G.W.D. Perera1, C.C. Gunawardana2, W.A.R Senevirathne3
123Department of Accounting and Finance, faculty of management studies,
The Open University of Sri Lanka
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The objective of this study was to address the research problem of how the effect of management accounting practices influences the operation performance of SMEs in the manufacturing sector of the Colombo district. Different SMEs use financial knowledge in varying ways, which affects the performance of the businesses. This study sheds light on the Practices of management accounting used by SMEs in the manufacturing sector and how they affect Operational success. The Management accounting practices which are discussed in the study is, costing, performance evaluation, budgeting, strategic management accounting and decision support system. The data gathered was primary data, using a convenience sampling method in cross-sectional time horizon. And the deductive research methodology and the survey method were used in the research design. The Research was conducted using demographic analysis, correlation coefficient analysis, and regression analysis. The sample was taken from the small and medium-sized, 131 manufacturing enterprises in the Colombo district. The study found, the budgeting system, performance evaluation system, and strategic management accounting system to have a statistically significant impact on operational performance. Costing systems and Decision support systems were found to be not statistically significant in regression analysis. Therefore, 3 out of 5 hypotheses were accepted. As for concluding remarks, this study’s findings recommend that using management accounting practices can enhance operational performance. Further, study suggests that budgeting, performance evaluation, and strategic management accounting be used by management to improve the operational performance of Manufacturing SMEs. The study thereby, hopes to increase the knowledge and awareness of students and professionals who are interested in this field. Additionally, this will provide insight on the management accounting techniques now employed by SME’s and their level of financial literacy. Consequently, this study’s valuable information can be used by government, organizations, and experts to advance the Small Medium Enterprises of Sri Lanka.
Keywords: Management accounting practices; Operations performance; Small medium enterprises; Manufacturing sector; Colombo district