Sustaining Viability in Smes : Perspectives on Innovation in Financial Management

Current accounting and financial management practicesin small and medium-sized enterprises (SMEs) are considered.Among theexternal influences to which SMEs are subject are the impact of accountinginnovations, such as activity-based costing (ABC), and the rise of the NewFinance movement, which effected the shift of the finance function from anemphasis on transaction to an emphasis on decision support andperformance-related work. A financial study of 140 SMEs operating in a large industrial cluster in thenorthwest of England was conducted using a questionnaire as well as industrialdata. The study indicates that most SMEs relied on a single growth strategy andhad only a vague understanding of organizational costs. Further, few SMEs usedmore than one measure of performance -most measured their performance bysales. The study suggests that many SMEs operate with unsophisticatedaccounting and financial management procedures. Administrative innovation inaccounting, although integral to the quest for competitive advantage, has yetto be exploited by SMEs. (SAA)