Financial reporting and performance of small and medium-sized enterprises in Rubaga division, Kampala, Uganda. A cross-sectional study.
Résumé
Background: Small and medium-sized enterprises (SMEs) play a critical role in economic growth, employment creation, and poverty reduction in Uganda. This study, therefore, examined the relationship between financial reporting and the performance of SMEs in Rubaga Division, Kampala, Uganda. Methodology: The study adopted a descriptive correlational cross-sectional design using mixed methods. A sample of 169 SMEs was selected using stratified and simple random sampling techniques, while 18 key informants were purposively selected for interviews. Data were collected using structured questionnaires and interview guides. Quantitative data were analyzed using SPSS Version 23 through descriptive statistics, Pearson correlation, and regression analysis, while qualitative data were analyzed thematically. Results: Out of 169 questionnaires distributed, 160 were returned, representing a response rate of 94.7%. Findings revealed that financial reporting practices among SMEs were relatively strong, with an overall mean of 3.64 (SD=0.76). Accuracy of financial records scored highly (Mean=3.89), while utilization of financial statements for decision-making was comparatively low (Mean=3.28). SME financial performance was moderate, with sales growth recording the highest mean (3.61), followed by liquidity (3.52) and profitability (3.44). Correlation analysis established a significant positive relationship between financial reporting and profitability (r=0.521, p<0.01), sales growth (r=0.485, p<0.01), and liquidity (r=0.459, p<0.01). SMEs maintaining formal financial records also demonstrated superior gross profit margins (42.5%) compared to non-record SMEs (18.3%). Conclusion: The study established that effective financial reporting significantly improves SME financial performance, although many enterprises underutilize financial information for strategic decision-making. Recommendation: SME owners should strengthen the use of financial statements in forecasting, budgeting, and performance analysis through regular financial review practices and targeted financial management training programs.
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