Abstract
Orientation: Financial record-keeping is a pivotal management tool to analyse profitability, solvency and liquidity, and contribute towards financial efficiency and organisational performance.Research purpose: The purpose of the research is to explore financial record-keeping practices by small- and medium-sized entities in the informal sector with specific reference to selected demographic variables.Motivation for study: The contribution of the informal sector to economic growth has recently gained momentum. Financial record-keeping has been identified as keystone to the success of small- and medium-sized entities.Research approach, design and method: Quantitative data obtained from the national Survey of Employers and the Self-Employed (2017) acquired from Statistics South Africa were utilised, yielding a final sample of 1658 respondents.Main findings: By means of binary logistic regression, the research established that various demographic variables influence financial record-keeping practices in the informal sector in a statistically significant way. Moreover, it was found that the majority of small- and medium-sized entities do not practise financial record-keeping.Practical/managerial implications: Interventions should underscore addressing the perceived absence of financial record-keeping practices in the informal sector. Whilst the National Development Plan (NDP) extrapolate the informal sector contributing to job creation by 2030, the effect of these demographic variables on financial record-keeping practices should be taken into cognisance.Contribution/value-add: The evidence generated by the research presented could be utilised when debating developing or expanding the informal sector. The theoretical contribution relates to modernisation, structure and dependency of the informal sector specifically contributing to the development of a theoretical framework underscoring the influence of demographic variables.
Highlights
Small- and medium-sized enterprises (SMEs) have been known as a fundamental part of every nation’s economic activity (Muriithi 2017). Nketsiah (2018) opines that the role of SMEs in economic development cannot be overstated
The primary aim of the study was to investigate the influence of demographic variables on the financial record-keeping practices in the South African informal business sector
5% (n = 83) of the sample kept full annual financial accounts. From those respondents who identified some form of financial record-keeping practice, 51% (n = 174) indicated that financial accounts are kept separate from general household accounts; whilst, 24.4% (n = 83) of the sample indicated that not all financial record-keeping is separated and 24.6% (n = 84) indicated that no separation is present
Summary
Small- and medium-sized enterprises (SMEs) have been known as a fundamental part of every nation’s economic activity (Muriithi 2017). Nketsiah (2018) opines that the role of SMEs in economic development cannot be overstated. Small- and medium-sized enterprises (SMEs) have been known as a fundamental part of every nation’s economic activity (Muriithi 2017). Nketsiah (2018) opines that the role of SMEs in economic development cannot be overstated. Small- and medium-sized enterprises account for a vast portion of new employment opportunities, stimulate growth, create social cohesion, generate income and are known as a primary driver for gross domestic product (GDP) growth (Nketsiah 2018). Muriithi (2017) noted that in African countries, SMEs account for approximately 90% of commerce in both leading and developing countries contributing to job creation, employment, tax provision and GDP. Owolabi, Ogundajo and Olayinka (2016) confirm that SMEs serve as a principal means for poverty alleviation, employment creation and economic development. Owolabi, Ogundajo and Olayinka (2016) confirm that SMEs serve as a principal means for poverty alleviation, employment creation and economic development. Muhammad and Isah (2018), citing Fred (2003), noted that SMEs https://www.jefjournal.org.za
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