1.2 The problem statement.Apart from the effort made by the Kenyan government to support thegrowth of SMEs sector by creating enabling environment throughappropriate legal and regulatory procedures, and despite the fact thatbanks have recently made micro-credit accessible to SMEs (MESPT,2011), there is no indication that the sector is growing. Research hasshown that sixty percent of SMEs fail within few months of theiroperation (Bowen, 2009). Furthermore, research has also confirmed thatpoor or lack of recordkeeping in a business and especially the Smallenterprises lead to their collapsing (Germain 2010).The necessity of recording all the transactions clearly and systematicallycannot be over-emphasized. Accounting records, prepared on the basisof uniform practices enable business to compare results of one periodwith another period. Taxation authority (both income tax and VAT arealso likely to believe the facts contained in the set of accountingrecords/books if they are maintained according to generally acceptedaccounting principles. Accounting records backed up by properauthenticated vouchers are good evidence in court of law in the event offraud by the customers, suppliers and employees. Studies on SMEs havedisclosed that about 60% of small and medium businesses fail within thefirst three years due to management inefficiencies brought about bypoor record keeping. Further studies indicate that a significant elementin the failure of many SMEs is due to inefficient or absence of20
bookkeeping. An adequate financial record-keeping-system will providethe required information to assist SMEs to make sound decisions forfuture plans. However, many SMEs do not maintain accounting recordsyet they perceive the positive role of accounting records in the businessperformance. Although accounting records have been cited as one of thepossible factors contributing to successof business, there is no researchdone to establish how accounting influences performance. Littleinformation if any is available on the role of bookkeeping on performanceof SMEs (Joseph Kurwo, Chelimo & Isaac Ole Sopia, 2012) Hence, it’sagainst this background that the study investigated the effects ofbookkeeping on the growth of SMEs in Kericho town.21
1.3 Objectives.1.3.1 General objectiveThe aim of this study is to find out the effects of bookkeeping to the growth of SMEs in Kericho Town.1.3.2 Specific objectives.I. To establish the effects of record keeping to the growth of SMEs in Kericho town.II. To establish the effects of filing system to the growth of small and medium enterprises in Kericho town.III. To establish the effects of workbooks to the growth and development of SMEs in Kericho town.1.4 Research questions.The study strives to answer the following questions:I. How does record keeping affects the growth of SMEs in Kericho Town?