Impact of accounting best practices on financial performance of small and medium enterprises in Ilala municipality, Dar es Salaam, Tanzania

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Kampala International University, College of Economics and Management.
SMEs are one of the important economic catalysts in Tanzania. Majority of the people are either supported directly (59%) or indirectly (78%). However, these entities are collapsing in the earlier stages and some making little profit. Could it be because of accounting best practices which are causing these SMEs to collapse or earn little profit? The study was conducted about the Impact of Accounting Best Practices on Financial Performance of SMEs in Ilala Municipality, Dar es salaam, Tanzania. The specific objectives of the study were: to establish accounting practices adopted by SMEs in Ilala Municipality, to analyse the trend of SMEs financial performance and to determine the relationship between accounting practices and financial performance of SMEs in Ilala District, Dar es salaam, Tanzania. The study used mixed method research design with a descriptive nature and the primary data collected from 291 SMEs in Ilala Municipality using structured questionnaires. Proportionate random stratified sampling was used. The study revealed that accounting best practice is partially being utilized by SMEs in Ilala Municipality hence giving chance for some SMEs to collapse in the second year of their establishment. The study suggests that SMEs laws be enhanced and made mandatory for SMEs under a specific volume of sales to hire accountants and internal auditors. In case circumstances are that the volume of sales is less than the stipulated in the law, the authority (Ministry) concerned should organize special accounting and auditing staff that should assist these SMEs in keeping their book, with certificates of competence issued to SMEs best performers in accounting best practices. Also the study recommends that budgets for SMEs should be lodged or submitted to the authority (Ministry) concerned. Lastly, the authorities concerned should conduct workshops and seminars for elementary accounting best practices for SMEs owners to appreciate the whole process of accounting best practices.
In Partial Fulfillment of the Requirements of the Degree of Masters in Business Administration (Finance & Accounting)
Accounting best practices, Financial performance, Small and medium enterprises, Ilala municipality, Dar es Salaam, Tanzania