Examining the effect of financial accounting services on the financial performance of SME: The function of information technology as a moderator

Abstract

The study investigates the effects of financial accounting services on SMEs’ financial performance. The agency theory was used in the research. The study used a quantitative strategy and a survey method to acquire the essential data for the project. The study used a sample of 320 SMEs to carry out the analysis. Partial least square structural equation modelling was used to undertake the statistical analysis. The results indicate that using financial accounting services helps SMEs improve their financial performance. The research also discovered a link between information technology and SMEs’ financial performance. The findings of our research reveal that, small businesses that employ accounting services in their business experience an increase in financial performance. This is because the use of financial accounting has a lot of technical advantages which can be helpful to business users. A lot of SMEs need credit to be able to improve their business, therefore they need a financial statement to serve as evidence of their performance before the loan could be granted to them. This means that financial accounting service is a key component in the scheme of this SME. Information technology has been one of the driving forces of every business. It was found that information technology has a positive effect on the financial performance of SMEs. The study is unique in that it gives a successful approach for small and medium-sized businesses in emerging nations to focus more on the function of financial accounting in improving business performance.