ASSESSING BOOK-KEEPING PRACTICES OF SMEs IN NIGERIA (A CASE STUDY OF SELECTED SMEs IN PORT HARCOURT, RIVERS STATE)

CHAPTER ONE

INTRODUCTION

1.1   Background of the Study

It is pertinent to note that small and medium scale enterprises (SMEs) constitute an integral foundation of a nation’s economy. The economic progress Nigeria recorded in the last two decades could be attributed to the speedy growth of small and medium scale enterprises.

This is a fact attested to by a number of speakers during an economic conference held in Lagos in 1989 at the instance of the Nigerian Institute of social and economic Research (NISER) and the National Association of Small Scale Industries (NASSI).

The environment in which the SMEs operate in Nigeria is very challenging and rewarding as well as the risk associated with investment, management and competition with weel-established businesses underscore the underlying threat to the development of the small and medium scale enterprises in Nigeria. The small size of capital required to run these enterprises and the ease with which they are operated make this form of enterprise very viable and rewarding.

There has been increasing attention of government at various levels in Nigeria to the growth of SMEs. Incentives and enlightenment workshops and programs have been implemented on the large scale by the Obasanjo-led administration to boost and strengthen this unit of the economy. The Nigeria government has realized that small and medium scale enterprises do not only foster industrial development but promote rural development and generate employment. Malaysia, India, China, Japan and South Korea are noble examples of countries whose successes in the development of small and medium scale industries have placed them as economic giants in the global market.

In Nigeria, the focus on the development of SMEs dates back to the sound National Development Plan (1970-1975) during which the small scale industries (SSI) audit scheme was initiated. This was a result of the immense government support for the sector in terms of funding.

1.2   Statement of the Problem

Verifiable records have shown that the performance of SMEs in Nigeria can be rated as unimpressive because of poor accounting practices such as improper and incomplete book-keeping.

A major cause of business failures in SMEs sector is poor accounting practices. Improper and insufficient record-keeping has become a regular feature of most SMEs in Nigeria.

Although there are other factors that hinder the growth of SMEs in Nigeria such as managerial incompetence, inadequate financial/capital, state of economy, employee’s experience etc, non-observation of accounting principles and system constitute a bane of SMEs in Nigeria.

1.3   Objectives of the Study

The study sought to achieve the following objectives;

1. To examine the importance of adequate book-keeping to small businesses in Nigeria.
2. To examine the level of assistance of SMEDAN to small businesses in Nigeria.
3. To examine the type of book-keeping practices mostly used by small businesses in Nigeria.
4. To evaluate the level of book-keeping practices in small businesses in Nigeria.

1.4   Research Questions

1.  What is the importance of adequate book-keeping to small businesses in Nigeria?

2.     What is the level of assistance of SMEDAN to small businesses in Nigeria?

3.     What is the type of book-keeping practices mostly used by small businesses in Nigeria?

4.     What is the level of book-keeping practices in small businesses in Nigeria?

1.5   Research Hypotheses

Ho: There is a significant relationship between adequate book-keeping and operational performance of SMEs in Nigeria.

Hi: There is no significant relationship between adequate book-keeping and operational performance of SMEs in Nigeria.

1.6   Significance of the Study

This study contributes to knowledge and could serve as a bench mark or guide for other work or study. It avails SMEs with information about the importance of proper book-keeping in their business. The knowledge and use of book-keeping is not just important or relevant for SMEs alone but also to every individual in any profession or career as it helps to make them better understand the usefulness of book-keeping, misinformation and inappropriateness of book-keeping can then be corrected.

1.7   Scope/Limitations of the Study

This studyon assessing book-keeping practices of SMEs in Nigeria was conducted in Uyo Local Government Area of Akwa Ibom State with selected SMEs as the case study.

Limitations of study

1. Financial constraint- Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).
2. Time constraint- The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.

1.8   Definition of Terms

Book-Keeping: Bookkeeping is the recording of financial transactions, and is part of the process of accounting in business. Transactions include purchases, sales, receipts, and payments by an individual person or an organization/corporation.

Small and Medium-scale Enterprise (SME): Small and medium-sized enterprises or small and medium-sized businesses (SMBs) are businesses whose personnel numbers fall below certain limits.

Cash Book: A book in which receipts and payments of money are recorded.