Managerial Accounting Practices in SMEs: Articles Review and Analysis

This report summarizes two research articles related to managerial accounting and Small and Medium Enterprises (SMEs). The first article explores the significance of budgeting in SMEs, highlighting its role in performance monitoring, future planning, and decision-making. The research methodology involved questionnaires and surveys to assess the use of budgets and the factors influencing their adoption. The second article examines the adoption of management accounting practices in Malaysian SMEs, revealing that while traditional accounting methods are still prevalent, there's a need for broader adoption of advanced techniques to enhance financial robustness and sustainability. The research employed surveys to gauge the extent of these practices. Both articles emphasize the implications for business decision-making, particularly in the context of SMEs, by providing insights into effective budgeting, management accounting practices, and their impact on cost management, financial performance, and overall business success. The report concludes by reflecting on the assignment's learning outcomes and the practical application of the concepts discussed.

Running Head: MANAGERIAL ACCOUNTING
MANAGERIAL ACCOUNTING
Name of the Student
Name of the University
Author Note

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Table of Contents
MEMO.......................................................................................................................................2
Summary of First Article...........................................................................................................2
Summary of Second Article.......................................................................................................4
Business Implications of Paper on the Clients...........................................................................5
Reflection...................................................................................................................................7
Reference....................................................................................................................................8

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MEMO
To- Paulina Presto
From-
Date- April 2, 2020
Subject- Articles Review on management accounting and SMEs
Dear Paulima,
I came across two research articles, while searching for articles in the online library. I
searched the article by mentioning keywords such as SMEs, management accounting, and
budgeting. The first article is by (Maduekwe & Kamala, 2016), which is regarding uses of
budgets by the SMEs and the second article is by (Ahmad, 2014) about empirical evidences
on the adoption of wide ranges of the management accounting practices in the Malaysian
SMEs in manufacturing sector.
Summary of First Article
This article has discussed the significance of the uses of budgets by SMEs. Budgets
are considered as most-important for SMEs because it helps in providing the future-oriented
information, which facilitates control and monitoring of performance of the business. It can
be done by highlighting the areas in which there is a deviation of actual performance from
planned or budgeted performance, which helps in taking corrective actions. Budgets help in
facilitating management by the exceptions through isolating the problem areas, which
requires urgent attention and taking method that results in the effective problem resolution.
This paper provides valuable insights regarding budgets uses by SMEs. The insights gained
from this could help to inform future endeavors of government, when intervention is
developed that is meant to avert higher failure rate of SMEs.

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The research was conducted by designing the questionnaire, followed by population and
sample selection, distribution of questionnaire and checking rate of response and test for the
bias of non-response. Prior disseminating the questionnaires, a pilot test was conducted, in
which the questionnaire was evaluated critically by 10 academics with immense experiences
in the questionnaire designing. It was then adjusted for reflecting academics
recommendations and when it was resubmitted to them, it was found concise and clear. The
target sample of one hundred FMCG SMEs was considered and for achieving this target, a
total of 170 respondents were being approached. Further, potential respondents were then
requested for indicating their willingness for participating in the study and they were
persuaded for participating in a survey using the face-to-face approach.
The key findings of this paper are that most companies use budgets and the most
frequent budgets that are used include cash budgets, purchases budgets and sales budgets. For
preparing budgets, most of the SMEs use fixed as well as flexible methods of budgeting in
comparison to zero-based budgeting and incremental budgeting methods. Moreover, results
indicate that the budgets are used frequently for monitoring of the business, measurement of
performance, planning for future and for improving the decision-making. Lastly, findings
suggest that the budgets are being perceived as effective and the lack of support of the top
management and the qualified personnel are two main factors, which constrain budget
preparation.
There would be great implications of this research on the decision-making of clients
because they will get to know about different types of the budgets and the methods of
budgeting, which can be used in the business. It will also help in enlighten decision-making
on various budgets uses, perceives the effectiveness of the budgets and factors inhibiting
SMEs to use these tools (Maduekwe & Kamala, 2016).

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Summary of Second Article
This article has discussed broad ranges adoption of management accounting in the
manufacturing sector of the Malaysian sector. The management accounting practices are
mostly used by large firms compared to SMEs, despite the significance of SMEs in the
country’s economy. The higher failure rate of SMEs has pointed out the requirement to
enhance their financial robustness. The uses of the traditional approach of accounting in
SMEs are no longer meeting the needs of the current business environment. These changes in
the global business environment have driven transformation in SMEs for moving towards
sustainability by focusing on the efficiency of cost. This paper has summarized how the
adoption of management accounting practices helps in improving the sustainability of the
business in the context of SMEs.
The research was conducted by conducting a survey of 1,000 Malaysian entities of
manufacturing in the sector of SMEs. The selection of firms was from the “Federation of
Malaysian Manufacturers”. This source gives the comprehensive information regarding
SMEs in the sector of manufacturing. This sample was mailed with the first survey, which
comprised of the questionnaire, cover letter, and the reply-paid envelope. At the end, a total
of 176 questionnaire was received by giving a response rate of 17.6%. For examining non-
response bias, a comparison was made from the first 30 percent of the returns and the last 30
percent for testing if there are differences between the two groups.
The results of this article indicate that widely uses of the traditional approach of
management accounting in SMEs is no longer meeting the current requirement of business.
The results indicated that Malaysian SMEs widely adopts basic techniques of management
accounting such as performance evaluation measures and budgeting system. In comparison to
small enterprises, management accounting practices are used more by medium enterprises. It
was found that because of the relatively small size of the firm and some constraints, it is

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difficult for SMEs to adopt comprehensive MAP in the firms. Hence, it is suggested in the
article that there are plenty of opportunities for increasing understanding and awareness of
MAPs significance within SMEs, since these practices are considered to be an ingredients in
organizational success.
This research will have great implications on clients because it will increase
knowledge regarding management accounting practices in SME context. It will also be
beneficial in providing relevant knowledge, which can help support efforts for enhancing the
company’s performance. If clients will use modern techniques of management accounting,
then it will not only reduce the cost of business but also helps in increasing financial and the
non-financial performance of the company (Ahmad, 2014).
Business Implications of Paper on the Clients
Therefore, the results of both the paper will have significant implications on business
and its decision-making, especially in the context of SMEs. The use of budgeting helps in
setting targets and efforts are made to check deviations from planned and actual performance.
If there are any deviations, then remedial actions are taken. If the client adopts the budgeting
techniques, then it will compel the business decision-makers for thinking for a long-term
perspective compared to being distracted by the short-term day-to-day activities. This
distraction will greatly affect the long-term survival and competitiveness of the entity.
However, if the client uses modern and sophisticated management accounting
practices, then this will help their business to better manage their scarce resources and
enhance their values of the business organization. In the current business scenario, where
there is rapid change in the conditions of the market, if the firm is not updated with the latest
techniques of management accounting practices and they are stick to traditional and outdated
techniques, then they will be able to survive in the market for long-term. Hence, clients are

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advised to use budgeting and management accounting practices for reviewing their financial
progress and based on that making important business decisions. MAPs provide different
techniques, tools and valuable internal information, consisting of profit planning, budgeting
and evaluation of performance. Hence, the clients are advised to use the latest techniques of
budgeting as well as management accounting practices in their business because the tools and
techniques provided by these practices will help in enhancing the profitability and efficiency
of the client’s business.

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Reflection
This assignment helps me to enhance my understanding regarding budgeting and
management accounting practices. Both these concept helps in measuring as well as
improving efficiency, reducing or controlling costs and enabling decision-making that
ultimately results in increasing overall profitability of the business organization in the context
of SMEs. The first step before starting this assignment was to search two articles. I then
searched two articles from the online library by giving the keywords such as SMEs and
management accounting. Afterward, I found two articles, from which one article was of
budgeting in SMEs and the second article was about management accounting practices in
SMEs. Moreover, it was not difficult for me to understand both the articles, because these
articles clearly described the issues, findings and implications in SMEs. Further, the concept
and scenarios that I have learned from academic research will be quite useful when I will be
using these techniques practically to enhancing the profitability and efficiency of the
company and reducing its cost of operations. Lastly, other takeaway learned from writing this
includes analyzing the research papers, making business memos and the way of taking
business decisions by implementing budgeting and modern MAPs.

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Reference
Ahmad, K. (2014). The adoption of Management accounting practices in Malaysian Small
and Medium-sized Enterprises. Asian Social Science, 10(2), 236.
Maduekwe, C. C., & Kamala, P. (2016). The use of budgets by small and medium enterprises
in Cape Metropolis, South Africa. Problems and perspectives in management, (14,
Iss. 1 (contin)), 183-191.