The use of management accounting practices in small and medium-sized enterprises in Mogadishu, Somalia

Abstract

Small and medium-sized enterprises (SMEs) in the context of post-civil war face greater challenge in the face of tremendous and rapid development in business environment. The needs to use information in making timely decisions is imperatively demanding. Hence, the use of financial and non-financial information from diverse management accounting practices tools would enhance the efficiency and effectiveness of business operations. Prior studies mostly concentrated on use of management accounting practices in manufacturing industry context. This study aims to provide findings on the use of management accounting practices in manufacturing, trading and services industry within the context of post-civil war where the use is still at the infancy stage. Also, studies about management accounting practices in smaller firms or SMEs in developing countries are still lacking. Therefore, there is a need for further study to contribute to filling the literature gap in MAPs in SMEs in a developing country, especially in reference to Somalia. This study examined the level usage of MAPs in Somali SMEs and factor that affect the level of usage of MAPs in Somali SMEs in Mogadishu. The questionnaires were distributed to 372 small and medium-sized enterprises in Mogadishu by using a purposive sampling method. The findings demonstrated that most responses from SMEs in Mogadishu have used budgeting systems and performance measurement systems compared to costing systems, decision support systems, and strategic management accounting. From the regression analysis, this study indicated that two out of five contingent factors influence management accounting practices. For instance, market competition and technology have been significantly and positively associated with the level of usage of management accounting practices. Nevertheless, the size of the firm, types of businesses and age of firm do not have a significant relationship with the level of usage of management accounting practices. Thus, this study suggests that managers and owners of SMEs would benefit greatly from using management accounting practices when their small and medium-sized enterprises have high market competition. Also, small and medium-sized enterprises should use proper technology to increase their chances of getting adequate information by the adoption of management accounting practices.