Accounting services and financial performance of SMES in Mbarara district

Abstract

This study sought to investigate the effect of accounting services on the financial performance of SMEs. The specific objectives were to assess how tax planning influences the financial performance of SMEs; to determine the role of advisory services on the financial performance of SMEs and to establish the influence of financial reporting on the financial performance of SMEs. A case study design was adopted and data collected from a sample of 56 respondents. Self-administered questionnaires, interview and documentary review were used in the study to collect data. Data was analysed using SPSS Version 16 and findings were presented in a tabular format showing frequencies and percentages. Qualitative findings were presented in themes in a narrative form. The study revealed that SMEs Plan for all the taxes that they pay, have been able to reduce tax burdens without additional investments in tax planning, have also encountered misunderstanding, punishment and censor from some basic taxation law enforcement agencies. SMEs have accountants who help to get advisory services on what to do in case the business is not doing well. It was also revealed that Advisory services have provide them better management control and that they have also helped them to access new market and maximize profits. SMEs also keep financial records properly and that Cash flow difficulties have reduced as a result of financial records, Financial reporting has been useful for decision making and the SMEs are also able to compare information of different entities because they use the same accounting principles. Finally it was recommended that the managers should aim at producing a good quality and reliable financial records that will assist and equip them with accurate accounting information. Thus, this will guide them to make a quick and precise decision. The tax authorities should also address the lack of formal tax planning as this may be a way of evading taxation in the name of tax avoidance. The small scale enterprises should also be ready to open up to advice on tax planning to make savings lather than playing a hide and seek game with tax authorities.