While deficiencies in financial management have been repeatedly cited as a root cause ofbusiness failure (Najak and Greenfield 1994) two arguments are advanced for suchdeficiencies in SMEs; that new accounting is not relevant and that SME managers areunable to make use of accounting. Here it is argued that accounting ideas are relevant toSMEs but that a process of innovation combining both knowledge to overcome a barrier ofbelief and an external shock are necessary in order for innovation to take place.These ideas were explored through a survey of SMEs from both service and manufacturingbusiness in the Greater Manchester region. It was observed that the use of accountingtechniques is negatively related to growth in turnover. However the use of accountingtechniques that were related to product market was found to be positively related to growthin turnover and that owner/managers belief in the importance of accounting in businessdecisions was strongly related to growth in turnover. These results were the moreinteresting when it was observed that growth was negatively related to size.A second theme of the research was the significance of the role of external advisors. Primafacie it was suggested that external advisors may be key agents of change, but the studyfound that their (accountants, academics and consultants) perceived value was relativelylow.The findings of this survey suggest that when accounting is perceived to be relevant thenits use does support business growth but innovation in accounting in SME requires furtherresearch.
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