Examining the challenges faced by small and medium enterprises in adopting sound financial reporting in Kampala central division-Kikuubo business area

Abstract

SMEs in Uganda are dominant in all sectors. The purpose of this study was mainly to examine the challenges in adopting sound financial reporting in Kampala Central- Kikuubo business area using qualitative approach. Specific objective of the study was to establish the challenges facing SMEs in adopting sound financial reporting, ascertain the benefits that SMEs could derive from adopting IFRS for SMEs and establish the causes of poor financial reporting practices by SMEs. The study was conducted using descriptive research design. A sample size of 97 respondents was drawn from a population of 130 SMEs in Kikuubo business area. Data was collected using interview guide, coded and analyzed using content and narrative analysis. Data was then summarized and presented in tables and pie-charts. Key findings revealed that there was poor internal control practices yet internal control is an important ingredient to sound financial reporting. There was also difficulty in understanding and applying IFRS. The study suggested measures to address the challenges of poor financial reporting such as proper record and bookkeeping practices. The findings of this study will help SMEs in Kikuubo business area to improve their financial performance there by enabling their businesses continue as a going concern. The study recommends sensitization of SME proprietors and their key staff on the aspects of financial reporting as a way of growing their business.