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Bookkeeping Practices and Business Performance among Small and
Medium Enterprises in Agusan Del Sur, Mindanao, Philippines
Donald Cyndyl L. Miguel, DBM., Rodel L. Oclaret, DBA., Joan M. Arado, DBM., Rosalie C. Gemina,
MBA., Felixberto Dominic B. Eruela, MSBA., Leopich Gerald M. Moreno
BS Entrepreneurship, College of Business Administration, Agusan del Sur State College of Agriculture
and Technology-Trento Campus
DOI: https://dx.doi.org/10.47772/IJRISS.2025.910000605
Received: 04 November 2025; Accepted: 10 November 2025; Published: 19 November 2025
ABSTRACT
Bookkeeping serves as the backbone of financial transparency and sustainability among small and medium
enterprises (SMEs), yet many in developing economies face challenges in maintaining accurate financial records.
This study examined the relationship between bookkeeping practices and business performance among SMEs in
Agusan del Sur, Philippines, emphasizing the importance of effective financial management in fostering growth
and competitiveness. Using a descriptive–correlational research design, data were collected through a validated
survey questionnaire administered to SME owners and managers. Descriptive and inferential analyses were
employed to determine the extent of bookkeeping practices and their influence on business performance. Results
revealed that SMEs generally demonstrated a high level of bookkeeping practices, particularly in recording daily
transactions and preparing financial reports, while the use of accounting software was only moderate. Business
performance was also rated high, especially in profitability and operational efficiency. Furthermore, a significant
positive relationship was found between bookkeeping practices and business performance, suggesting that
accurate record-keeping enhances decision-making, profitability, and operational stability. The findings
highlight the essential role of systematic bookkeeping in ensuring SME success and recommend that local
government units and business support agencies promote continuous training on computerized bookkeeping and
financial literacy to strengthen entrepreneurial financial capability
Keywords: Bookkeeping Practices, Business Performance, Small and Medium Enterprises, Financial
Management, Agusan del Sur
INTRODUCTION
Small and Medium Enterprises (SMEs) play a pivotal role in fostering economic growth, employment, and
innovation. However, many SMEs face operational and financial challenges due to poor record-keeping and
limited financial management skills. Bookkeeping, a vital component of financial management, serves as the
foundation for informed decision-making, tax compliance, and financial planning. Despite its importance, many
SME owners undervalue systematic bookkeeping, leading to inefficiencies and inaccurate financial records.
Understanding bookkeeping practices among SMEs is crucial to identifying areas of improvement that can
support business sustainability. Previous studies (Abor & Quartey, 2010; Amoako, 2013) emphasized that
effective bookkeeping enhances accountability, profitability, and transparency. However, SMEs in rural
provinces like Agusan del Sur may lack access to proper financial training or resources, resulting in inconsistent
bookkeeping practices.
Furthermore, research has shown that strong financial management practices, including accurate bookkeeping,
positively influence business performance through improved decision-making, cash flow management, and
investment strategies (Ismail & King, 2014; Maseko & Manyani, 2011). Conversely, inadequate record-keeping
often leads to poor performance, business losses, and limited growth potential.
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This study seeks to assess the level of bookkeeping practices among SMEs in Agusan del Sur and their impact
on business performance. The findings aim to provide valuable insights for policymakers, financial institutions,
and business support organizations to design training programs and policies that enhance the financial
capabilities and sustainability of local enterprises.
Research Questions
1. To determine the profile of SMEs in Agusan del Sur.
2. To assess the level of bookkeeping practices among SMEs in Agusan del Sur.
3. To evaluate the level of business performance among SMEs in Agusan del Sur.
4. To determine the relationship between bookkeeping practices and business performance.
5. To determine the extent to which bookkeeping practices influence the overall business performance of
small and medium enterprises (SMEs) in Agusan del Sur.
METHODOLOGY
Research Design
This study investigated the relationship between bookkeeping practices and business performance among small
and medium enterprises (SMEs) using a descriptive–correlational research design. This design was deemed
appropriate as it enables the identification of patterns and associations between variables without manipulation,
allowing the researcher to describe conditions as they naturally occur and to infer potential relationships.
According to Martin (2018), correlational research examines the statistical association between two or more
variables as they exist in their natural setting, providing insights into whether a significant relationship among
them exists. In this study, the correlational approach enabled the researcher to determine how bookkeeping
practices relate to the business performance of SMEs in Agusan del Sur, particularly in terms of financial and
operational outcomes.
Research Locale
The study was conducted among small and medium enterprises located in Agusan del Sur, a province in the
Caraga Region of Mindanao, Philippines. The province was selected as the locale of the study due to its growing
entrepreneurial landscape and the active participation of SMEs in local trade and commerce. SMEs in Agusan
del Sur represent a wide range of industries such as retail, food processing, agriculture-related businesses, and
service-oriented enterprises. The selection of business establishments included in the study was based on the
criteria that they must be duly registered with the Department of Trade and Industry (DTI) or the Securities and
Exchange Commission (SEC), have been operating for at least five years, and fall within the SME classification
set by the DTI.
Research Respondent
The respondents of this study consisted of SME owners and managers from different municipalities of Agusan
del Sur. A total of one hundred twenty respondents were selected to represent various sectors such as food and
beverage, trading, and services. The sample size was determined using the Raosoft sample size calculator to
ensure representativeness and statistical validity. The study employed stratified random sampling to guarantee
that all industry types within the SME sector were proportionately represented. Each stratum corresponded to
specific business categories such as retail, service, and manufacturing, ensuring diversity and fairness in data
representation.
Research Instrument
The primary data-gathering tool used in this study was a structured survey questionnaire developed and validated
by the researcher. The instrument was designed to measure two major variables: bookkeeping practices and
business performance. It was divided into two main sections. The first section focused on bookkeeping practices,
which included indicators such as recording of daily transactions, preparation of financial reports, cash flow
monitoring, updating of ledgers and journals, and utilization of accounting software. The second section
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measured business performance through indicators such as profitability, operational efficiency, customer
satisfaction, and market competitiveness. All items were rated using a five-point Likert scale ranging from “Very
Low” to “Very High.”
To ensure the accuracy and quality of the data collection tool, the questionnaire was subjected to expert
validation by professionals in accounting, business management, and research methodology. Construct and
content validity were established to confirm that the items were aligned with the study’s objectives and variables.
Furthermore, a pilot test was conducted among a sample of SMEs not included in the main study to assess
reliability. The computed Cronbach’s alpha coefficient was between 0.72 to 0.91, indicating excellent internal
consistency of the instrument. This confirmed that the survey questionnaire was both valid and reliable for use
in the study.
Data Gathering Procedure
Before conducting the data collection, the researcher sought permission from the Department of Trade and
Industry (DTI) Provincial Office of Agusan del Sur to obtain a list of registered SMEs within the province. A
formal request letter was also presented to business owners and managers, informing them of the purpose of the
study and ensuring voluntary participation. Respondents were provided with informed consent forms indicating
their rights, including confidentiality and the freedom to withdraw at any time. After securing approval, the
researcher personally distributed the questionnaires to the target respondents, ensuring that all items were clearly
explained. Respondents were given sufficient time to accomplish the survey, which typically took around ten
minutes. The retrieval of accomplished questionnaires was done personally by the researcher within one month
to ensure a high response rate and data accuracy. The collected data were tabulated, organized, and analyzed
using statistical tools such as mean, standard deviation, and Pearson correlation to identify significant
relationships between bookkeeping practices and business performance.
RESULTS
The study investigated the bookkeeping practices and business performance of small and medium enterprises
(SMEs) in Agusan del Sur, as well as the relationship between the two variables.
Table 1. The results presented indicate that most small and medium enterprises (SMEs) in Agusan del Sur are
concentrated in the retail trade (37.5%) and food services (25%) sectors, reflecting a preference for industries
that require relatively low startup capital and provide immediate cash flow. Additionally, a large portion of these
businesses have been operating for four to six years (33.3%), suggesting that the SME sector in the province is
composed mainly of emerging enterprises still in their growth phase. The dominance of sole proprietorships
(66.7%) further reveals that many of these businesses are owner-managed and family-run, which is typical in
developing regions where entrepreneurship often arises from household initiatives rather than corporate
structures.
This observation is consistent with the findings of Nowak et al. (2023), who emphasized that in many developing
economies, family businesses and sole proprietorships dominate the SME landscape due to ease of establishment,
strong family labor support, and localized market focus. Similarly, Mensah and Adomako (2025) found that
SMEs in emerging economies tend to cluster in retail and service-oriented industries because these sectors offer
quick returns and require minimal formal training or technological investment. Hence, the business profile of
SMEs in Agusan del Sur aligns with global patterns of small-scale entrepreneurship in developing regions—
characterized by family-based management, short operating years, and limited formal organizational structures,
yet contributing significantly to local economic development.
Table1.Profile of SMEs in Agusan del Sur
Profile Indicator
Category
Frequency (f)
Percentage (%)
Type of Business
Retail Trade
45
37.5
Food Services
30
25.0
Agribusiness
20
16.7
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Manufacturing
15
12.5
Others
10
8.3
Years in Operation
1–3 years
28
23.3
4–6 years
40
33.3
7–10 years
32
26.7
More than 10 years
20
16.7
Ownership Structure
Sole Proprietorship
80
66.7
Partnership
25
20.8
Corporation
15
12.5
As shown in Table 2, bookkeeping practices among SMEs in Agusan del Sur were rated high (M = 3.83),
suggesting that most enterprises recognize the importance of maintaining accurate and systematic financial
records. The highest-rated indicators were the recording of daily transactions (M = 4.10) and the preparation of
financial reports (M = 3.92), which reflects the proactive efforts of SME owners to track income, expenses, and
financial performance regularly. Similarly, cash flow monitoring (M = 3.80) and the updating of ledgers and
journals (M = 3.96) were consistently practiced, indicating an awareness of proper financial documentation as a
key management function. However, the utilization of accounting software (M = 3.35) was only rated average,
implying that many SMEs still rely on manual bookkeeping methods. This limited adoption of digital tools can
be attributed to cost constraints, inadequate technical knowledge, and lack of access to financial management
training.
These findings are consistent with the study of Kwarteng et al. (2024), who emphasized that while bookkeeping
and accounting practices significantly enhance SME performance, many enterprises in developing economies
remain dependent on traditional record-keeping systems due to insufficient digital literacy and capital investment.
Similarly, Yunis et al. (2024) in their review on information and communication technology (ICT) in SMEs,
noted that the slow transition toward digital bookkeeping systems stems from organizational barriers, such as
low ICT awareness and limited readiness to adopt new technologies. Thus, while SMEs in Agusan del Sur exhibit
strong foundational bookkeeping practices, there is a clear need for further capacity-building initiatives to
promote the use of computerized accounting systems that can enhance accuracy, efficiency, and decision-making.
Table 2 Level of Bookkeeping Practices Among SMEs in Agusan del Sur
Mean
SD
Descriptive Level
4.10
0.32
High
3.92
0.40
High
3.80
0.38
High
3.96
0.35
High
3.35
0.45
Average
3.83
0.38
High
Table 3 shows that business performance among SMEs in Agusan del Sur was rated high overall (M = 3.87),
indicating that these enterprises maintain relatively stable financial and operational standing. Profitability (M =
3.95) and operational efficiency (M = 3.90) emerged as the strongest dimensions, suggesting that most SMEs
effectively manage their resources and achieve consistent returns from operations. Other indicators, including
customer retention (M = 3.85), market competitiveness (M = 3.74), and business growth (M = 3.89), were also
rated high, reflecting that SMEs are capable of sustaining customer relationships and maintaining their position
within local markets. These results imply that effective internal management systems, coupled with sound
financial monitoring, contribute to improved performance outcomes.
These findings align with the study of Ayandibu and Houghton (2024), who emphasized that SME success is
often attributed to the integration of financial management discipline and operational efficiency, both of which
enhance profitability and sustainability. Similarly, Nthebe and Rambe (2023) found that businesses maintaining
proper financial documentation and operational control tend to achieve higher growth rates and competitive
advantage in emerging markets. Hence, the high business performance observed among SMEs in Agusan del
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Sur reinforces the importance of financial management and operational practices as critical drivers of long-term
viability and competitiveness in the SME sector.
Table 3. Level of Business Performance Among SMEs in Agusan del Sur
Indicators
Mean
SD
Descriptive Level
Profitability
3.95
0.33
High
Operational Efficiency
3.90
0.37
High
Customer Retention
3.85
0.42
High
Market Competitiveness
3.74
0.41
High
Business Growth
3.89
0.39
High
Overall Mean
3.87
0.38
High
Table 4 presents the correlation results, revealing a significant positive relationship between bookkeeping
practices and business performance (r = 0.472, p < 0.01). This finding indicates that SMEs with well-
implemented financial record-keeping systems tend to achieve higher profitability, operational efficiency, and
customer satisfaction. Among the indicators, recording of daily transactions and preparation of financial reports
showed the strongest correlations, underscoring the critical role of consistent and accurate documentation in
facilitating sound financial decision-making and resource allocation. While the utilization of accounting software
was only moderate, it still exhibited a significant relationship with market competitiveness, suggesting that even
partial adoption of digital bookkeeping tools can enhance business agility and strategic planning.
These results are consistent with the findings of Kariuki and Mungai (2024), who reported that systematic
bookkeeping enables SMEs to make data-driven decisions that improve profitability and operational control.
Likewise, Tijani and Ogunleye (2023) highlighted that the integration of accounting technology, even at a basic
level, fosters transparency, efficiency, and competitiveness in small enterprises. Therefore, the significant
correlation observed in this study reinforces that effective bookkeeping is not merely an administrative task but
a strategic management tool that directly contributes to overall business success and sustainability.
Table 4 Significant Relationship Between Bookkeeping Practices and Business Performance of SMEs
Bookkeeping Practices
Business Performance Indicators
r-value
p-value
Remarks
Recording of daily transactions
Profitability
0.421**
0.001
Highly Significant
Financial reporting
Operational Efficiency
0.465**
0.000
Highly Significant
Cash flow monitoring
Business Growth
0.398**
0.002
Highly Significant
Updating of ledgers
Customer Retention
0.355*
0.009
Significant
Accounting software use
Market Competitiveness
0.278*
0.031
Significant
Overall Relationship
Bookkeeping Practices Business
Performance
0.472
0.000
Highly Significant
Table 5 presents the results of the regression analysis, which revealed that bookkeeping practices account for
22.3% of the variance in business performance, supported by a highly significant F-value (17.945, p < 0.01).
This finding suggests that nearly one-fifth of an SME’s performance outcomes can be explained by the quality
and consistency of its bookkeeping activities. It underscores the critical importance of accurate record-keeping,
financial reporting, and cash flow monitoring as integral drivers of profitability and operational success.
The analysis also highlights that effective bookkeeping serves as a foundational management tool, enabling
entrepreneurs to make evidence-based decisions that contribute to sustainable growth. By maintaining organized
and reliable financial data, SMEs can better assess their cost structures, manage resources, and identify
opportunities for expansion or improvement. This supports the argument of Wadesango et al. (2019), who
emphasized that proper financial record management enhances transparency and control, leading to improved
business outcomes.
Although bookkeeping alone does not determine overall business performance since factors like marketing
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strategy, innovation capacity, and customer relations also play vital roles it remains an indispensable element of
sound financial management. The regression result, therefore, reinforces the need for SMEs in Agusan del Sur
to strengthen their bookkeeping systems, integrate technology where possible, and invest in training programs
that build financial literacy among business owners and staff.
Table 5 Multiple Regression Analysis of Bookkeeping Practices and Business Performance
Independent Variable
Dependent Variable
r-value
r² value
F-value
p-value
Remarks
Bookkeeping Practices
Business Performance
0.472
0.223
17.945
0.000
Highly Significant
CONCLUSIONS
The findings of this study clearly demonstrate that small and medium enterprises (SMEs) in Agusan del Sur
possess generally strong bookkeeping practices, especially in recording daily transactions, preparing financial
reports, and maintaining ledgers and journals. These practices reflect their recognition of the importance of
proper financial documentation as a foundation for business stability. However, the moderate level of accounting
software utilization indicates that the transition toward digital bookkeeping systems remains gradual and uneven
among enterprises in the province.
The results further established that SMEs with strong bookkeeping practices tend to exhibit high business
performance, particularly in profitability, operational efficiency, and growth potential. This positive association
underscores that well-maintained financial records enhance management’s ability to make informed decisions,
control costs, and adapt to changing market conditions. Consequently, effective bookkeeping is not merely an
administrative function but a critical component of strategic and financial management.
The regression analysis revealed that bookkeeping practices significantly contribute to variations in overall
business performance. This finding affirms that systematic financial recording and reporting provide SMEs with
a competitive advantage by ensuring transparency, accountability, and accurate decision-making. Collectively,
the results confirm that sound bookkeeping practices are vital drivers of enterprise resilience, sustainability, and
long-term success in a dynamic business environment.
RECOMMENDATIONS
Based on the findings, it is strongly recommended that SME owners and managers enhance their financial
management systems by adopting computerized bookkeeping tools and digital accounting platforms.
Transitioning from manual to automated processes will improve accuracy, reduce human error, and provide real-
time financial insights essential for operational planning and control. Encouraging SMEs to invest in digital
transformation will also strengthen their capacity to meet regulatory requirements and adapt to technological
changes.
Local government units (LGUs), business development centers, and academic institutions are encouraged to
collaborate in implementing capacity-building programs focused on financial literacy, accounting software
utilization, and internal control systems. These initiatives should aim to empower entrepreneurs with the
knowledge and technical skills necessary to maintain accurate financial records and manage their resources
effectively. Moreover, mentorship and consultancy programs can help SMEs sustain good bookkeeping habits
over the long term.
Lastly, policymakers and development agencies should consider providing incentives, grants, or tax benefits to
SMEs that adopt formalized and computerized bookkeeping systems. This support can accelerate financial
modernization among enterprises and promote a culture of transparency and accountability. Future researchers
are also encouraged to explore related areas, such as the influence of taxation practices, budgeting efficiency,
and digital transformation readiness, to develop a more comprehensive understanding of financial management
among SMEs in the region.
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Compliance with Ethical Standards
Participation was entirely voluntary, and the study was not deceptive or manipulative in any way. The
respondents were not subjected to physical, psychological, or social harm, and their involvement only
contributed to the creation of knowledge that could help companies and enhance performance. Prior to data
collection, respondents received written consent forms and were informed of their right to withdraw at any time
without incurring penalties.
The study adhered to accepted ethical norms, which included risk-benefit analysis, informed consent, protecting
vulnerable groups, privacy and confidentiality, social benefit, justice, honesty, and accountability. Academic
training and suitable training ensured the researcher's competence and integrity.
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