ISSN: 2225-8329
Open access
The aim of this study is to examine the impact of proper accounting practices on financial performance of small and medium-sized businesses (SMEs) in Somalia. SMEs play an important role in the country's economic development, job creation, and poverty alleviation. However, small businesses frequently confront particular accounting issues as a result of limited resources and unstructured systems. This study attempts to address a gap in understanding Somali SMEs' accounting procedures by investigating the extent to which these practices impact their financial performance. The study uses quantitative method, distributing questionnaires to 470 SME owners and managers from a variety of industries. Demographic statistics show that respondents had a fair gender representation, as well as a wide range of age and educational backgrounds. The statistics show that about 88 percent .3% of SMEs keep accurate accounting records, with about 58 percent utilizing manual methods and 42 percent using automated systems. Descriptive statistics suggest a strong emphasis on record-keeping techniques, with a mean score of 4.67, showing its importance in financial success. Correlation study reveals substantial positive associations between financial performance and elements such as record-keeping procedures (r =.94), the aim of correct accounting practices (r =.65), and the difficulties of faulty accounting record-keeping (r =.57). The regression model, with a R² of 0.899, demonstrates that these accounting methods explain a significant percentage of the variance in financial performance. The ANOVA analysis validates the model's relevance, and the results show that record-keeping habits are the most important predictor of financial success. The study suggests that proper accounting practices are critical to the financial performance of Somali SMEs. It proposes increasing access to accounting knowledge and technology to further strengthen these practices, hence promoting the long-term growth and development of Somali SMEs.
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