition (SMEs). This is owing to the enormous number of micro, small, and medium firms, each of which differs in its field of operation, activities, and development environment.

The majority of SME definitions contain asset or turnover per year parameters, as well as the number of employees.

Typically, one or more of the following approaches are used in the definition: The criterion approach 6, the institutional approach 7, and the typological approach 8 are all approaches that can be used (Mmeti,2020).

The financial viability of SMEs determines their success or failure, and one of the most prevalent issues that these businesses face is securing enough cash flow and working capital to stay profitable.

As early as the Bolton Report in the early 1970s, it was identified as one of the main issues confronting SMEs (Bolton, 1971). Since then, this has been a frequent issue in small business writing.

the period of time (Kennedy, Tennent and Gibson, 2006).

Poor financial management has been identified as the primary cause of MSE failure (Longeneter et al 2006). According to Bowen (2009), there is a strong link between firm performance and the amount of business management training, particularly in corporate financial record keeping.

Keeping good records of business transactions is part of business management. Bookkeeping knowledge and abilities are a particularly important aspect that has a favorable impact on the long-term viability and growth of SMEs.

Failure to document financial transactions (bookkeeping) in a business leads to its demise within a few months of its inception (Muchira, 2007). In essence, recordkeeping is something that no business owner can afford to overlook.

According to research, recordkeeping is the first step in the accounting process in any firm, which also includes classifying, reporting, and analyzing financial data.

It entails arranging and keeping track of receipts, canceled checks, and other financial transaction data.

All transactions, including cash disbursements, cash receipts, sales and purchases, and others, are chronologically recorded in a journal by bookkeepers, who then post the journal entries to a general ledger of accounts, which is required for the preparation of monthly financial statements.

This is critical for a successful business. Furthermore, research has shown that in business administration, keeping accurate records of all business transactions is critical to the company’s performance (Muchira, 2007) Butler (2009) also claims that a business is doomed to fail from the start if it does not keep accurate and comprehensive records of its transactions.

Businesses are distinct, according to Muchira (2007), and there are many various sorts of detailed records that may need to be preserved.

Cashbooks, petty cash books, order notes, and invoices, copies of sales invoices, details of any other business income received, details of any private money brought into the business, till rolls, or another form of an electronic record of sales, details of any other income, any cash taken out of the till to pay small business expenses, bills and invoices for purchases and expenses, a record of stock on hand at the end of the year are just a few examples of records to keep.

The official definition of SME, according to Mmeti (2020) Cameroon, is based on the first two approaches, the criterion and institution approach. As a result, there are four basic definitions of SME in the country. The investment law, FOGAPE BEAC, and economic and social issues provide these definitions.

Over 95% of Cameroonian enterprises are small businesses, according to the National Institute of Statistics (NIS) of Cameroon (2009 and 2017). Small firms, which generate more than 34% of Cameroon’s Gross Domestic Product, are responsible for 70% of employment generation and over 90% of the country’s national economic fabric (GDP). Cameroon’s government established the Ministry of Small and Medium-Sized Enterprises and issued Law N° 2010/001 on April 13, 2010 to promote and support this sector of the economy.

2010 as amended by Law No. 2015/010 on July 16, 2015 on the Promotion of Small and Medium-Sized Enterprises (SMEs). This demonstrates how important these businesses are to the Cameroonian economy.

The most effective way for SMEs to maintain their critical responsibilities is to apply basic financial and accounting standards (Schwenk & Schrader, 1993). Many SMEs, however, have been reported to have failed to retain proper accounting records in order to create the much-needed accounting information that owner-managers and other users demand for decision-making purposes, resulting in serious issues (Howard, 2009; Madurapperuma, Thilakerathne, & Manawadu, 2016).

Larson & Clute (1997) also stated that certain SMEs had deficient internal accounting systems, which resulted in poor planning, spending control, low accounts receivable collection, bad financial condition, and insufficient information for decision-making.

1.2 Problem Statement

Little is known about the importance of bookkeeping in SMEs, the issues SMEs experience in preparing accounting records, or the relevance of bookkeeping methods in SMEs. According to previous research, bookkeeping is at the center of all external interaction with SMEs, whether it’s obtaining financing or determining eligibility for help.

That is, creditworthiness and growth potentials are all encoded in a company’s accounting records. Theoretically, proper bookkeeping and enterprise success, such as profitability and expansion, should have some favorable impacts.

Some business owners are afraid of bookkeeping; yet, keeping a record of income and spending allows a business owner to keep track of financial activities (Olufemi& Oladimeji,2019). Bad accounting or the lack of financial records, according to Dawuda and Azeko (2015), can lead to resource mismanagement and poor cash management. Many SMEs have been forced to close as a result of these factors.

Accounting records have a significant impact on a company’s ability to achieve its goals (Olufemi& Oladimeji,2019). Some business owners are still unaware of the importance and advantages of efficient bookkeeping (Abayomi & Adegoke, 2007). (2016).

Some SMEs in Cameroon are being pushed to submit their financial records in order to acquire tax clearance certificates, which are required to bid for government contracts.

In addition, several SMEs create their financial statements in order to get bank loans. It’s tough to tell the difference between company and personal transactions for SME owners due to poor recordkeeping (Van Aardt et al. 2008; Rankhamise, 2010).

Many SMEs’ assets are used for personal gain by its owners and managers. According to Aremu and Adeyemi (2011), studies have indicated that SMEs find it difficult to obtain loans from financial institutions due to a necessity of maintaining accurate financial records (Amoako, 2013).

Except for legal obligations, SMEs rarely consider solid bookkeeping; yet, poor and ineffective bookkeeping has contributed to the failure of certain SMEs; failure of SMEs to keep accurate records is one of the causes for their failure.

One of the major issues facing the double-entry accounting system is the complexity of the operations involved. The double-entry system can feel like learning a completely new language to a business owner who has no accounting experience.

Simple words like “subtract” and “add” have been replaced by terminology such as “debits” and “credits,” producing confusion. Determining when to debit an account and when to credit the matching account can be tricky, and it can throw a new bookkeeper for a loop (Desa, Tanden, & Practising Law Institute, 2014).

1.3 Research Issues

1.3.1 The main research problem

What impact does bookkeeping have on the success of SMEs in the municipality of Buea?

1.3.2 Research questions in detail

What impact do financial statements have on the performance of SMEs in the municipality of Buea?

In the municipality of Buea, what obstacles do SMEs entrepreneurs confront when it comes to bookkeeping?

What is the relationship between bookkeeping and tax disclosure in Buea’s SMEs?

What is the relationship between tax declaration and SMEs’ success in the municipality of Buea?

1.4 Goals of Research

1.4.1 Overarching research goal

The purpose of this study was to look into the impact of bookkeeping on SMEs in the Buea municipality.

1.4.2 Research aims in detail

The purpose of this study was to look into the impact of financial statements on the performance of SMEs in the Buea municipality.

To learn about the issues that SMEs entrepreneurs encounter when it comes to recordkeeping.

The purpose of this study was to see how income statements affected the performance of SMEs in the Buea municipality.

The purpose of this study was to see if there was a link between tax declarations and the performance of SMEs in the Buea municipality.

1.5 The study’s hypothesis

H01: In the Buea municipality, bookkeeping has little bearing on the performance of small and medium-sized businesses.

H02: The performance of SMEs in the Buea municipality is unaffected by financial statements.

H03: In the municipality of Buea, the income statement has no impact on the performance of SMEs.

H04: In the Buea municipality, there is no substantial association between tax declaration and SMEs’ performance.