The effect of accounting information system quality on financial performance of SMEs in Nairobi county
Abstract
Accounting information system is a system that records and processes data of transaction and events into meaningful information for use in planning, controlling and operation of businesses. The quality of the accounting information that a firms has would influence the nature of reporting and thus performance. The study therefore sought to investigate the relationship between this quality and financial performance of SMES in Nairobi County. Primary data was collected from a sample of 50 business enterprises in diverse sectors in the county. A self-administered questionnaire was used through a drop and pick module. Information was sought majorly from top manager, owners and accountants to enhance reliability. The questions asked covered the key aspects of quality and performance that included the records and report management, the extent of knowledge and usage of the AIS, the nature of the AIS in place and the extent of regulation in place. Correlation analysis done indicated that all the independent were significantly correlated with the dependent variable as all the coefficient of correlation were more than 0.5. Binary logistic regression model was fitted on the variables. The major finding of the study was that most enterprises had a high linkage of financial performance as measured by the change in ROI being heavily influenced by the nature of records and reports, nature of the accounting system adopted the extent of knowledge and usage of accounting information and the extent of regulation in place. The key recommendations of the study therefore included development and adoption of user friendly computerized accounting information systems for all the enterprises in the county for daily operations and reporting. This will go far way in saving on time and improving on operational efficiency as well increasing reliability of the financial reports generated for consumption by other users including banks, tax authorities etc through reduction biases caused by human interaction. There is need to develop affordable, easy and user friendly training kits to be consumed by majorly players in the sme bracket on accounting and financial management. This will majorly be useful in improving skills so as to boost proper decision making based on factual realities by management and owners of these enterprises