Small and Medium Enterprises in Mauritius Essay

Basically concerns are regarded as little based on different characteristics. Different states define SME otherwise. For illustration the definition of SMEs in European Union ( Eu ) is based on Turnover or equilibrate sheet entire and head count.

The Small and Medium Industries Development Organization ( SMIDO ) which was established under the SMIDO 1993 as a parastatal organic structure, was the premier support establishment for Small and Medium Enterprises ( SMEs ) in Mauritius. It aims was to further growing and development of SMEs ” . Small Medium Enterprise is defined as:

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“ Fabrication endeavors which uses production equipment with an sum CIF value non transcending ten million rupees. “ Manufacturing means the transmutation, transition of natural stuffs, fix, packing and assembly of semi-finished parts into finished goods. Production Equipment means machinery and equipment used in the procedure of fabrication ” .

As per SMEDA act of 2009, the SME definition comprises of endeavor of all economic sectors. There is no distinction between services and fabricating sectors. Therefore, turnover standards are used across sectors.

“ A Small Enterprise is defined as an endeavor which has an one-year turnover of non more than 10 million MUR “ .

“ A Medium Enterprise is defined as an endeavor which has an one-year turnover of more than 10 million MUR but non more than 50 million MUR ” .

No differences are made between service and fabrication sector. Harmonizing to the Organization for Economic Cooperation and Development ( OECD ) , some states refer to the figure of employee as standards for SME ‘s and some other usage a combination of the figure of employees, invested capital, gross revenues and industry type.A Basically there is no universally agreed definition of Small & A ; Medium Enterprises as it is based on the figure of employees, on concern or turnover and assets. However, harmonizing to the exposure bill of exchange for SME ‘S of IASB, SMEs is an endeavor that do non has public answerability and publish general purpose fiscal statement for external users.

The bottom line mission of SMEDA is to help Mauritius start, physique and grow concerns. It besides seeks to develop an entrepreneurial civilization in Mauritius where a big proportion of the population is willing to get down a concern.

2.1.2 The importance of SMES in Mauritius

Harmonizing to Beyene ( 2002 ) Small and Medium Scale Enterprises ( SMEs ) are universally acknowledged as effectual instruments for employment coevals and economic growing.Padachi ( xxx ) who analyzed the importance attached to accounting services among little to Medium sized Mauritanian Fabrication houses states that: “ SME ‘S are the anchor of an economic system as they are the major subscriber and plays an of import function as efficient suppliers of intermediate goods and services to big houses ” .

Large concerns and little concerns have a large difference in the function played by the proprietor and director. In little concern, the proprietor and the director are frequently the same individual ( Vos E and Roulston C ( 2008 ) ) . In this regard they are acknowledged as owner-manager. Basically most SMEs in Mauritius are private limited company. However there are some houses that are organized as exclusive proprietary. It was besides found that bulk of the houses are family-owned and the owner- directors takes all the duty of the concern.

Lal K and Peedoly A S ( 2006 ) who carried a study to turn up Mauritanian SMEs in the present context of planetary competition and to place the extent to which they have adopted ICTs as a tool to run into the challenges suggested that:

“ The general image of Mauritanian SMEs that emerges from the above findings is that the overpowering bulk are ill-equipped both literally and figuratively to get by with the challenges of globalisation. The gradual death of some of the economic pillars of the state in recent old ages triggered by contemporary ideological, economic and political worlds of globalisation and their attendant effects on the unemployment rates are showing at the one same clip both a challenge and an chance for the SME sector. ”

2.2 Accounting information System and its deduction

2.2.1 What is an accounting information system?

Accounting information system collects and processes dealing informations and pass on fiscal information to determination shapers. Weygandt J ( 2010 ) . Besides Moscove A Et Al ( 1999 ) , there are many ways where accounting itself is an information system. It distributes information to those in demand of it.

However Moscove A et Al ( 1999 ) point out that many people think of computing machines when they hear the word information system. He suggests that information system may non necessary be a computerized system. It can still be with or without a computing machine. However it may utilize computing machines to treat a paper-based information. Furthermore, the information may besides be captured in order to input electronically, processed by computing machine, and end product to a computing machine screen.

Accounting information system plays a critical function in a company.In these modern times accounting information are about processed by a computing machine instead than on paper. Harmonizing to Smith ( 2008 ) , most companies involved comptrollers to keep their accounting system but today with the debut of computing machines and several types of accounting package the figure of accountant to keep histories in Small Medium Enterprise has reduced. Owners of SME ‘S invest some sum of money for put ining computing machine engineering and accounting package. As a consequence, disbursals made on paper work and excess staff is eliminated.

Son et Al. ( 2006 ) conducted a outstanding study in Vietnam on users ‘ perceptual experiences and utilizations of fiscal studies of little and medium companies found that the user ‘s accounting expertness was one of the chief factors impacting the information usage of the proprietor or manager. Due to miss of accounting expertness they are non able to utilize or understand the information. “ There was a negative perceptual experience among users about the dependability of fiscal information provided by little medium endeavor. Reliability and seasonableness were found to be the most desirable characteristic impacting the public-service corporation of information.

2.2.2 Deduction of accounting information systems for SME ‘S

The Accounting information has two primary informational constituents: fiscal accounting and managerial ( direction ) accounting

Management accounting is concerned with supplying information about an organisation to directors to assist them in pull offing the concern.Basically the activities that are involved are decision-making, planning and control. Therefore it is the aggregation, analysis, airing and reading of information for directors of an organisation that will help in the devising of determination and planning based on those determination and eventually to command so as to guarantee the achievement of planning. ( Atrill and Mclaney ) . It generates monthly or hebdomadal studies for the internal users of the company. It tends to concentrate on merchandises, section and activities. Furthermore it helps direction with the organisation ‘s acquisition, processing, distribution and merchandising activities.

Fiscal accounting collects and summarizes fiscal informations to fix fiscal study for the house ‘s direction, investors, loaners, providers, revenue enhancement governments and other stakeholders. These external users seldom have entree to the internal information of the company. Therefore they have to trust merely on the general study presented by the company. Although it is prepare for external usage, directors besides use it for measuring organisation ‘s public presentation. Furthermore, fiscal statements are prepared to follow with revenue enhancement ordinance and are besides utile for loan dialogues.

Isa et Al. ( 2007 ) examine fiscal and direction accounting patterns in little and average endeavor in Malaysia. The consequences showed that bulks of company prepare fiscal and direction accounting studies such as net income and loss, balance sheet and hard currency flow statement on a regular footing. The usage of computerized system was prevailing among the house. The direction accounting studies include budget and different types of budget such as discrepancy analysis, production cost statement, cost volume net income analysis and benchmarking study.

2.3 General beginnings of accounting information for SMEs

The fiscal statement of SMEs comprises of income statement, balance sheet, the managers study and revelation of accounting policies. There are merely some SMEs whose fiscal statements are audited giving rise to the audit study. In Mauritius, fiscal coverage which is governed by company act 2001 does non necessitate smaller integrated company to hold statutory audit. Consequently when fixing fiscal statement, international fiscal coverage are followed. Harmonizing to company act 2001 little companies ( turnover & lt ; Rs 10 million ) is non necessitate to name an hearer. They can either take to register a fiscal sum-up or statement.

Palmer Kristine N ( 1994 ) carried a study on the fiscal information used by little independent Retailer owner-manager. She found that day-to-day records of gross revenues and other minutess were largely kept which small of them uses computerized accounting system. Cash method of record maintaining was used. A chequebook and a net income and loss statement were to be their fiscal statement. The fiscal information that was prepared did non give them the appropriate information.It was merely prepared for revenue enhancement intents. She farther stipulated that information that was gathered was non written down on paper or recorded in any accounting system. It was found to be merely in their heads. In this regard, fiscal counsel is needed by the owner-manager to place the information they need to do a good determination by altering their methods of garnering information to a sophisticated accounting system.

Basically the proprietors of little endeavor used external comptroller or bookkeepers chiefly to bring forth fiscal statement, to supply revenue enhancement or VAT information or to run the accounting system ( Sian S and Robert C ( 2009 ) ) . Accountant to boot provides services such as production of one-year study and everyday revenue enhancement work and direction histories. ( Chittenden et al.1990 ) .Garvin C Reid ( xxx ) suggests that one-year history contained historical informations that do non advance monitoring and control in the company although it is of import for statutory demand for revenue enhancement intents. Collis and Jarvis ( 2002 ) who conducted a study in UK on fiscal information and direction of little private company where beginnings and public-service corporation of fiscal information used were indentified, suggested that the most utile general beginnings of information were periodic direction histories, hard currency flow information and bank statement which are besides signifier of hard currency flow information. It was besides found that the most widely used information is monthly/quarterly direction histories and hard currency flow information in assorted signifiers. This shows that much attending are placed on commanding hard currency as old research ( Jarvis et al.1996 ) indicates that hard currency flow direction is of import to assist little house for their endurance.

John and Healeas ( 2000 ) stipulated that the statutory history was non utile for decision-making and direction histories and hard currency flow prognosis were sooner used. Collis and Jarvis ( 2002 ) found when the company received statutory histories, at the same clip they get extra information such as verbal account or analysis of histories. Furthermore, elaborate net income and loss and some direction advice were besides provided to a lesser extent. Sian S and Robert C ( 2009 ) and John and Healeas ( 2000 ) besides found that few SME ‘S owners-manager has trouble do understand the contents of statutory histories. Besides, as accountant frequently prepare fiscal statement, they advise little endeavors on internal, direction planning, determination devising control and future scheme. ( Chittenden et al.1990, Deakins et al.2001. )

Harmonizing to the concluding study of Expert Group conducted by the European Commission and expert besides suggest that

“ Normally statutory histories of little endeavors are non considered to be peculiarly utile for pull offing the endeavor, but the bulk of managers receive direction advice or farther analysis at the same clip ” .

Recently, Isa et Al. ( 2007 ) conducted a study on fiscal and direction accounting patterns among little and average endeavor in Malaysia. The findings revealed that all owners- directors of the sample prepared balance sheet and net income and loss. In add-on to the chief fiscal statement ; hard currency flow statement, fixed assets records, revenue enhancement returns and stock list analysis were prepared. Equally far as the frequence of study coevals is concerned, it was found that a greater extent of the owner-managers prepared this study on a monthly footing. Furthermore owner- director fix direction accounting studies which comprised of budget, production cost and cost volume net income analysis.

Pinson L ( 2007 ) points out all of the general records in little concern that is used to track the twenty-four hours to twenty-four hours dealing. Some of them are:

Cash in Bank

Gross and expense Journal

Bills and gross revenues reception

Junior-grade hard currency record

Inventory records

Fixed plus log

Histories receivable and collectible

Payroll record

Customer records

Business chequebook

2.4 External users of fiscal statement

The International Accounting standard board ( IASB ) identifies seven chief users of fiscal statement. They are








The intergovernmental working group of expert on International Standards of Accounting and Reporting ( ISAR ) issued a publication on Accounting and fiscal coverage Guidelines for SMEs where they identified six chief users of fiscal statement viz. : direction, loaners and others creditors, Government, Taxation authorization, their bureaus and recognition bureaus.

Harmonizing to the Final study of the Expert group 2008, the chief users of fiscal statement is concern owners/investors, direction, authorities and its bureaus, Banks and their creditors, client or providers and employees

“ The aim of fiscal statements of a little or moderate-sized entity is to supply information about the fiscal place, public presentation and hard currency flows of the entity that is utile for economic decision-making by a wide scope of users who are non in a place to demand studies tailored to run into their peculiar information demands. Examples of external users include proprietors who are non involved in pull offing the concern, bing and possible creditors, and recognition evaluation bureaus. ” ( Exposure bill of exchange of a proposed IFRS for Small and Medium-sized Entities, February 2007 ) .

Amir and farooq ( 2010 ) conduct a outstanding study in Sweden on whether SMEs in Sweden are inclined to the acceptance of IFRS for SMEs and how do they fix for its execution. They interviewed ( Henrik ) the main fiscal accountant sing the users of fiscal statement:

“ When asked if revenue enhancement governments need fiscal statements for the computation of revenue enhancements, Henry said that revenue enhancement governments certainly need fiscal statements in order to cipher the revenue enhancements. He added that there is a possibility that by the terminal of this twelvemonth a threshold will be defined for the companies which will non necessitate engaging the services of an hearer. After the execution of this threshold, the revenue enhancement governments would necessitate to take excess consideration of the fiscal statements of such companies which fall below this defined threshold. Harmonizing to Anonym, there has been much treatments sing this issue that whether revenue enhancement studies can be based on the fiscal statements. There should be complete information symmetricalness because the comptrollers and hearers might cognize much more than forces in revenue enhancement section. In this manner, the revenue enhancement section does non desire to trust on fiscal statements which are made in conformity to specific accounting criterions, and they want to utilize their ain regulations for the computation of revenue enhancement intents. ”

Banks is considered as one of the important beginning for little endeavor ( Chittenden et al.1990 ; Storey 1994 ) . Collis and Jarvis ( 2000 ) identified that the chief non-statutory receivers of the statutory fiscal statements as major loaners, the Inland Revenue and direction. Most of the company used it to supply information to the bank. Berry and Warring ( 1995 ) stipulated that a set of expanded fiscal statement are demanded for any loan application by the bank. This findings is similar to that of Collis and Jarvis ( 2000 ) where it was suggest that bulk of the company usage statutory histories to supply information to the bank

The extent to which directors use fiscal information

A fiscal study is a study which is published by an endeavor to supply accounting information to reflect the fiscal place on a peculiar day of the month and its operating consequences and hard currency flow for an accounting period to the users of fiscal study. It includes accounting statements and notes and other information that shall be disclosed in the fiscal studies. Sian S and Robert C ( 2009 ) province that, the bank statement and one-year studies were the most indispensable information resources for the owner- directors. It was further stipulated that most owner-manager seldom use fiscal statement and if so merely to compare income with past periods. Collis and Jarvis ( 2000 ) besides suggest that the most utile intent of the one-year history that owner-manager consider is that, it helps to find managers wage and dividend. It was besides utile for comparing public presentation with old period and besides for loan and finance intents. Directors, who sent their histories to the bank, see the statutory histories are advantageous for direction intents and would choose for a voluntary audit.

In contrast, Barker and Noonan ( 1996 ) highlight that fiscal statement was chiefly utile for proprietors or managers. However, the readying of fiscal statement in high criterions is non good to the proprietors or managers but to the bank alternatively. The fiscal statement was of great importance in hard currency direction determination if the information is non available until at least three or six months after the twelvemonth terminal. Abdel K. Halabi et Al. ( 2010 ) conduct a study of proprietors to analyze what fiscal information little house proprietor ‘s record and the system they use to roll up, procedure and study that information. It affirms that accounting study were non bring forth for usage in the concern because it was beyond the comprehensibility of the owner- director but instead for revenue enhancement intents. Taxation returns and accounting study utilized similar information but expression different. Some proprietors use these accounting studies merely for analysing information for decision-making.

Furthermore, Abdel K. Halabi et Al. ( 2010 ) besides studied whether fiscal information was used in the ratings of the house ‘s public presentation. It was found that that there were both positive and negative responses. The positive 1 suggests that the information were recorded up to day of the month and each one-fourth they have an thought of the house ‘s public presentation. It was argued that the value achieve from the recording of fiscal information is based on the fiscal accomplishment and their relationship with the comptroller. Furthermore, some proprietors used a computerized system such as an “ off-the-rack accounting bundles to enter fiscal information. With such system, comparing across clip period was advantageous. Basically, the proprietors trusted everything that were generated from a computing machine therefore leting the production of timely studies. This survey ( 2010 ) provinces

“ Fiscal direction accomplishments are critical to the endurance of little houses. Despite this the bulk of proprietors of little houses do non ( as yet ) demand to follow with any specific accounting criterions and must merely describe fiscal information for revenue enhancement intents. Fiscal information and accounting studies can inform proprietors of the effects of their house ‘s operations and the impacts of their past determination devising. It can be used to assist proprietors turn and develop their house and therefore, strengthen the economic and societal part little houses can do. ”

Longenecker etal. ( 2006 ) province that directors must hold accurate, meaningful and timely information to do good determination. This is peculiarly true of fiscal information about houses operations. Sometimes owner-manager tends to believe that they have less demand of fiscal statement because they are involved in personal engagement in twenty-four hours to twenty-four hours operation.

“ An accounting system structures the flow of fiscal information to supply a complete image of a house ‘s fiscal activities.Conceivably a few really little houses may non necessitate formal fiscal statement. Most nevertheless, need at least monthly fiscal statement which should be computing machine generated. The benefits of utilizing a computing machine in developing fiscal information are so great and the costs so low that it makes perfectly no sense to make otherwise.An accounting system for little concern should offer fiscal statement for usage by direction, bankers and prospective creditors. ”

Amir and farooq ( 2010 ) questioned X ( main fiscal accountant ) and Y ( chartered comptroller of company omega ) refering their sentiment sing the position that little concern directors are less dependent upon formal fiscal statements.

Ten provinces: ” In one-person owned house the proprietor knows what his concern is approximately, what he makes and sells, so he does non hold to trust on any sort of formal fiscal statements. In a manner, it can be associated with the size of the house, the more employees a house has got the more direction it needs, and the fiscal statements is required in order to maintain a cheque and balance. Harmonizing to Y, little concern directors are less dependent on fiscal statements because in these concerns there are business communities who do non cognize much about book-keeping and fiscal information. The lone thing they know is how to gain money, and they can make it without the usage of any sort of fiscal information. Therefore, engagement can do the directors understand much more than merely acquiring the thought from fiscal statements. ”

Owners or Directors believed that fiscal statement are really of import for capital devising determination. ( Holmes s ( 1988 ) ) . Nandan R ( 2010 ) stated since SME ‘s have independent ownership where proprietors or directors provide bulk of capital required for the operation of the endeavor. Holmes and Nicholls ( 1989 ) point out that little concern proprietor or director seldom does hold entree to all information that is considered of import for all facets of the concern. This were due to the four external factors such as concern size, the sum of clip under current direction, the industrial sector and the instruction degree of the proprietor or director.

2.6 Financial consciousness among directors

Sian S and Robert C ( 2009 ) high spots that many owner-managers turned to comptrollers to supply accounting service, such as the readying of histories or the proviso of revenue enhancement or VAT information because of deficiency of fiscal consciousness among them. Deakins et Al ( 2001 ) found that owners-managers have different attacks refering concern planning. Basically planning was of import to those houses under turning growing and periods of rapid alterations.

However, Collis and Jarvis ( 2002 ) , argued that due to the fact that the comptroller, employees or manager are qualified, the company have considerable fiscal expertness which is available internally to help in the analysis of fiscal information. It was besides found that some houses had a computerized or partially computerized system. There information engineering is used for their aid.

Son et Al. ( 2006 ) besides argued that accounting expertness was seen as the biggest menaces to the usage of fiscal information by the managers. In fact the managers do non understand the information because of its low quality. This consequence in low consciousness of cost-benefit consideration of describing undertaking. The external users were concerned with the dependability of fiscal information provided by the little endeavor fundamentally an owner-manager should be to the full cognizant about the merchandise or services on which their concern is based. The owner-manager may non be adept in concern direction accomplishments peculiarly when get downing the concern. The fiscal direction may be expected to be simple and hard currency flow-based. As the proprietors concentrate in the running of the concern, this may go forth really small clip for the owner-manager to larn about the worthiness of utilizing more fiscal direction tools for the achievement of their end instead than the basic itself. Padachi provinces that:

“ In fact, when history is taken of the limited resources that are normally available to SMEs, the typical deficiency of expertness in fiscal direction of their owner-managers, and the likely effects of doing hapless determinations, the demand for authorities support is undeniable. ”

Abdelrahim R and Alsaddie A ( 2008 ) who analyzed little concern public presentation in Syria, confirmed in a broad ranging questionnaire that directors developing are positively related to successful concern public presentation. When little house ‘s directors has equal preparation, it has a immense impact on concern public presentation and as a consequence are likely to turn successfully. It was further found that directors who received preparation in selling ‘s accomplishments had better concern public presentation in footings of turnover and profitableness than that received in other concern Fieldss such as accounting. However, it was stipulated that there is a deficiency of consciousness among little concern directors in preparation of selling.

The survey provinces:

“ Lack of consciousness among little concern directors of the possible benefits of preparation in general and selling in peculiar on their concern public presentation. Lack of managerial preparation does non needfully take to failure, but with a high grade of certainty, as evidenced by the consequences, overall concern public presentation will better. ”


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