Small business owner objectives and utilisation of accounting information

Christopher McDowell

This thesis explores relationships between objectives of small business owners and their use of accounting and financial information. Previous research has identified a failure by small business owners to obtain and use accounting information, potentially available from accounting professionals, beyond statutory requirements. Prior researchers have explained varying propensity to utilise non-statutory accounting information in terms of business sector, business size, owner education and life span under existing management. This research aims to contribute to the explanation, by relating owner objectives to accounting and financial information inputs for decision making and management of small businesses. Empirical analysis is based on results obtained from a survey of 279 small retailers in north eastern NSW. A typology of small business objectives is developed from factor analysis. A nine factor model, comprising 72 objective variables, provides a synthesis of a complex array of financial and non-financial objectives pertaining to small business owners, their families and their businesses. Cluster analysis, via a multi-stage clustering procedure, was employed to construct a typology of owners based on factors linked to objectives. Owners are classified into four types, reflecting relative importance of factors. Differences between clusters, and interpretation of owner types, were examined with multivariate analysis of variance using deviation contrasts, as well as comparisons of structural and demographic variables. Owner types are then compared through analysis of responses on preparation, acquisition and use of accounting and financial information. Both accounting information generated within the business and information acquired externally from accountants in professional practice are considered. In addition, various criteria for judging business performance, and alternative sources of information for decision making, are used to compare owner types. Research found that emphasis on current high performance, and extracting immediate value from businesses, are associated with higher frequency of acquiring historical accounting statements from accountants. Emphasis on business stability and risk minimisation were found to be associated with greater frequency of acquisition of budget accounting statements, and a higher regard for information and advice from accountants. Failure to acquire non-statutory accounting information, and a low regard for the usefulness of externally acquired accounting information and advice, are associated with low emphasis on short term financial objectives. Implications for training of accounting professionals and small business owners are discussed in the light of results, particularly the need for empathy with small business owners and their families, regarding the diversity of objectives and priorities which impact on small business management. The results demonstrate that simple assumptions, such as maximising profit or equity, may not be appropriate for most small businesses owners. A significant contribution of the research is the development of the typologies of objectives and owners, and demonstrations of the use of typologies of objectives as a framework for explaining one aspect of small business behaviour. Classification and understanding of small business owners, on the basis of their financial and non – financial objectives which impact on the management of their businesses, provides an opportunity to explain other phenomena arising from a developing body of small business research.

Small business owner objectives and utilisation of accounting information

Files and links (1)

Metrics

Abstract

Details

Small business owner objectives and utilisation of accounting information

Files and links (1)

Metrics

Abstract

Details

Southern Cross University Social media