BUS707 Applied Business Research: Small Business Accounting Problems

This research proposal aims to identify and address significant accounting challenges faced by small businesses. It emphasizes the importance of accurate financial statements for internal organization and profitability. The proposal includes a literature review exploring the conceptual analysis of financial accounting reports, highlighting the potential losses from inadequate accounting processes, such as difficulty securing business loans. It outlines the research design and methodology, including the research approach, data collection methods, sampling technique, and data analysis, while also addressing research ethics. The study seeks to provide solutions for mitigating these challenges, focusing on the operational impacts of accounting mismanagement and the need for skilled accountants and appropriate software tools.

Running head: ACCOUNTING PROBLEM
Accounting Problems faced by Small Businesses
Name of the Student:
Name of the University:
Author Note:

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ACCOUNTING PROBLEM
Abstract
The research study is identifying the significant challenges that affect the business procedures in
a recognizable way. The study even recognizes the necessity of developing the right financial
and accounting statements to organize the internal functionalities and develop the profitability
parameter. The study helps in providing the solutions to deal with diverse accounting problems.
The literature review explores such conceptual analysis to identify the importance of preparing
the appropriate financial accounting report. It is notable that the failure to the maintenance of the
appropriate accounting process can signify the greater loss to business that have the long term
impact. If the financial accounts are not maintained properly, it might reduce the chances for
receiving the business loans for the further growth. The study highlights the affected business
segments. The identification of these areas provides the better solutions for mitigating the
challenges. The use of the appropriate research methodology helps the research process to be
conducted in a systematic way.

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Table of Contents
Introduction......................................................................................................................................3
Background of the Research............................................................................................................3
Problem Statement...........................................................................................................................4
Research Aim...................................................................................................................................5
Research Objectives.........................................................................................................................5
Research Questions..........................................................................................................................5
Research Hypothesis........................................................................................................................6
Literature Review............................................................................................................................6
Research Design and Methodology...............................................................................................14
Research design.............................................................................................................................14
Research approach.........................................................................................................................14
Type of data will be used...............................................................................................................15
Data collection...............................................................................................................................15
Sampling Technique......................................................................................................................15
Data analysis..................................................................................................................................16
Research ethics..............................................................................................................................17
References......................................................................................................................................18

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Introduction
The accounting field is the integral part of every business corporations. Both the smaller
and larger enterprises need to be skilled enough to structure their financial statement
appropriately to develop the knowledge while investing a fixed amount of capital or incur costs
from the market. However, it has been observed that the smaller firms often face the
considerable challenges in developing the accounting process. In fact, in compare to the larger
business, the smaller businesses face such challenges in a more prominent way. According to
Eavis (2016), unlike many other larger corporations, the smaller business faces the considerable
challenges with the lack of capital resources that are used for paying the professional services.
For instance, in a process like bookkeeping or accounting, the smaller business enterprises need
to ensure larger investments. The smaller businesses can face the challenges in many of the
aspects that are related to the accounting process.
This study would thus reflect on such considerable factors of accounting that are much
riskier to mange for the smaller businesses. The research aims and objectives would adjust the
focus of the study depending on which he literature study will explore the conceptual and
theoretical background of the subject. The use of the appropriate methodology will also be
discussed in this study.
Background of the Research
The research subject is widely focusing on the considerable accounting problems faced
by the small business firms. The business marketers associated with the small business
enterprises need to consider the right accounting process in order to avoid the emerging
challenges. Lesonsky (2014) observed that the smaller business firms face the recognizable

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challenges in their financial accounting process on a daily basis. For instance, the lack of the
skilled accountant can be challenging for the smaller business to keep the record of the financial
statement of the business. According to Lowry (2015), accounting is the conceptual idea that
develops the understanding of the financial aspects of the firm. It develops the knowledge
regarding the financial information of the company. The smaller businesses often face the
considerable challenges concerning the accounting information. It is essential for these
companies to develop the effective solutions by addressing these issues. It has been observed that
the small businesses mostly face the problem in the operational process if there is the
mismanagement of the accounting procedures (Resnik, 2015). In many of the cases, it is noticed
that the small businesses strive to develop the accounting information rightly that create the
adverse effects on the business performance. The research study is thus formulated to identify
those significant challenges that affect the business procedures in a recognizable way. Moreover,
the study will even identify the necessity of developing the right financial and accounting
statements to organize the internal functionalities and develop the profitability parameter. The
study will also help in providing the solutions to deal with diverse accounting problems.
Problem Statement
The accounting process has become much significant for a company to keep the
information about the financial aspects of the company. In fact, the current business world is
highly influenced by the hanging rules and regulations. Similarly, in keeping pace with such
regulatory factors, the accounting process also needs to be developed in a structured and
informative way. Moreover, as stated by Collis, Holt and Hussey (2017), the importance of the
accounting process has been increasing due to such changes brought to the regulatory factors in
this business world. Hence, in order to maintain such financial statement much appropriately, it

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is quite necessary for the skilled accountant to create the fair financial statement. The smaller
businesses are mostly facing the challenges in maintaining the appropriate financial statement to
comply with the changed rules and regulations. The challenges emerge from various ways, such
as the lack of skilled accountant or the appropriate software tools for preparing financial
statements (DeYoung et al., 2015). It is thus necessary for these smaller businesses to address
these challenges and develop the fruitful solutions to mitigate these challenges. The research
study will put forward the idea of dealing with such challenges and the necessary strategies to
eliminate the shortfalls in preparing the appropriate financial statements.
Research Aim
The aim of the research is to identify the significant accounting challenges that the
smaller businesses have been facing in current business world. The study also attempts to
identify the solutions for mitigating such identified challenges within the smaller businesses.
Research Objectives
 To critically analyse the importance of accounting in the smaller businesses
 To identify the key accounting problems faced by smaller businesses like Café or Small
Restaurants
 To develop understanding related to the key aspects of small businesses that are mainly
affected by the accounting problem
 To provide the preferable recommendation to mitigate the emerging challenges in the
accounting field
Research Questions
 What are the major importances of the accounting process in the small businesses?

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 What are the major accounting problems that the small businesses like café and
restaurants facing in current time?
 How the accounting disparities affect the smaller businesses like café and restaurants?
 How these identified accounting problems can be mitigated?
Research Hypothesis
H0: Small businesses face challenges with the accounting disparities
H1: Small businesses do not face challenges with the accounting disparities
Literature Review
The literature review of this study focuses on the conceptual and theoretical analysis of
the accounting process undertaken by the businesses to prepare their financial statement.
According to Goffee and Scase (2015), financial accounting is crucial for the business
organisation to prepare the structured financial report based on which the businesses develop the
understanding regarding the capital investments and incurred profits. It is noticeable that the
appropriate financial accounting process helps in identifying the business potentiality and growth
probability in an operating location. It also determines that whether the business has the
probability to ensure success in a competitive landscape. The literature review will explore such
conceptual analysis to identify the importance of preparing the appropriate financial accounting
report. Furthermore, the literature will also identify the probable challenges faced by the small
businesses in this context. The study will also highlight the affected business segments. The
identification of these areas will provide the better solutions for mitigating the challenges.
Concept of Accounting

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Accounting is a practice of keeping the record of the businesses’ financial transactions.
According to Ismail and King (2014), the accounting process is formulated by using the standard
guidelines, summarization, transactions, and identification of the financial information. It is often
presented in a financial report or financial statements, such as balance sheet or income statement.
Each of the companies maintains a proper schedule to publish the financial information. This
financial report is generally published for the external stakeholders of the business. Accounting
process is generally conceptualized as one of the business languages since it communicates the
financial conditions and performance in a clarified way. LaviaLópez and Hiebl (2014) defined
that accounting is a method of identifying, measuring as well as communicating the financial
information to permit the suitable decisions and judgments of the information users. As per the
definition of Lipi, Rama and Agaraj (2015), accounting is the art of classifying, recording, and
summarizing the financial transactions and events to ensure the better outcomes. In defining the
term, Madurapperuma, Thilakerathne and Manawadu (2016) argued that accounting is not only a
process of recording the financial transactions; rather it defines the existing financial condition of
the company much precisely. In the small business field, this accounting process holds the most
priority since the businesses need to keep the focus on their financial transactions on each step. it
is important to appoint the skilled accountants who can use the software tools in an efficient and
smarter way to prepare the accurate financial statement It has been observed that small
businesses often face the significant challenges in developing the data regarding the financial
transactions that affect the business functions in a significant way. The further study would thus
develop the ideas about those segments that are highly affected by the accounting disparities.
Importance of the Accounting process in small businesses

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Accounting process has the significant role in the making the relevant business decisions
and improving the financial performance of any business. According to Williams and
O'Donovan (2015), every stakeholder of the business require the complete understanding of the
financial condition of the company to gather ideas about the business potentiality. Similarly, the
failure to the maintenance of the appropriate accounting process can signify the greater loss to
business that have the long term impact. If the financial accounts are not maintained properly, it
might reduce the chances for receiving the business loans for the further growth. Cassar, Ittner
and Cavalluzzo (2015) identified that the accounting disparity affect mostly the small businesses
that have lesser capital resources to be invested on a business. The accounting disparity creates
the negative impacts on the small businesses in terms of increasing the financial capital that is to
be used for the purpose of business expansion. In such context, it is essential for the businesses
to maintain the appropriate accounting records for dealing with the emerging issues in this
segment.
Chenhall and Moers (2015) implied that the current technological advancements have
been providing the enormous opportunities to the businesses to develop their financial
accounting process in a skilled way. The technological tools used for keeping the record of the
financial statements are much effective to ensure thee accurate information (Senftlechner and
Hiebl, 2015). It is thus quite necessary for the small businesses to use these effective software
tools that can produce the accurate financial records for performing much effectively in this
competitive business scenario. It helps the smaller business to work with more efficiency level
and improve the overall record keeping process of the firm in a remarkable way. Williams (2014)
recognised that accounting is one of the most significant tools used for establishing the budgeting
and structuring the future plans in a sequential and systematic way. Considering such

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requirements, it can be implied that it is important for the small businesses to concentrate on the
accounting process to prepare the future budget. In fact, the small business companies can
receive the adequate information about the financial performance, sales expectations, and cost
expectations by considering the appropriate financial accounting process. A budget formulation
depends on these aspects and it can clarify the vision of the company to become more futuristic.
Hence, it is noticeable that accounting is one of the most effective processes to be considered to
ensure future success of the firm. However, on the contrary, Scholes (2015) argued that small
businesses have been facing most of the challenges due to the inappropriate maintenance of the
finical statements, accounting software, and lack of skilled accountants. It is often presented in a
financial report or financial statements, such as balance sheet or income statement. Each of the
companies maintains a proper schedule to publish the financial information. In addition to this,
the regulatory factors are also taken into considerations to determine the issues with the
accounting process in the small business enterprises. These specific issues create the negative
effects on the smaller businesses in a most significant way.
The major challenges faced due to accounting process
 Lack of Knowledge and Skilled Workforce
As per the analysis presented by Warren and Jones (2018), small businesses are generally
associated with the smaller number of the workforce to manage each of the segments in an
effective way. Therefore, the SMEs often face challenges to maintain a proper bookkeeping
process to record the updated financial information. It is important for each of the businesses to
update their accounting information accurately to understand the business potentiality,
investment parameter, and probability of incurring costs from the market (Senftlechner and

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Hiebl, 2015). Therefore, it can be inferred that the lack of skilled workforce is one of the major
challenges that the small businesses face in the accounting field. If the small businesses cannot
maintain the proper calculations in terms of developing the appropriate financial statement, it
would be much improper for the business to identify the major functionalities that is needed to be
adopted. The lack of appropriate financial entry can thus be one of the most considerable
challenges in such context.
 Improper use of the accounting software tools and expensive features
On the other hand, Agrawal and Cooper (2017) identified that many of the small
businesses often purchase the effective accounting software that is supposed to resolve the issues
emerging with the accounting process. However, they fail to understand that there is the
significant difference identified between the record storage and accounting process. These
software tools can function properly to calculate data if the accounting process is clarified.
Without the appropriate accounting information, these tools cannot provide accurate recorded
financial information. Therefore, it is noticed that the lack of adequate knowledge in handling
these software tools is another significant challenge faced by the small businesses. It is a quite
difficult task for the SMEs since it generally requires having knowledge on both the technical
and accounting skills. On the other hand, Prencipe, Bar-Yosef and Dekker (2014) observed that
many small businesses cannot even afford this expensive this software tool. The small businesses
struggle to manage the capital resources to manage the business functionalities. Unlike the larger
business organisations, these SMEs have the limited capital resources that are to be invested in
developing the position of the organization. Hence, the SMEs fail to resolve the solutions the
issues in such contexts.

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 Challenges regarding bank loans
Bank loan is anther challenging factor observed in the accounting process in the small
businesses. It is noticeable that the failure to the maintenance of the appropriate accounting
process can signify the greater loss to business that have the long term impact. If the financial
accounts are not maintained properly, it might reduce the chances for receiving the business
loans for the further growth. It is important for the business to check the assets and liabilities to
formulate the appropriate financial statements (Senftlechner and Hiebl, 2015). This financial
statement is needed to be presented to the banks in order to derive loans for the business.
However, the improper arrangements of the information related to such assets and liabilities
would lead towards the inaccurate financial statement. It affects the reputational aspect of the
business in a significant way. It even creates obstacles in generating loans from the banks. In
fact, the businesses face challenges in generating funds from other sources. Therefore, the
business faces trouble in establishing the business in a sequential way.
 Emergence of the Employment Issues
The issues with the employment rate are also concerned in such context. it is noticeable that
the smaller businesses often cannot afford the high salary package or wages for the employees. It
creates the significant challenge due to the lack of skilled workers. It is noticeable that the failure
to the maintenance of the appropriate accounting process can signify the greater loss to business
that have the long term impact (Burns 2016). The lack of skilled workforce would ensure the
significant loss to business since the accounting process cannot be handled skillfully. The
inaccurate data record and the inefficient method of handling the accounting process leads
towards significant loss that is beyond mending. Hence, the smaller businesses have such risk