International Journal of Research and Innovation in Social Science (IJRISS) |Volume VI, Issue XI, November 2022|ISSN 2454-6186
Collins Amimo Lumumba*, Dr. Fredric Aila
Maseno University, Kenya
*Corresponding Author
Abstract: Book keeping practices including the maintenance of sales and purchases books, cash/bank reconciliation practices, and maintenance of cash book among others, are financial control mechanisms relevant for enhancing business performance. However, while Micro Enterprises (MEs) constitute over 80% of total small enterprises across the globe, their rates of failure is also high (at 50 – 70%). In Kisumu city of Kenya where over 60% of the total inhabitants reside in informal settlements served by micro enterprises, over 70% of them collapsed within under 4 years in operation. This questions the effectiveness of book keeping practices in this circumstance. This paper explores the influence book keeping practices on the performance of MEs in informal settlements of Kisumu City, Kenya. Specific objectives were to explore the influences of sales and purchases books, cash/bank reconciliation practices, and maintenance of cash book on performance of MEs in the area. Decision usefulness theory was used to guide the study. Correlational research design was adopted on 360 sampled traders from 3660 targeted traders through Yamane’s formula, from whom primary data was collected via structured questionnaire. Regressions analysis was used to compare the relationship between book keeping practices and financial performance of MEs. The study found that book-keeping practices: maintenance of cashbooks (r=0.431), sales/purchases books (r=0.504) and bank reconciliation (r=0.491) have significant relationship with financial performance of MEs in the informal settlements. Cumulatively, approximately 46.9% of financial performance of MEs is attributed to the book-keeping practices under study. It is therefore concluded that with the enhanced book keeping practices, the MEs operating in informal settlements would gain adequate capital to remain solvent over time.
Key Words: Performance of Micro Enterprises; Book keeping Practices; Sales/Purchases Book; Bank reconciliation Practices; Cash Book Maintenance; Informal Settlements
I. INTRODUCTION
The role played by micro enterprises (MEs) towards development of economies cannot be over emphasized. Described as any venture with less than 9 employee (in Africa) of less than 35 employee in developed economies (European Union –EU, 2019), these ventures have been applauded for the growth of economies of different countries across the globe. Micro enterprises have been at the centre of the growth of major economies such as the USA, UK, Germany, China, Brazil, and many more (ILO, 2019). According to European Union (EU, 2019), there were 24.5 million SMEs in Europe in 2017,