Adoption of Accounting Practices and Its Effects on SMEs: Financial Perspective of Sachet Water Producers in Northern Region of Ghana

Abstract

The position of water and its accompanying business enterprises in an economy like Ghana cannot be exaggerated. It is in this light, that over the years, Small and Medium Enterprises (SMEs) and other organisations have been set up to enable both rural and urban people to access this scarce resource for productive, consumptive and social purposes. One of such small-scale enterprises is the sachet water producing enterprise. Albeit the sachet water enterprises play important role in the area, the development of their business is largely affected by poor accounting practices. Accounting has been seen as the best route to a successful business career as it is considered as the language and basic tool of business. It has always concerned itself with determining how a business is doing and what the bottom is. The growth of the small-scale enterprises can be determined through maintenance of proper records of accounts, which provides the basis for safeguarding, and controlling the business properties. As sachet water producing sector is increasingly taking center-stage in the private sector of the Northern Region of Ghana, it will be interesting to know their adoption of accounting practices, challenges they encounter, factors that influence their adoption and recommend some measures in that regard. This was the prime drive for this study. A qualitative research design was employed and for this study a non-probability sampling design in the form of a convenience sampling method was employed to gather the data. Data were drawn from both primary and secondary sources. Primary data was drawn from 30 registered small-scale sachet water producers (5 each in North, South, East and Central constituencies of Tamale Metropolis) of the Northern Sachet Water Producing Association by administering semi-structured questionnaires through personal interviews. We found that there are many perceived factors affecting their adoption of accounting practices and their effects on their business operations in the area. Among such factors include; lack of adequate training, willful misconduct, and negligence. It was also revealed that that, illiteracy was the root cause making it often difficult if not impossible for them to separate personal expenditure from business expenditure. Non-documentation of cash sales, error of principle, and incomplete entry, etc. were found to be higher because almost all the operators have no accounting background. It was further identified that enterprises whose accounting records are beset with challenges, lack the credit worthiness of accessing loans and funding for further investments and growth. It was concluded that the lack of accounting knowledge and skills may in future threaten the financial steadiness of the water producing sector. In sustaining the sector, the findings recommends operators to undergo basic accounting training to acquire relevant knowledge and skills, employ qualified accounting personnel and providing them with good motivational packages to ensure that their efficiency and morale is enhanced and, maintain strong internal control to check the practice of misappropriating funds in the business.

Keywords: Small-scale enterprises, Sachet Water Producers, Adoption, Accounting Practices, Challenges,

Effects, Ghana