Impact of Poor Accounting Practices on the Growth and Sustainability of SMEs

Abstract

SMEs act as backbone of the business and commerce creating many entrepreneurs, involving different stakeholder, creating job opportunities for skilled and half skilled workforce, playing role like lubricant for the local economy. Due to the lack of public accountability, regulations, audit requirement and some other reasons many SMEs do not have systematic accounting practices which incorporate a huge negative impact on the growth and sustainability of SMEs. Due to the lack of quality accounting information many owners/ managers of SMEs are found to take inaccurate and clumsy decisions regarding investment, credit, operations etc. Such inaccurate and faulty business and strategic decisions results excess costs of capital, investments in the low return even in the loss project, inefficient business operations etc. The main purpose of this study is to focus how poor accounting practices hamper the growth and sustainability of SMEs, how different stakeholders are affected due to the lack of quality accounting information. Effective and systematic accounting practice is necessary to increase the operational efficiency, profitability and growth of SMEs.