Abstract:
Despite the effort made by the government of Kenya to support the growth of SMEs sector by creating enabling environment through appropriate legal and regulatory procedures, and in spite the fact that banks have recently made micro-credit accessible to SMEs, there is no indication that the sector is growing. This research was therefore set to investigate the effect of records keeping on Small scale and Medium Enterprises. In line with the objectives of this study, a descriptive design such as personal interviews and questionnaire were employed as the major techniques for primary data collection. Data collected were analysed using both the qualitative and quantitative methods. The descriptive statistics used were tables and percentages.
The study found that the SMEs do not keep complete accounting records because of lack of accounting knowledge and the cost of hiring professional accountants. As a result, there is inefficient use of accounting information to support financial performance measurement by SMEs. This made it difficult for the entrepreneurs to calculate their business profit efficiently. For the success of SMEs accurate records of business transactions need to be kept. Education is also critical to enable small business owners acquire more knowledge on bookkeeping practices. This is through introduction of seminars, workshops and training sessions where such knowledge can be acquired. Universities and colleges should also offer more courses related to bookkeeping apart from the general business courses
Following the outcome of this study, it is therefore concluded that that there is a strong positive relationship between records keeping and financial performance of small scale and medium enterprises. Records keeping is essential for decision making which invariably affects performance of small scale enterprises. It is recommended that the owners and managers of the small scale and medium enterprises should embrace proper records keeping practices for effective financial performance in their business.
