Compliance or management: The benefits that small business owners gain from frequently sourcing accounting services

Abstract

Background: Despite calls by scholars for small business owners (SBOs) to seek external consultation from accountants, empirical work demonstrating the relationship between the frequency of various types of services sourced and the perceived benefits obtained remains neglected. Aim: The purpose of this article was to determine the benefits that SBOs obtain from the frequency by which they source different types of accounting services. Setting: Survey data were collected from a sample of 422 South African SBOs. Small business owners are defined as those who own a distinct business entity with no more than 200 employees. Methods: The study followed a quantitative research approach. Structural equation modelling was used to test the hypotheses. Results: Overall, the study found that the frequency by which different types of accounting services are sourced influences SBOs’ perceptions of the levels of management versus compliance benefits obtained. Results show that SBOs that frequently source the service of submitting income tax returns perceive the relationship with their accountant to provide significant compliance benefits. Small and medium enterprises (SMEs) that source tax planning services and routine accounting services from their accounting practitioners experience significant compliance and management benefits. Results confirm the notion that no significant benefit are gained from year-end accounting services, such as the preparation and audit of annual financial statements. Conclusions: The study advises SBOs not to limit their perceptions regarding the role of an accountant to that of a compliance officer. The article suggests that by sourcing advisory services more frequently, SMEs could overcome the difficulties associated with an internal lack of financial skills.