The Small and Medium Scale enterprises SMES have been identified as the engine room of many economies in the World [1]. Apart from creation of employment opportunities for the society, the SMEs sector is also regarded as the major player in poverty reduction strategies of many economies across the globe. Despite the numerous advantages inherent in the SMEs, the sector is prone to some challenges that have limited its contributions to the economic growth of some countries and these challenges are diverse and vary from one country to the other.

In Nigeria the SMEs contribute more than 50% to the GDP of the country and it is the sectors contributing about 78% to the total employment generation in Nigeria [2]. According to the World Bank Nigeria has a country with vast human resources can achieve outstanding economic prosperity through diversification into SMEs and make the economy more broad based rather than depending on the oil sector alone. However, the SMEs are bedeviled with various challenges in Nigeria which has prevented the country from tapping the advantage in the sector to the fullest. These challenges are due to internal to external factors as the case may be. Chakraborty [3] posited that the mode of operation internally by many SMEs in Nigeria is the responsible for the major challenges faced by many of the SMEs in Nigeria. SMEDAN  asserted that about 85% of SMEs in Nigeria do not live to witness their 5 year anniversary. This speaks volume of the severity of mortality rate among the SMEs in Nigeria. SMEDAN also attributed the main cause of this to the mode of operations in many SMEs internally. The notion of “ I can do it all” by many SMEs entrepreneurs who are majorly sole proprietorship  is a major challenge to the performance of the SMEs in Nigeria.

An important area where SMEs encounter challenges is in the area of using accounting services in their operations. Many of the SMEs are with the notion that application of accounting principles to their businesses does not require any special training once they are able to remove their cost from their revenue and get profit. Little did they know that application of accounting services in businesses is more than profit and loss. From the study of Ezejiofo, Emmanuel & Olise [4], many SMEs in Nigeria do not have basic financial accounting books of records such as cash books, sales book, and purchase day books among others. Generally the book keeping principles which are basic are completely lacking in many SMEs in Nigeria. In ability to take cognizance of this has led to the sudden collapse of many SMEs in the country.

Notwithstanding, few that are using the principles of accounting believe they can do it on their own without consulting professional accountants. This idea also has culminated in the death of many SMEs in Nigeria [5]. Furthermore, studies have also revealed that some SMEs that apply accounting services in their operations use different strategies, doing this depends on the nature of the businesses and the decision  of  the   owner.

For instance some SMEs usually train some of the staff to acquire basic accounting skills and they are only employ to render such services to the organization. In another dimension, some SMEs use the strategy of engaging the services of professional accountants outside the organization to audit their operations and performance other accounting services for them. The debate on which of these two strategies is better is still on going and there have been no consensus on this.

Consequently, apart from the fact that this study will investigate the impact of accounting services of the performance of SMEs, the study will also investigate which of the strategies identified above is more in use in Nigeria and which one has the greater positive and significant impact on the performance on the SMEs in Nigeria using the SMEs in Ondo State Nigeria as a case study.

Other sections of this paper are divided into, literature review, methodology, presentation of results and discussion, conclusion and recommendation.

Many studies have investigated the role of accounting services in the performance of the SMEs across the globe. Few of the relevant ones to this study are reviewed under this section.

Empirically, Nwobu, Faboyede and Nwoelingo[5] investigated the role of accounting services in Small and Medium Scale Business in Nigeria. A survey instrument was administered to one hundred and twenty respondents in Lagos State and Ogun State, Nigeria. The test of reliability of the questionnaire was carried out using Cronbach’s alpha, which resulted in a coefficient of 0.773. On the basis of the coefficient, the research instrument is reliable. The study finds that SSEs employ accounting services for better accountability, correct determination of profit, to help management reach set goals and objectives. Some of the benefits of employing accounting services as identified by respondents include increased accountability of business operations, reduced fraud, correct measurement of profit, achievement of managements’ set goals.

Olatunji  examined the impact of sound accounting system on corporate performance of small and medium scale enterprises in Nigeria. This was done by a survey carried out through questionnaire and analysed using the F-Statistic (ANOVA). Results showed that adoption of sound accounting system enhances performance of small and medium scale businesses.

Ezejiofor, Emmanuel and Olise [4] determine the contributions of accounting records in efficient performance of small scale business in Nigeria. Two hypotheses were formulated in line with the objectives of the study. Survey method was adopted and data were collected through the use of questionnaire. Data generated were analyzed with means, standard deviation and weighted value and the hypotheses formulated were tested using Z-test statistical technique. The study found thatthe training of accountants by these institution and the various professional institutes should focus more on practical means of solving accounts reporting needs of small and medium scale enterprises.

Mohd and Mohamed [6] assessed the role of accounting services and impact on SMEs performance in manufacturing sector from East Coast Region of Malaysia. The study was a conceptual one that actually tried to examines the relationship between accounting services and SMEs. The study was based on the Resourced-Based Theory RBT as well as the agency theory. Both Amos and Nivo were used to analyse the questionnaire and the result showed that there was a relationship between accounting service quality and SMEs performance. The study further established a relationship between the SMES performance and the accounting firms.

Chakraborty [3] examined the impact of poor accounting knowledge on sustainability of SMEs in Baglandesh. The study used mainly qualitative approach with the usage of structured questionnaires.  The main objective is to examine how poor knowledge of accounting practices affects the growth of the SMES. The result from the study shows that Effective and systematic accounting practice is necessary to increase the operational efficiency, profitability and growth of SMEs.

Research design

The research design adopted for the study is a survey method which uses questionnaire to collect responses from target respondents and the responses are analysed using quantitative analysis.

Population of the study

The target population consisted of all small and medium scale businesses in Ondo State who has been in existence for minimum of past three years. This is to ensure that the businesses have gained experience in the market. Information on these firms was obtained in the official document on SMEs in Ondo State by the Ministry of Commerce and Industry, Ondo State.  The characteristics of the population were determined by limiting the study to Directors, CEOs, Managers and Owners of SMEs in Ondo State. The population of this study is all the registered SMEs in Ondo State, which are 1,999 in total .

Sample and Sampling techniques

According to the Sekaran, sample is defined as subgroup or subset of the population. Besides, it also can be defined as a set of respondents selected from a larger population for the purpose of a survey. There are 1,999 registered SMEs in Ondo State. For this study, Multistage Sample will be adopted. Out of this population, 25 dominant SMEs in the top ten Local Governments with the highest SMEs out of the 18 local Governments in Ondo State are used. A total number of 250 SMEs across the state are sampled. The respondents are the CEOs, Directors, Owners or the Managers of the surveyed enterprise. This is based on the perceived level of their participation in company decision making  process  being  an  integral  part  of  the   company.

Method of data collection

Well-structured questionnaire are used to elicit information from the respondents, Two hundred and fifty copies of questionnaire were administered to respondents by the researcher using face-to-face approach. The respondents for this study include small businesses located in top ten local governments in Ondo State, Nigeria. The questionnaires were completed by either the owner or a manager representing him/her. The purpose of limiting the administration of questionnaires to these two categories of people in the small business was to get the correct information that will enable the researcher come to an unbiased conclusion.

Reliability and validity tests

The reliability of the questionnaire was tested using Cronbach’s alpha, which resulted in a coefficient of 0.874. This implies that the instrument is reliable to measure the constructs in this study. The validity test applied the KMO tests and the results shows an average of 0.76 which shows the questions measures what they are actually designed to measure.

Method of data analysis

The data collected through responses given in the questionnaire personally delivered was analyzed through the use of both descriptive and inferential methods of analyses. The descriptive statistics includes: cross tabulation and simple percentages while the inferential statistics applied is multiple Regression which is used to find out the variable with most influence on the dependent variables and ANOVA which is to verify the overall significance of the regression model.

This section focuses on data analysis and interpretation, the data information collected on the  professional accounting services and Performance of Small and Medium Scale Enterprises in  Ondo State, Nigeria’’ through the use survey research design for the purpose of qualitative analysis. The information was generated from different SMEs Owners in Ondo State in order to gather genuine information from the respondents. Therefore, the study adopted simple regression analysis to test the short-run effect of research questions and answers were analyzed and hypotheses tested.

Bio Data Information of Respondents

Based on years in business as shown in the Table 1:, the respondents in this study indicated that majority of the respondents had been in business between 6-10 years which represent 45.3% while the minority of the respondents had been in business between 11-15 years which represents 6.7%.  This implies that the majority of the SMEs had in depth knowledge about the subject matter.

From the Table 2:, 93 respondents which represent 62% are directors/Owner of the business while 57 respondents   representing   38%   are  Manager  of  the 

Table 1: Year in Service

Source: Author’s computation, 2020

Table 2: Status of the Respondents

 Source: Author’s computation, 2020

Table 3: Year of Business Experience

 Source: Author’s computation, 2020

Table 4: Firm Size of the Respondents

 Source: Author’s computation, 2020

Tale 5: Education Qualification of the Respondents

 Source: Author’s computation, 2020

Table 6: Accounting Qualification of the Respondents

 Source: Author’s computation, 2020

Table 7: Sex of the Respondents

Source: Author’s computation, 2020

Table 8: Usage of Sales Day Book

Source: Author’s computation, 2020

business. It implies that majority of the respondents are owner of the SMEs who really supplied adequate information about their business.

The majority of the respondents had between one year and five years of their business existence which had 71 respondents representing 40.7% while from the Table: 3 the minority respondents had 16 or more years of business existence which represent 8%. This is an indication that the majority of the respondents are just starting up the business. 

From the data in Tabl: 4, 58, 35, 37 and 57 SMEs operated an employee size of Less than 20 people 20-30 people, and 31-50 people respectively.

It could be noted from the (above)( Table 5) that many of the respondents based on their educational qualification were post secondary school which indicate 1.3%. Also, 63.3%, 35.3% of the respondents were first degree and post graduate respectively. It can be deduced that majority of the respondents were first degree holder which implies that the majority were knowledgeable about the running of the business. 

The responses on the able above (Table 6) indicates that 154 respondents say Yes which form 82.7% of the total respondents as against total 17.3% that says No show that majority of the respondents had training in Accounting or Accounting related discipline.

The responses as shown in the above table (Table 7) discovered that male respondents were more engaging in SMEs which represent 62% whereas female respondents represent 38%

From the above table (Table 8), the respondents who used sales day book sometimes represent 44% whereas, those that used sales day book frequently were 84 which represents 46%.

From the above table (Table 9), the respondents who used purchase day book sometimes represent 42.7% whereas, those that used purchase day book frequently were 86 which represents 57.3%.

Table 10 above showed the respondents that chose they never use cash book were 10 which represents 6.7%, 54 respondents representing 36% showed that they use cash book sometimes while majority of the respondents frequently used cash book which represent 42.9%

The responses as shown in the above Table 11 discovered that respondents who never and rarely use record of asset represent 6.7% both, 54 respondents who sometimes use record of asset represent 36% whereas the majority of respondents who frequently use record of asset represent 50.7%.

Table 12 indicates that majority of the SMEs do not prepare financial statement. About 40% of the SMEs have not prepared financial statement since they have been existing. The table further indicates that only 6% of the SMEs do prepare financial statement.

Table 13 shows that most of the SMEs do audit their operations. About 38% of the respondents carry out auditing services on thir operations although 12% still don’t do auditing at all.

The strategy used for accessing professional accounting services is also investigated among the SMEs, The result shows that majority of the SMEs use internal approach to accessing professional accounting services. About 58% do not consult professional accountants for auditing and other accounting services instead they do it internally. Notwithstanding, about n32% of the SMEs still consult professional accountant outside for accounting services in their SMEs (Table 14).

Table 9: Usage of Purchase Day Book

Source: Author’s computation, 2020

Table 10: Usage of Cash Book

Source: Author’s computation, 2020

Table 11: Usage of record of Asset

Source: Author’s computation, 2020

 Table 12: Preparation of financial statement

Source: Author’s computation, 2020

Table 13: Usage of auditing services

Source: Author’s computation, 2020

Table 14: Strategies for accessing professional accounting services

Source: Author’s computation, 2020

Table 15: Regression Result

Note: R= 0.694, R2= 0.882, Adj R2= 0.867, F Cal= 33.669, P value= 0.000

Source: Author’s Computation, 

Analysis of the impacts of processional accounting services on performance of the SMEs

Table 15 has shown that professional accounting services are proxy with basic accounting principles, auditing, financial statement and consultancy services. These variables show various areas where professional accounting services are applied in the SMEs. All the probabilities of the parameter estimates are all less than 0.05 thus showing that all the four variables used to proxy professional accounting services have significant impact on SMEs performance.

The coefficients of each of the indicator and level of significance clearly show that each of them have significant impacts on performance of the SMEs.  The R square of 0.882 shows that about 88% variation in SMEs performance is explained by professional accounting services. The ANOVA result also shows that the estimated model is statistically significant. Therefore, it can be concluded from the interpretation that professional accounting services have significant impact on SMEs performance. The next task is to investigate the impact of the two strategies of sourcing of professional accounting services on SMEs performance.

Analysis of Impact strategies for sourcing for professional accounting services on SMEs performance 

Table 16 describes the impacts of strategies for sourcing for professional accounting services on SMEs performance. The results show that external sourcing has a parameter estimates with p value of 0.00. this shows that external sourcing of professional accounting services have significant impact on SMEs performance. The coefficient of internal sourcing has a p value of 0.51 which is above 0.05. This is an indication that internal sourcing of professional accounting services does not have significant impact on SMEs performance. 

Table 16: Regression Results

R= 0.605, R2= 0.648, Adj R2= 0.538, F Cal= 66.275, P value= 0.000

Source: Author’s Computation

Notwithstanding, the R square is 0.648 which shows that about 64% of the variation in SMEs performance is explained by strategies for sourcing professional accounting services. The f test also indicates that the estimated model is statistically significant. This further shows that the strategies for sourcing professional accounting services have significant impact on SMEs performance.

The study has shown that there is a relationship between professional accounting services and SMEs performance. Notwithstanding, the following conclusions are made

Firstly, the study has shown that professional accounting services have significant impact on SMEs performance. More explicitly, the study concludes that application of basic accounting principles, preparation of financial statement, auditing of accounts and general consultancy are all significant in influencing the performance of the SMEs.

Secondly, the study investigated the strategies for accessing professional accounting services. Concluding from the findings of this study, it is evident that external sourcing of professional accounting services have more significant impact on SMEs performance than the internal sourcing.

Following the conclusions from this study it is recommended that SMEs operators in Nigeria should key into services offered by the professional accountants to bring more accountability to their daily operations and in the long run promote the performance of their businesses. It is also recommend that the slogan of “ I can do it all alone” should be shelved be entrepreneurs and especially the one man business. This will go a long way to bring about sustainable performance into the SMEs sector in Nigeria.

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