ACCOUNTING DEPARTMENT RESEARCH PROPOSAL



Topic: Small and Medium Enterprises and their Management Accounting Needs in Fiji

Title of the research project: Management Accounting Needs of SMEs and the Role of SMPs in Fiji

Researchers’ names: Professor Ruvendra Nandan (Principal Researcher), Associate Researchers (Shivneil Kumar Raj, Mohammed Riaz Azam and Sandhiya Roy)

Researchers’ affiliation: The University of Fiji, Private Mail Bag, Saweni Campus, Lautoka, Fiji

Executive Summary (250 words)

This research project aims at understanding management accounting needs of owner-managers of small and medium enterprises (SMEs) and the role of small and medium accounting practitioners (SMPs) in meeting such needs. SMEs represent a major business sector in industrialised and emerging economies of the world and SMPs are also a dominant group within such economies and the accounting profession globally and locally. Research shows that a vast majority of SMEs struggle for survival and continuity, and under these circumstances management accounting and control systems have an important role in these organisations. Unfortunately, provision of management accounting services by SMPs is considerably lacking and this study calls for greater and collective involvement of researchers, SMEs, SMPs and the accounting profession in understanding, identifying and meeting SMEs’ management accounting needs. Apart from routine compliance works, SMPs’ skill sets place them well for more proactive roles in areas such as cost management, pricing decisions, financial planning, information systems and strategic management processes.

Institutional theory will be drawn upon to understand the pressures that create demand for management accounting information by SMEs and the role of SMPs and their profession in provision of such services. This qualitative field study aims to obtain a rich understanding of the management accounting needs of SME owner-managers and the role of SMPs in fulfilling those needs. The main data collection source will be in the form of in-depth semi structured interviews with SME owner-managers and their public accountants, supported by entity specific archival data collected from sources internal and external to the organisations involved. It is envisaged that this study will provide in-depth insights into issues confronting both SMEs and SMPs generally and more specifically in relation to broader, non-traditional financial and management information needs of SME owner-managers and opportunities for SMPs. Finally, the study should provide opportunities, challenges and future directions for researchers, accounting profession and its members on broader accounting needs of SMEs.

1. Introduction

Small and medium enterprises (SMEs) have been a key force in many economies of the world. However, the vast majority struggle for survival and continuity (Mitchell, 1998; Mitchell and Reid, 2000). Under these circumstances, management accounting information has an important role to play with respect to monitoring and control of the activities of SMEs.

SMPs (small and medium accounting practitioners) are a dominant group within the accounting profession and play an important part in the global as well as in the Fijian economy. In spite of the economic and social importance of SMEs and SMP, management accounting research initiatives and provision for management accounting information in SMEs by SMPs have been considerably lacking. Indeed, these provide challenges to the researchers, accounting practitioners, and the accounting profession as a whole.

2. An overview of the literature

Research shows that owner-managers of SMEs expect, apart from routine compliance services, advice on many broad and specific aspects of their business including financial planning, management accounting and information system, forensic accounting, cost reduction, succession planning and pricing decisions (Arnold, et al. 1986; Kirby and King, 1997; Marriott and Marriott, 2000; Ciccotosto, et al. 2005; Nandan and Ciccotosto, 2007; Alam and Nandan, 2007). While SMPs have the expertise and skills to provide the majority of above mentioned services, they have not been extensively involved in the provision of such services. It also appears that SMPs have not been forthcoming in moving beyond their traditional service areas of compliance (Arnold, et al. 1986; Kirby and King, 1997). The factors that may have influenced such a decision include satisfaction with narrow compliance-based service, reluctance to move out from their comfort zone, and lack of resources – human, intellectual and financial (Marriott and Marriott, 2000; Kirby and King, 1997; Arnold, et al. 1984).

SMPs are perceived by SMEs to be too busy, disorganized, very fee-conscious and not trained to provide management accounting services (White, 1983; Kirby and King, 1997). These provide opportunities to other professionals such as solicitors, IT experts and financial institutions such as banks to provide management accounting services to SMEs.

There is a dearth of literature on the management accounting needs of SMEs and the role professional accountants, particularly in the Fijian context. Those published to date mostly focus on the UK and USA, and a Fijian perspective is virtually non-existent. Given the space constraints, the findings of the relevant published studies are only briefly presented below.

Kirby and King (1997: 294) examined the relationship between SMEs and SMPs in the North East of England and found ‘a mismatch in the expectations of the two groups’. SMPs perceive a well-founded relationship between themselves and their clients but this relationship is not reciprocal. Owner-managers perceive that it is not the cost but the lack of knowledge and expertise of their business on the part of the accountants. Kirby and King (1997: 295) further suggested that accounting practitioners did not accept any responsibility for the small business sector other than contractual obligations for compliance-related works, and that practicing accountants often provided advice only when it was requested.

Marriott and Marriott (2000) report results within the UK context on SMEs need for management accounting information, and the capacity of public accounting practitioners, particularly SMPs to meet those needs. All fifteen companies interviewed used computers to produce accounting reports but advice on appropriate software and systems in the majority of the cases came from sources other than accountants. The findings further reveal that the charges for the services provided are quite high especially when all information is provided by the owner-managers to produce accounting reports suitable for tax office. The majority of the owner-managers felt that they would benefit from management accounting information but were reluctant to seek the same from SMPs as it could result in greater fees. It is this perception of the SMEs that acts as a barrier to requesting management accounting services from SMPs.

Holmes and Nicholls (1989) highlighted the limited acquisition or preparation of detailed accounting information by owner-managers of Australian SMEs, except those sought for statutory returns. The findings further revealed that most owner-managers engaged a practicing accountant to prepare statutory accounts and limited non-statutory management accounting information were either acquired externally or generated in-house.

3. Key research objectives

The study will draw upon Institutional theory to understand the pressures that create demand for management accounting information by SMEs and the role of SMPs and their profession in provision of such services.

• Understand the importance of management accounting information for owner-managers of SMEs;

• Identify specific management accounting needs of SME owner-managers;

• Discuss the ability of SMPs to meet SMEs management accounting needs.

4. Research methods

Upon identification of the participating organisations, archival data publically available with respect to those organisations will be collected. Requests will be made to participating organisations for copies of annual reports and other publications. This procedure will allow the researcher to obtain a better understanding of the nature of the participating organisations and the accounting profession.

Unlike previous survey-based studies, this study will adopt a qualitative field study approach to collect, analyse and report rich data from the field. At least ten owner-managers from ten different SMEs and their public accountants will be identified from different areas in Fiji. A total of fifteen in-depth semi-structured interviews are planned for, each interview lasting for about an hour. Permission will be sought from the interviewees to record the interview proceedings, and upon transcription of the interviews by the research assistant, a copy will be fed back to the interviewees for shared understanding of the issues involved and for incorporation of any additional information. Back-up notes will also be taken by the research assistant given the risk associated with technology failures, and to facilitate more efficient and effective transcription.

5. Timelines

Application for research approval by the University of Fiji will be done once the grant is approved. Formal contacts with participating organisations will be made soon after research approval is granted, although some preliminary contacts have already been established through previous research and meetings. The interviewees will be identified and request for participation in research will be sent out as early as January, 2018. The interviews are expected to commence in mid February 2018. Analysis of archival and interview data is expected to be complete by end of June 2018. The next three to six months will be devoted the write up of the project. The final report will be completed by December 2018 and graded Journals through ABDC will be looked for publishing this research.

6. Budget Details

|BUDGET ITEM(S) |$ Requested |

|Personnel | |

| |$1000.00 |

|Research Assistant Cost for gathering data: | |

|Transcription of interviews: |$2000.00 |

|Total Personnel (a) |3000.00 |

|Equipment and Maintenance | |

|1 Digital recorder for Interviews |1000.00 |

|Total Equipment and Maintenance (b) |1000.00 |

|Travel | |

|Mileage claim: (15*120KM approx)* 55c – All the divisions |1000.00 |

|Total Travel (c) |1000.00 |

|Other | |

|Proof reading / Photocopy/Printing/Internet Costs | |

|Draft and final report proof reading |1000.00 |

|Total Other (d) | |

| | |

|TOTAL COSTS |$6,000 |

7. A discussion of outcomes and its relevance to the accounting profession in Fiji

The findings of the study should highlight the management accounting needs of SME and the role of SMPs in provision of such services. It should further reveal similarities and differences from previous studies. It is argued that owner-managers of SMEs derive little benefit from statutory reports prepared by SMPs (Marriott and Marriott, 2000). A lot of routine bookkeeping functions are now computerised and this should free SMPs’ time to some extent to provide broader management accounting services to their clients. SMPs, based on their knowledge and expertise, certainly have a role here, and if they are not careful then consultants, IT experts, banks, solicitors and unqualified accountants would obviously creep in to provide cheap and poor quality services. Professional accounting bodies will need to ensure that their members are well-equipped with appropriate skill sets, education and training to keep pace with the changing needs of SMEs operating in complex, competitive and uncertain environment. This research project will help identify future challenges and directions for management accounting researchers in terms of SMEs’ management accounting needs.

8. Selected references

Alam, M., Nandan, R. (2007) Organisational change and innovation in small accounting practices: evidence from the field, Proceedings of the Asia Pacific Interdisciplinary Research in Accounting, July, Auckland, NZ.

Alam, M., Nandan, R. (2010) Organisational change and innovation in small accounting

practices: evidences from the field, Journal of Accounting and Organisational Change, Vol. 6, No. 4, pp. 460 – 476.

Burns, J., Scapens, R. (2000) conceptualizing management accounting change: an institutional framework, Management Accounting Research, 11, 1, pp. 3 – 25.

Burns, J., Ezzamel, M., Scapens, R. (2003) The challenge of management accounting change: behavioural and cultural aspects of change management, CIMA, Elsevier, Oxford.

Ciccotosto, S., Nandan, R., Smorfitt, D. (2008) Issues facing small accounting practices in regional North Queensland, Australian Accounting Review,18, 4, pp. 324-333.

Gibbins, M., Wright, A. (1999) Expertise and knowledge management in public accounting professional services firms: a North American perspective, Australian Accounting Review, 9, 3, pp. 27 – 34.

Kirby, D., King, S. (1997) Accountant and small firm development: filling the expectation gap, The Service Industries Journal, 17, 2, pp. 294 – 304.

Marriott, N., Marriott, P. (2000) Professional accountants and the development of a management accounting service for the small firms: barriers and possibilities, Management Accounting Research, 11, pp 475 – 492.

Mitchell, F. (1998) A case for researching management accounting in SMEs, Management Accounting, Oct. pp. 30 – 32.

Mitchell, F., Reid, G. (2000) Problems, challenges and opportunities: small business as a setting for management accounting research, Management Accounting Research, 11, pp. 385 – 390.

Nandan, R., Ciccotosto, S. (2006) Networks in knowledge intensive industry: the case of a regional accountants’ network, Proceedings of the 30th European Accounting Conference, April, Lisbon.

Nandan, R., Ciccotosto, S. (2014) Networks in knowledge-intensive industry: the case of a

regional accountants’ network, Journal of Accounting and Organisational Change, Vol. 10, No. 1, pp. 2 -21.

Nandan, R. (2010) Management accounting needs of SMEs and the role of professional accountants: a renewed research agenda, Journal of Applied Management Accounting Research. Vol. 8, No. 1, pp. 67 – 79.

Perren L, Grant P. 2000. The evolution of management accounting routines in small businesses: a social construction perspective. Management Accounting Research 11:391-411

Scapens, R., Bromwich, M. (2001) Management accounting research: the first decade, Management Accounting Research, 12, pp. 245 – 254.

Scapens, R., Ezzamel, M., Burns, J., Baldvinsdottir, G. (2003) The future direction of UK management accounting practice, CIMA, Elsevier, Oxford.

The End

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