1 A critical analysis of the role of bookkeeping towards...

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A critical analysis of the role of bookkeeping towards effective financial management among

SMEs entrepreneurs: The case of Thai Restaurants

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Executive Summary

Financial management differs between SMEs and large firms given the latter have a more

dynamic cash flow cycle (Welsh and White, 2012). On the other hand, SMEs do not have

financial management systems and accounting protocols such as those present in large firms.

Poor financial management serves as the main cause of failure in SMEs. It was noted that

there exists strong relationship in the case of business performance and the degree of training

in record keeping. As such business management is about maintaining and keeping accurate

records involving business transactions. The purpose of the dissertation was to perform a

critical analysis of the role of bookkeeping towards effective financial management among

restaurant SMEs in Thai. In the conceptual model the researcher envisages an interrelatedness

or symbiotic relationship between tools, methods and modes of bookkeeping and their

influence to sound financial management. In the primary research analysis, a strong and

positive association existed between the trends emergent on bookkeeping practices and

financial management practices in Thai Restaurants. All emergent issues on bookkeeping did

show positive association to financial management outcomes as perceived by the participants.

It was seen that double-entry system (.000), computerised bookkeeping (.007), and use of

Quick-Books (.000) on average usage did show to positively influence the ability to track any

financial transaction without delay. A Chi-Square test was used to validate H3 because both

the variables were categorical in nature. The Pearson Chi-Square was .000 meaning H3 could

not be rejected! Better still; there was dependence between motivation to do bookkeeping to

monitor cash flow and affirmation of inadequate cashflow as a major financial setback. On a

regulatory level, there should be provisions requiring auditing of bookkeeping processes as a

way to enhance business sustainability. An examination of the various tools used in

bookkeeping would be an added value to the findings of the present research; then each

should be assessed in how it contributes to sound financial management of firms especially

monitoring and evaluation.

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Table of Contents

Executive Summary ................................................................................................................... 2

Declaration ................................................................................................................................. 4

Acknowledgements .................................................................................................................... 5

List of Tables ............................................................................................................................. 6

List of Figures ............................................................................................................................ 7

List of Exhibits ........................................................................................................................... 8

1.0 CHAPTER ONE: INTRODUCTION AND BACKGROUND ........................................... 9

1.1 Industry and sector profile ................................................................................................... 9

1.2 Problem statement .......................................................................................................... 11

1.3 Purpose of the study ....................................................................................................... 12

1.4 Research Questions ........................................................................................................ 12

1.5 Research Objectives ....................................................................................................... 12

1.6 Scope and Significance of the study .............................................................................. 13

1.7 Dissertation Structure and Thematic Variables .............................................................. 13

2.0 CHAPTER TWO: STATE OF THE ART ......................................................................... 14

2.1 Theoretical Framework .................................................................................................. 14

2.1.1 Accounting Theory .................................................................................................. 14

2.2 Overview on understanding of Small Medium Enterprises (SMEs) .............................. 14

2.3 Understanding of Bookkeeping ...................................................................................... 15

2.4 Systems of bookkeeping ................................................................................................ 16

2.5 Relevance of bookkeeping to Small and Medium Enterprises ...................................... 17

2.6 Analysis of financial management in SMEs .................................................................. 19

2.7 Benefits and challenges of financial management in SMEs .......................................... 21

2.8 Identification of gaps in past research ............................................................................ 22

2.9 Variables Development & Conceptual Framework ....................................................... 22

3.0 CHAPTER THREE: RESEARCH METHODOLOGY .................................................... 24

3.1 Anatomy of the research philosophy .............................................................................. 25

3.2 Research Approach and Methods ................................................................................... 27

3.3 Research Design ............................................................................................................. 28

3.4 Time Horizons, Validity and Reliability ........................................................................ 29

3.5 Sampling, Data collection and Data analysis ................................................................. 30

3.6 Ethical Issues .................................................................................................................. 31

4.0 CHAPTER FOUR: DATA ANALYSIS ............................................................................ 33

4.2: Descriptive statistics on general information of the respondents .................................. 34

4.3: Objective 2: Supported relationship between book-keeping and financial management

in Thai Restaurants ............................................................................................................... 38

4.3.1 Description on bookkeeping practices in Thai Restaurants..................................... 38

4.3.2 Description on feedback results on financial management in Thai Restaurants ..... 41

4.3.3 Relationship analysis using correlation matrix ........................................................ 42

4.3.4 Relationship analysis by testing hypothesis ............................................................ 44

5.0 CHAPTER FIVE: CONCLUSION.................................................................................... 47

6.0 RECOMMENDATIONS ............................................................................................... 49

References ................................................................................ Error! Bookmark not defined.

APPENDIX .......................................................................................................................... 53

APPENDIX I: ETHICS CONSENT FORM .................................................................... 53

APPENDIX II: QUESTIONNAIRE ................................................................................ 56

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Declaration

In this dissertation, every idea pauses as my original work. However, all cited materials have

been duly acknowledged with respect to their authorship

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Acknowledgements

It would not have gone this far if my supervisor did not give me the guidance and

cooperation. This way ensured that a greater part of the dissertation moved in the right

direction. I also thank all participants especially Thai Restaurant owners and managers for

their time to provide answers to the survey questionnaire. I am very grateful for the

cooperation which played a greater part of completing this dissertation. I cannot forget to

thank my parents and relatives who have extended to me financial support throughout my

studies. All, big thank you to all the research assistants back in Thailand that helped me

coordinate my questionnaire including being my mouth piece especially when it came to

clarifying issues with the participants! As I write to you, my dissertation has seen the light of

day because of all your contributions.

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List of Tables

Table 3.1: Summary on positivism research philosophy

Table 4.1: Test of H1



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List of Figures

Figure 1.1: SMEs in Thailand

Figure 2.1: Conceptual Framework

Figure 3.1: Mind-map of the research process

Figure 3.2: Research onion model

Figure 4.1: Frequency distribution over the period in the restaurant industry

Figure 4.2: Frequency distribution over the category of the enterprise

Figure 4.3: Frequency distribution over the rate of use of formal bookkeeping

Figure 4.4: Frequency distribution over who does bookkeeping


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List of Exhibits

Exhibit 4.1: Reliability test using Cronbach’s Alpha

Exhibit 4.2: Descriptive statistics on general information

Exhibit 4.3: Test of difference on questionnaire item 4 and 5 using 2 sample t test

Exhibit 4.4: Descriptive statistics on data feedback on bookkeeping

Exhibit 4.5: Test of Equal Variance for response results’ variations for bookkeeping practices

Exhibit 4.6: Descriptive statistics on feedback results for financial management

Exhibit 4.7: Summary on analysis of Exhibit 4.6

Exhibit 4.8: Correlation analysis between bookkeeping and financial management

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1.0 CHAPTER ONE: INTRODUCTION AND BACKGROUND

The focus of the dissertation was to perform a critical analysis of the role of book

keeping towards effective financial management among SMEs entrepreneurs. The context of

the study was based on Thai Restaurants (Thailand) which form a greater part of the SME

sector in this region. Therefore, the study especially for the primary data was applied to

Thailand restaurant owners and managers where a questionnaire was distributed to the

entrepreneurs so as to capture from them the degree to which they have been using

bookkeeping, how they are doing it, whom and its overall contribution to the financial

management of their SMEs business. As demonstrated in the objectives of the study, the

focus was to record the key benefits of bookkeeping in the wider context of financial

management of SMEs. In most cases proprietors may have in place wonderful accounting

control processes and yet not be able to maximise value from its usage. This is partly the

problem to be evaluated. For a better industry and sector profile of SMEs in Thai Economy

see the developments next.

1.1 Industry and sector profile

Research indicates that small and medium enterprises do play a vital role towards

Thai economy (Yoshino et al, 2016). For instance, in the period 2012 it is approximated that

about 2.7 million SMEs were operational in Thailand as shown in figure 1.1 below. In total,

such comprised about 98.5% of the enterprises. Still in 2012, SMEs catered for 37.0% of the

gross domestic product including supporting an employment base of 80.4% of the overall

workforce in Thailand (ADB, 2014). Other surveys indicate that Thai SMEs contributed

about 28.8% of the aggregate exports and in terms of imports taking a portion of 31.9% by

the year 2012 (Yoshino and Taghizadeh-Hesary, 2014).

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Figure 1.1: SMEs in Thailand

Source: (ADB, 2014)

It is held that given the importance of SMEs in Thai economy, it is significant to

augment their resilience like providing them with stable financing opportunities. According

to Yoshino et al (2016) credit advancement to SMEs amounted to 32.8% in comparison to the

aggregate bank loans from the commercial banks in the period 2012. However, experts

believe this is still a small allocation. On the same survey, it was opined that the ratio

attributable to non-performing loans i.e. NPLs has been high in SME lending. For instance, at

3.4% in comparison to the gross non-performing loans at 2.2% in 2013. In Thai, there is

notable high appetite for SMEs growth which has made banks move away from large

transactions to retail financing as well as portfolio guarantee schemes. All these meant to

raise SME credit opportunities in Thailand; however, lack of collateral security serves as a

barrier for Thai SMEs in acquiring business funds (ADB, 2014).

It is fundamental for the government of Thailand to help SMEs overcome financing

obstacles they face. It is noted that credit accessibility is one of the indispensable ways to

stimulate growth in the SME sector (Yoshino et al, 2016). Research indicates that in Thai

there is credit rating for large firms which banks use to advance loan to these institutions. For

instance, Moody’s Standard & Poor’s, and Fitch provide such ratings and enable large firms

to have access to credit. However, for SMEs this rating is scarce given the lack of credit

rating indices (ADB, 2014). In most cases, banks perceive SMEs as risk investments to even

hesitate to extend loans to respective proprietors on fears of defaulting. It becomes quite a

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challenge for lending banks to evaluate the financial health of every SME. On the same the

SMEs bear the burden of increased borrowing cost (Yoshino and Taghizadeh-Hesary, 2014).

It so that coming up with a credit rating index would shield banks from indulging in

risky lending through reduction of information asymmetry; in the same respect bring down

borrowing costs for SMEs that depict a stable financial health including strong growth

prospects (Yoshino et al, 2016). For instance, Yoshino and Taghizadeh-Hesary (2014) in

their analysis proposed a model for statistical analysis in terms of quality of SMEs; this could

be of assistance to banks decision making on financing to SMEs. On the same note, Yoshino

et al. (2015) indicated the manner in which a credit rating scheme for SMEs could be

established and executed using specified data. This is notwithstanding the lack of access to

nonfinancial and financial ratios (Yoshino et al, 2016).

As can be seen from the background of the study especially the industry and sector

trend for SMEs in Thailand is that a number of issues come into light; first there is a need for

better financial management that would endear SMEs to the bank and in the process acquire

funding and so on. The important note is that bookkeeping is an important aspect of how

SMEs can be in a position to account for various financial transactions. In this dissertation the

focus is not mostly on bank lending or credit worthiness of SMEs in Thai but how

bookkeeping is a tool for sound financial management. It would be even worthwhile to use

this study to ascertain the extent to which SMEs could use their bookkeeping processes to

achieve value for the entire business through financial management.

1.2 Problem statement

Financial management differs between SMEs and large firms given the latter have a

more dynamic cash flow cycle (Welsh and White, 2012). On the other hand, SMEs do not

have financial management systems and accounting protocols such as those present in large

firms (Amoako, 2013). Typically, SMEs proprietors undertake financial management of their

business through the help of a bookkeeper or even an accountant (Uwonda et al, 2013).

According to Longeneter et al (2011) poor financial management serves as the main cause of

failure in SMEs. Another study by Bowen (2009) noted that there exists strong relationship in

the case of business performance and the degree of training in record keeping. As such

business management is about maintaining and keeping accurate records involving business

transactions. Knowledge and expertise in bookkeeping serves as a major factor impacting

positively on growth and sustainability of SMEs (Amoako, 2013).

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The lack of recording business financial transactions i.e. bookkeeping translates to the

collapse of the enterprise in short periods after its establishment (Germain, 2009). Essentially,

record keeping is among the activities that SME entrepreneurs would not afford to ignore.

Bookkeeping is an important aspect of a profitable business; however, the challenge is that

businesses do not meet criteria for accurate and complete records that may be used for further

financial decision making (Bowen, 2009). In this dissertation, the projected problem would

be that SMEs proprietors have not deciphered the important role of bookkeeping to financial

management of their enterprises. This may have prevented them from giving bookkeeping the

attention it deserves considering its strategic impact to the business itself.

1.3 Purpose of the study

The purpose of the dissertation was to perform a critical analysis of the role of

bookkeeping towards effective financial management among restaurant SMEs in Thai.

Therefore, understand the relationship between bookkeeping and financial management

practices of SMEs in Thai.

1.4 Research Questions

The research questions include:

i. To what extent has book-keeping been adopted in Thai restaurants?

ii. Is there any supported relationship between book-keeping and financial management

in Thai Restaurants?

iii. How has bookkeeping been used to achieve sound financial management in Thai

Restaurants?

iv. What would be the best strategies in bookkeeping towards effective financial

management in Thai Restaurants?

1.5 Research Objectives

The objectives will be as follows:

1. To analyse the types of book-keeping systems in Thai restaurants

2. To evaluate the supported relationship between book-keeping and financial

management in Thai Restaurants

3. To assess the contribution of bookkeeping to achieve sound financial management in

Thai Restaurants

4. To recommend strategies in bookkeeping to facilitate effective financial management

in Thai Restaurants

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1.6 Scope and Significance of the study

In the completion of this dissertation it shall be illustrated how SMEs stand to benefit

from bookkeeping. Bookkeeping processes were evaluated in light of financial management

so as to establish any correlation or supported relationship between them. The findings are of

great importance to entrepreneurs in the SME sector because they will be in a position to re-

align their bookkeeping with best practices for financial management i.e. both in monitoring

and in evaluation. The dissertation also based on empirical-numerical analysis of SMEs

restaurants in Thai making its findings credible and generalisable.

1.7 Dissertation Structure and Thematic Variables

The structure of the dissertation is as shown below:

Introduction: Background, Research Questions and Objectives, Problem and

Significance

Literature Review: The Concept of Bookkeeping; the Concept of Financial

Management; Theoretical Framework; Conceptual Framework

Methodology: Research Onion, Strategies, Design, Approaches, Data

Collection, Data Analysis, Ethics

Data Findings: Report data from the questionnaire results, graphs charts and

hypothesis testing

Conclusion, Recommendations and Implications: Discussions of findings;

Implications; and Recommendations

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2.0 CHAPTER TWO: STATE OF THE ART

In this chapter the secondary research on contribution of bookkeeping towards

financial management of SMEs was conducted. The purpose was to develop a thorough

literature review of the main concepts and theories at the same time documenting the findings

of past scholars on the problem issue.

2.1 Theoretical Framework

2.1.1 Accounting Theory

The theoretical framework shall be based on Accounting Theory and Decision

Usefulness Theory. Under these theories the concept of accounting is perceived to be a

process aimed at providing relevant information to the appropriate decision makers. In

particular, the accounting theory lays out a formal process in where an individual ought to

make the most effective decision in lieu of the subjective probabilities. In most cases, it is

highly critical that SME managers dedicate to monitoring their business transactions and at

the same time undertake proper decisions that will optimise profits for the enterprise.

Scholars such as Clelland (2011) depicted the manner in which entrepreneurs may be

successful in their business. For instance, this author noted that successful entrepreneurs take

profit to be a measure of competency and success in the business. On the other hand, such

successful business operators create personal but achievable objectives including being

concerned about how the business is performing. For that matter, they are concerned and

closely monitor their everyday business transactions such that they would be able to

overcome potential losses. As such, the “Decision usefulness accounting theory” holds the

opinion that keeping record of business transactions facilitates effective decision making

within the enterprise.

2.2 Overview on understanding of Small Medium Enterprises (SMEs)

According to Carrington and Aurelia (2013) there lacks a common understanding on

the definition of SMEs. Thus, the definition may vary from one country to another or from

one industry to another. For instance, in Thailand Small and Medium Enterprises are

explained in terms of the number of individuals under employment and, on the other hand,

depending on the annual turnover of the firm (Ernst and Young, 2011). The Ministry of

Finance, Planning and Economic Development in Thailand explains the meaning of small

and medium enterprises as those employing a minimum number of five employees to a

maximum of 50 persons. In addition, a small enterprise is that whose sales and revenue

turnover gets to a maximum of Thai Baht 360 million and with a total asset base

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approximately Thai Baht 500 million the maximum. Then a medium enterprise is that which

has an employment base of 50-100 individuals (MFPED, 2008).

Further, is that in Thailand the most applicable terminology for SMEs has been “small

business” (Ernst and Young, 2011). The role SMEs have played towards Thailand’s economy

cannot be underestimated; this is because the sector contributes more than 90% of the

aggregate employment in the private sector. In addition, SMEs contribute more than 20% of

the labour force income not to mention that they have much potential in reducing poverty

levels (UIA, 2008). It is held that a greater part of SMEs in Thailand operate in the

restaurants, food processing, garages for motorcycles and motorcars, retail/wholesale trade,

furniture assembling, metal works, schools and then transport services (Namatovu et al,

2010).

It is worth noting that enterprises in Thailand face a number of challenges considering

the environment they operate in Namatovu et al. (2010). Also, a greater part of the SMEs in

Thailand fail to prepare formal books of accounting; other research indicates that they do not

adopt to appropriate technology. The other challenge includes the failure to access financing

to boost capital expenditure (Briggs, 2009). However, the failure to prepare formal books of

accounting is linked to the fact that most customers do not interest in receipts in the event

they purchase commodities; on the same note, suppliers fail to request for invoices including

the fact that private contracts are often not documented; the same is as a result of the

reluctance towards presentation of audited financial accounts rendering the SMEs to care less

about the need for professional bookkeeping (Rodgers and Lucas, 2011). It is held that

financial management of SMEs in Thailand began gaining root in the early 2000.

2.3 Understanding of Bookkeeping

According to the American heritage dictionary, bookkeeping has been defined as

follows:

“the practice or profession of recording the accounts and transactions of a business

(Marshall, 2011, p.145).”

The transactions may include purchases, sales, expenses or income generated by an

individual or a business. On the other hand, bookkeeping is believed to differ from

accounting practice in that the former stops at the point of trial balance stage. On the

contrary, accounting relies on the trial balance data and ledgers to develop the financial

statements such as the income statement and the balance sheet (Kravitz, 2009). There exists a

number of commonly practiced methods in relation to bookkeeping which include: (a) single

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entry bookkeeping system and the (b) double entry bookkeeping system (Kravitz, 2009). In

line with this Rodgers and Lucas (2011) noted that bookkeeping encompasses the recording

of financial transactions using either manual or digital/automated processes. The Chartered

Institute of Accountants in the United Kingdom refer to bookkeeping as the analysis,

classification and recording of financial activities in the books of accounts using systematic

protocols. On the other hand, bookkeeping serves as a mechanical initiative which records the

everyday activities of an enterprise (Yazdanfar and Ohman, 2014). Bookkeeping, serves as a

set of rules required in recording financial information within a financial accounting system;

in so doing every transaction changes (Gul et al, 2013).

2.4 Systems of bookkeeping

The purpose of this section is to provide a generic overview on systems of

bookkeeping that may be used by a business. The overview is generic because the researcher

has not attempted to practically show how the bookkeeping system may be implemented but

only to define its dynamics.

It is important noting that bookkeeping is the financial accounting preparation that

culminate into the trial balance. It means post financial activities following the trial balance

such as financial statements are not part of the bookkeeping process. It is crucial to

understand the different types of bookkeeping so as to identify the most appropriate to use in

a business (Kravitz, 2009). Bookkeeping can take a number of forms such as: (a) Single-entry

bookkeeping (b) Double-entry bookkeeping while the methods to achieve each of them could

be (c) manual bookkeeping or (d) computerised bookkeeping.

The single-entry bookkeeping system is a common practice for the small businesses

involving little or less transactions. In most cases such as a system involves the recording of

cash disbursement, sales, purchases and cash receipts. However, other accounting records, for

instance, capital, inventory among others are recorded as notes or memorandums (Rogers et

al, 2015). On the contrary, a double-entry bookkeeping system is whereby one transaction

impacts two accounts since for single-entry it would affect only one account. For a business

paying taxes it is not recommended to use single-entry for the reason its computation does

not generate a fair valuation of the business (Marshall, 2011).

The most commonly practiced bookkeeping protocol is the double-entry system. It

has a more detailed as well as complex approach since it introduces into the process both

debit and credit aspects (Haber and Jeffry, 2014). For instance, the use of debit and credit

means for every transaction going into or out of the business, there is what is debited and

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there is what is credited. In other words, there is what is received and there is a coinciding

item that must be given up by the business.

Figure 2.1: Types of bookkeeping systems

Having outlaid the types of bookkeeping systems the next thing is to comment on the

methods there are for their development. It was indicated that the two methods of

bookkeeping are either computerised or manual. In the traditional context, manual

bookkeeping is the most adopted way to keep good track of all transactions. It means

majority of the financial activities are recorded in a manual way using printed papers or

books of accounts like ledger books, journals and worksheets (Marshall, 2011).

On the other hand, computerised bookkeeping serves as modern and innovative

manner to record business transactions. As such, there exists a set of accounting and

bookkeeping software that have eased the process of bookkeeping including making it more

accurate and convenient. The notable issue should be that principles and guidelines for

traditional bookkeeping are the same when it comes to computerised bookkeeping. The only

difference is that computerised bookkeeping has enabled the process to be less tedious, faster

and much easier. However, businesses do not prefer to use the automated system because it is

expensive and costly; and on the other hand, it is reliable, efficient, and convenient

(Yazdanfar and Ohman, 2014).

2.5 Relevance of bookkeeping to Small and Medium Enterprises

Bookkeeping has a vital role towards the performance of small scale enterprises; on

the other hand, accounting plays significant role within large corporations and industries.

Bookkeeping has been adopted widely across businesses with the goal to safeguard major

business transactions (Bragg, 2011). Thus, the undertaking is a strong reference when it

comes to decision making where stakeholders can simply review the records only. It is so that

Bookkeeping Systems

Single-Entry

System

Double-Entry

System

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small businesses tend to overlook the importance of bookkeeping; on the other hand, they

tend to ignore the practice of keeping good records of their transactions on the account that

they can remember them. But this does not usually happen for the reason small business

owners have a lot of other things needing their equal attention. It means, therefore,

bookkeeping is a good and healthy initiative for enterprises in the sense they are able to keep

track of their financial records and retrieve whatever information they might need across the

years (Rodgers and Lucas, 2011).

Moving on is that bookkeeping serves as the first critical step in accounting whereby

it establishes a system for sources of information that may be needed by owners and

managers of SMEs (Marshall, 2011). In most cases, such information is required to measure

financial performance. It is also the case that the value of financial performance evaluation

and monitoring cannot be overemphasized for any business entity. It is held that recorded

profits depict changes taking place in the wealth of business owners. This is among the

reasons why fundamental economic decisions within enterprises are anchored on financial

performance as gauged by profitability (Bragg, 2011). In a review by the European

Commission (EC) (2008) it was affirmed that accounting information has got a vital role

towards the successful management of an enterprise albeit it being small or large; on the

same, is that business operators especially SMEs have a perception of recordkeeping as a

practice that must be undertaken to simply recover needed funds during the end of an

accounting period.

Similarly, it is purported that accurate bookkeeping does not serve as an important

tool to majority of the business operators. It is due to this majority of businesses end up

failing right from the start (Wanjohi, 2012). Therefore, where a business owner fails to

maintain reliable and complete records then such nay derail the success of the business. For

instance, the busiest operator may be compelled to pay higher tax than is required due to

absence of evidence in relation to tax deductible or inaccurate sales just to mention a few.

Practically, if an SME entrepreneur contracts an accountant to prepare the business accounts,

then they would charge them in light of the time it will take them to do so (Carrington and

Aurelio, 2013).

It means if the same business operator has been keen and accurate in preparing the

business accounts, then they would require less time to contract the services of the

accountant. As a result, it would take the contracted accountants less time doing the financial

reconciliations and so charge less fee (Haber and Jeffry, 2014). It is on basis of the reasons

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above that it becomes imperative to keep accurate books or records; and actually the greatest

reason being that bookkeeping ensures the business owner has got full and autonomous

control of the enterprise including that one can easily access and project its profitability.

Bookkeeping also enables SMEs to monitor their cash flow at the same time ensuring that

appropriate risk mitigation is in place to evade potential losses. Bookkeeping enables

effective decision making based on available information on record (Marshall, 2010).

The way to have maximum control of a business is by considering to maintain

accurate and reliable records or books of account. In so doing such leads an enterprise to

want to find out the kind of records that must be maintained for the sake of success of the

business (Kravitz, 2009). In addition to this, bookkeeping plays a major role when it comes to

the sourcing of funds from financial institutions such as banks. The financial institutions

require that enterprises no matter how small they are, maintain sufficient financial statements

if they are to be provided loans for business expansion purposes. The other concern is that

bookkeeping serves as a guide towards the preparation of financial reports where banks

evaluate such financial reports prior to deciding whether to give a loan to a business or not

(Kelly, Barrow and Epstein, 2012).

Also, bookkeeping enables SMEs to maintain proper inventory records such as

product diversification decision making with the intention to enhance profits and profitability

(Rodgers and Lucas, 2011). In that regard it is imperative that businesses monitor the fast

moving or fast selling commodities from those that are not; hence proceed to invest more on

fast moving goods. For instance, goods with the highest turnover can be termed as the stars in

the business and even proceed to invest in them. Basically, the argument is that bookkeeping

enables SMEs to identify the type of goods or commodities that they will need to consider

more in the inventory of the business. To reiterate is that SMEs are capable of easily

monitoring their transactions and maintaining proper records where in the end such facilitates

sound business decision making; for instance, having a good track of both debtors and

creditors (Bragg, 2011).

2.6 Analysis of financial management in SMEs

In looking at the most critical aspects of financial management in SMEs, experts

opine that they include cash flow and working capital management. In the event an SME

lacks adequate cash or liquidation assets such as working capital necessary for everyday

operations, then the risk of ending up insolvent would be high (Grondin and Cieply, 2012).

The generation of cash derives from sales revenues (accounts receivable) or accounts

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receivable. If there is a slow pace as a result of decreased sales or low debtor turnover, then

the business might need a cash injection failure to which may become insolvent (Kelly,

Barrow and Epstein, 2012). In a situation of being insolvent, an enterprise would have to

source more money to inject into the business; that way seek a loan or proceed to lower costs

by cutting the expenditure (Carrington and Aurelio, 2013). In this regard, effective

management of the cash cycle has been regarded as a major function in the SMEs (Rowan,

2014).

According to Yazdanfar and Ohman (2014) there exists a positive relationship

between efficient management of cash flow and the working capital. The same positively

relates to an SMEs’ profitability. It means when an SME efficiently manages its working

capital the better it can increase its profitability muscle (Enqvist, Graham and Nikkinen,

2014). On this backdrop, it is important for the SMEs to fasten the recovery of accounts

receivable at the same time giving ample oversight to the management of the inventory

turnover (Gul, et al., 2013).

It is also important that the SME manager monitors their accounts payable i.e. money

owed to the creditors and accounts receivables i.e. money belonging to the business. In some

instances, SMEs suffer a deficient working capital hence making it important to manage

effectively their cash conversion cycle; this way increase their level of profitability

(Tauringana and Afrifa, 2013). In parenthesis, SMEs may consider reducing their cash

conversion cycles since such would facilitate the collection of accounts receivable in a

speedy manner including increasing the working capital (Ebben and Johnson, 2011).

The effective management of working capital is an important achievement and

contributor to the success of an SME. It is also suggested that SMEs can attain an optimal

degree of working capital that exceeds the minimum level of the obtainable profit levels

(Wincent, 2005). The level of liquidity for an SME may depend on a number of factors such

as size, age, industry, availability of collateral from the business owner, and accessibility to

overdraft facilities (Drever and Hutchinson, 2007). It is held that SMEs have lower access to

funds unlike large or public companies since the former would be assessed in terms of the

social networks. This is because the social networks serve as an integral component of the

financial behaviour decision. The same may include application for loans (Vos, Yeh, Carter

and Tagg, 2007).

There exists strong relationship in the case of working capital management,

profitability and efficient cash flow in SMEs (Ekanem, 2010). However, the challenges that

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managers and owners of SMEs face when it comes to maintaining a lean financial

management includes poor systems of financial control and management practices

(Chapellier, 2013). It is held that managers ought to be actively engaged in giving oversight

to their firm’s cash flow cycle including monitoring the break-even performance and

profitability trends (Vos and Roulston, 2008).

2.7 Benefits and challenges of financial management in SMEs

As held by Sian and Roberts (2009) the requirement for SMEs to maintain sound

financial records and be compliant to tax regulations serves as a mandatory initiative in the

majority of advanced economies. It is due to this reason that they have to work together with

professional accounts as well as bookkeepers. Furthermore, when an SME increases in its

size as well as complexity so does its formal processes and financial management initiatives

widen (Stafanitisis, Fafaliou and Hassid, 2013). If SMEs owners and managers had got more

skills and knowledge in the accounting field including financial management, then the more

likely they would be able to prepare financial reports while at the same time, using them to

make informed decisions (Van Auken and Carraher, 2013).

The other observation is that the roles of a financial manager are of great importance

when it comes to the sustainable performance of a firm (Orobia et al., 2013). This is equally

so in the short-term and long-term aspect of a business. It is opined that the quality going into

the accounting practices of the SMEs positively relates to the enterprises’ performance

(Kubickova and Soucek, 2013). On a similar account is that financial information for SMEs

is a valuable management initiative given that they are associated with unstable liquidation

and profitability; also, have to rely on a greater part on short-term debt (Amoako, 2013).

In lieu of the benefits cited above, there are a number of challenges that SMEs

succumb to when it comes to financial management. Foremost, is that majority of owner-

managers give oversight to their cash flow as well as financial positions of the business

keenly; as such, monitor the trends for the debtors and creditors (Kubickova and Soucek,

2013). In most cases, there is tendency to focus more on the financial performance and leave

out the non-financial activities of a business (Perera and Baker, 2007). The challenge is that

for majority of industries in the developing economy, usage of formal accounting systems,

cash flow and credit management are done on ad hoc basis including being informal in their

execution (Orobia et al., 2013).

The poor practices going into the financial management is as a result of the owners

and managers being in short of skills and knowledge towards financial accounting practices

22

and controls mechanisms (Amoako, 2013): thus fail to undertake the right decisions given the

business situation and circumstances (Uwonda et al., 2013). As a result of such inadequate

skills and techniques, SMEs end up experiencing less cash flow and liquidity crisis as well as

unsolicited bad debts (Abanis et al., 2013).

2.8 Identification of gaps in past research

In looking at the completed literature review it can be seen that there are adequate

findings that support the relationship between bookkeeping and financial management of

small and medium enterprises (SMEs). It means it was possible to assert that bookkeeping as

a practice has impacted positively on financial management. However, there are still gaps in

the literature in that it does not depict a descriptive neither relational review of the

relationship between the said variables. This needs to be addressed properly in this

dissertation. A better illustration of the study’s variables and the hypotheses interlinked has

been depicted in the next section.

2.9 Variables Development & Conceptual Framework

All said and done, it is worth noting that the study has key dependent and independent

variables: the dependent variable is “financial management” while the independent variable is

“bookkeeping”. It needs to be shown how the two relate and influence each other.

Figure 2.1: Conceptual Framework

In the conceptual model the researcher envisages an interrelatedness or symbiotic

relationship between tools, methods and modes of bookkeeping and their influence to sound

financial management. This is to say that they should supported enhance effective financial

Modes of

Bookkeeping

Methods of

Bookkeeping

Tools of

Bookkeeping

Cashflow

Management

Tracking

Financial

Transactions

Inventory

Management

23

management of an enterprise. The hypothetical judgment would be that tools, methods, and

modes of booking should positively contribute to cashflow management, inventory

management and tracking of financial transactions. Well, it may be established that there

exist differences in how modes, methods to tools influence financial management in the sense

some would yield better results compared to another. As the reader can see it is a whole lot of

puzzle that needs more research and testing. However, this model could be used to explore

the effects of bookkeeping towards sound financial management of firms.

24

3.0 CHAPTER THREE: RESEARCH METHODOLOGY

In this part of the dissertation the methodology of research was developed. In the end

created a pathway that was used to gather data and analyse it within the objectives proposed.

Figure 3.1 below depicts the flow of the entire research process.

Figure 3.1: Mind-map of the research process

Introduction

State of the ART

Methodology

Research model

Mixed methods

Positivism Philosophy

Deductive Approach

Closed-ended questionnaires

Secondary

Research

Primary

Research

Library Survey Questionnaires

Analysis, Discussions,

Recommendations

25

The flow process indicates that the dissertation built on both secondary research and

primary research. In point of fact the library processes are what facilitated the development of

the literature review while the use of questionnaires was what led to the inclusion of primary

data. As shown later, the vast primary data was quantitative in nature since SPSS version 21

was used to code patterns and themes et cetera.

3.1 Anatomy of the research philosophy

In most cases scholars have used the research onion to build their methodology

because it has layers that are recommended to be executed one at a time and systematically.

Therefore, the author sought to use the same approach to build the methodology of this

dissertation. In order to shed more light, the main layers of the research onion were analysed

step-by-step. The research onion model is as shown below.

Figure 3.2: Research onion model

By observation it can be seen that there is the outer-most layer which represents the

research philosophy. Under the research philosophy there is positivism, realism,

intterpretivism, objectivism, subjectivism, pragmatism, radical humanists and others. More or

less it seems that one needs to settle on one research philosophy. So what is a research

philosophy? According to Kagioglou et al (2011) good comprehension of the research

philosophy and resolving to take up a specific perspective for a focused research paradigm is

constestably the first step towards setting other research blueprints and choices of a study. In

26

consequence, in deliberating on the most appropriate research philosophy to include in a

study, it is advisable that one also understands that they are adumbrated by assumptions that

could be epistemological, axiological and epistemological.

Moreover, the assumptions do influence the manner in which a research process will

be diagnosed including the general aproach to the proposed research (See Saunders et al,

2009). It is held that majority of researchers prefer to understand the complex philosophical

perspectives in lieu of the two traditional research enquiries namely quantitative and

qualitative methods (Creswell, 2009). In quoting Yin (2009) research philosophy becomes

the viewpoint through which individuals interact and know the world. On this background, it

can be deduced that research philosophy then influences other selected research paramaters

because it all boils down to what is the mind-view of the subject.

Epistemology, on the other hand, concerns to know the assumptions that are

acceptable as knowledge versus that which serve as acceptable knowledge (Saunders et al,

2009). For instance, in a qualitative approach, the investigator gets to network with the

subjects they are learning from; also the same involves interviewing and observing

participants for a lengthy period of time. This is the way for interpretive philosophy

(Creswell, 2009). On the other hand, quantitative approach is whereby there is concern over

the relationship between the investigator to what is being researched (see Creswell, 2003).

For positivism, it is made clear that the researcher remains independent and distant from what

has been established through research; it means such alleviates possibilities for bias at the

same time enabling objectivity in addressing or evalating a situation (Creswell, 2009).

In applying the issues above is that from the word go the researcher intended that he

remains objective to the findings of the work. That is to say the role of bookkeeping as

established from the sampled group needed to be an independent review from what the

researcher thought it should be. In that case, without knowing the researcher was taking a

positivist principle which bridges between the knower and the known. See table 3.1 below for

a summary of different perspectives of positivism research philosophy.

27

Table 3.1: Summary on positivism research philosophy

Positivism

Ontology Emphasizes that the investigator is external,

independent and objective of a research

process

Epistemology Observation of reality geared towards

proving credibility of facts; focuses on

causality and generalisations. It reduces

phenomena into less complex elements

Axiology Purports that research is value free. This is

due to independence of the data and

objectivity in its evaluation/analysis

Approach Quantitative but in other instances could still

be qualitative

Method Utilises a mono-method but would still rely

on mixed methods in some instances

Source: (Summary by Author)

The above touchpoints in table 3.1 project the other developments the resarcher used

to build the methodology framework.

3.2 Research Approach and Methods

At this juncture the resarcher intended to reconcile “approach” and “choice” sought in

this dissertation to the summary in table 3.1 above about research philosophy. It can be noted

that the research onion depicts the approach as taking different stances namely: deductive and

inductive approaches. On the other hand, under choices there is the use of mono-method,

mixed methods or multi methods. From this the choice was to settle for a mono-method in

this case being the quantitative research. Overall, the present dissertation adopted a

quantitative approach at the same time building on deductive reasoning.

In research there exists two extensive methods of reasoning namely inductive and

deductive approaches (Trochim, 2006). In the case of induction it is where the researcher

moves from a specific scenario to a general one and deduction starts from general and

culminates into the specific. For instance, argumentations deriving from experience or

observations are preferrably expressed in the inductive manner; then argumentations based on

laws, accepted principles, and rules are more categorised under deduction (Creswell and

28

Plano Clark, 2007). In other words, a deductive researcher operates from top to bottom (top-

down); rather begins from analysing theory to making hypotheses and uses the findings

thereof to confirm or contradict theory. On the contrary, inductive researcher is the individual

that operates from the bottom to top (bottom-up) and so uses the views from the participants

to create broader themes as well as generate theory that links the themes (Creswell and Plano

Clark, 2007). Suffice to mention that in a research such as the current one, the two kinds of

analysis would be the use of quantitative process (i.e. deduction) or qualitative process (i.e.

induction).

In this dissertation the researcher opted to be a deductive investigator; hence preferred

to rely on quantitative research approach. In using quantitative research, such translates to the

adoption and generation of statistical analysis so as to present the relationship between the

known and what may be established through research (Balnaves and Caputi, 2001). In

addition, the collection and analysis of data relying on quantitative strategies would be

supported by an understanding of the relationship across variables by either applying

descriptive or inferential statistics (Murray, 2003).

Descriptive statistics are applied where the researcher seeks to develop inferences

regarding populations and to approximate the parameters of the same populations (Trochim,

2006). Inferential statistics based on the descriptive statistics including the assumptions

which may be generalised to the sample of the study. In addition, in the case of quantitative

analysis a study is capable of simulating “visual representations for the data” such as plots,

graphs, charts and frequency tables (Creswell, 2005). In using quantitative research the

reseacher gets to draw conclusions from evidence presented by the findings, logically and in

argumentation.

In application to the present study is that data gathered from the sample was used to

generate descriptive and inferential statistics. This was explained in the data analysis section

of the study in keen detail (Refer to chapter four). However, is that through appropriate

coding of data in the SPSS the researcher was capable of generating descriptives and

inferential statistics at the same time made graphical illustrations on the results.

3.3 Research Design

In the research onion model it can be seen that the layer for strategies includes designs

such as experiment, surveys, case study, grounded threory, ethnography and action research.

Indeed, all these methods are possible to be used but it all depends with the nature of the

topic and the problem in question. In that case the researcher settled for a survey design. In

29

choosing a survey design the study may settle on either descriptive, causal or exploratory

research. For the present dissertation the researcher settled on the first two designs namely

descriptive and causal. For instance, in undertaking a descriptive research such involves a

hefty of surveying and can be regarded conclusive per se given its quantitative attribute (Lee

and Lings, 2008). A descriptive research is preplanned and has a srutucture design; thus the

information gathered may be statistically inferred to a given sample or the population at

large. On the other side of it, causal research uses quantitative processes including preplanned

as well as structured designs. Thereby, it is regarded as conclusive in nature just like

descriptive research. The distinct aspect of causal research is its attempt to explain the cause-

effect relationship between two or more variables (Saunders et al, 2007).

In applying to the study, it would be recalled that in building the variables mind-map

bookkeepng was termed as the independent variable while financial management practices

being the dependent variable. Here, the researcher was keen to establish how bookkeeping

intervening variables impacted on the dependent variable. Later in chapter four this was

analysed in depth where it was seen that the researcher used inferential statistics to explain

the cause-effect relationship among the selected variables. The choice for settling for a causal

research was because the researcher felt there were still gaps in he literature review in

exlaining whether bookkeeping causes the different situations occuring in effective financal

management of SMEs. The descriptive research would not be successful in establshing the

relationship between two given variables (Lee and Lings, 2008). Among the inferential

statistics applied included multiple regressions (OLS Square), Anova, and Bivariate analysis

i.e. Pearsman Product Moment Correlations, cross-tabulations and Chi-squares for categorical

variables.

3.4 Time Horizons, Validity and Reliability

In terms of time horizons the present study relied on a one-time interaction with the

participants. It means the survey quesionnaire was cordinated to the target sample and only at

that time the researcher interacted with the respondents. However, there was no need for long

follow ups and so on. In regard to validity the researcher relied on quantitative parameters

such as factor analysis where the questionnaire was tested in the SPSS version 21 and each

item expected to score a value of 0.4. This was the required score to declare the questionnaire

items used for the data collection as being valid. For reliability, the same questionnaire was

run through the SPSS and checked using Cronbach’s Alpha score of 0.7; this was the

threshold for determining reliability.

30

See chapter four for the outcomes on Cronbach’s Alpha estimate and Factor Analysis.

Moreover, due to the use of inferetial statistics in causal research, it was important to ensure

internal validity (Saunders et al, 2007). For instance, in the present dissertation the major way

to have ensured internal valdiity was to prove using statistical models that there existed a

cause-effect relatonship between the variable for bookkeeping and financial management.

Therefore, the researcher was keen to check incidences of spurious relationships throughout

the statisical analysis e.g.e the researcher checked whether the regression outputs consisted of

a spurious regression et cetera.

3.5 Sampling, Data collection and Data analysis

The sampling process was probabilistic. In probability sampling such involves

techniques where there is a lot more to do with the random processes of the researcher and

not merely purposive selection (Bazeley, 2004). In such a sampling criteria the individuals

selected or the study population do stand an equal chance of being handpicked. The reason is

because the researcher was flexible to pick from any of the existing resturants in Thailand.

Actually, the survey invitation consisted of a random emailing to the respective restaurants in

Thailand.

Moving on is that data collection was administered using closed-ended questionnaires

which were set in the SurveyMonkey platform and cordinated to the target sample. Then the

researcher invited the sample group to log in to the system and fill out the questionnaire. It

was easy to do so because majority of the respondents have access to computers and internet

so login into the SurveyMonkey online system was not going to be a problem. Once the

survey closed the researcher exported the results to the Minitab and SPSS so as to build both

descriptive and inferential statistics. It is worth noting that the closed ended questionnaire

was designed and part of it used Likert scale “To a very large extent” and “To a very low

extent”where the participants could tick on any issue depending on what they felt about the

matter in question. In the appendix the full details of the questionnaire were presented. The

number of targeted restaurants surveyed in Thailand were 99 in total. The way to calculate

the sample used Slovin’s formula as shown below (Cited in Kabui, 2016).

The parameters in the formula are:

n = No. of samples

N = Total Population

31

e = error margin/margin of error

N was the parameter for the population which was developed from a previous report

by on Thailand’s restaurant sector consisting of the SMEs. The Office of National Economic

and Social Development Board indicate that by November 2013 there were 8,450 restaurants

registered with the Ministry of Commerce (Sirikeratikul, 2014). Thus, N was 8,450 and the

error margin approximated at 0.1 which means a 90% confidence interval. By inputing these

parameters the sample total was 99. The reason why the researcher settled for a lower

confidence interval was because a 95% or 99% would have required a sample total of 382

and 4,580 respectively which would not have been achievable due to the limited time for

completing the data collection.

In the case of data reportng and analysis the researcher relied on the decision rule. It is

simply the guideline the researcher uses to reject or accept a null hypothesis (Hartley, 2004).

In this dissertation, the principle was that for a null hypothesis to have been accepted then it

must have yielded a p value result not exceeding 0.05. This is to say a confidence level of

95% was sought in all statistical outcomes for hypotheses testing. Therefore, any value

beyond 0.05 was to be a basis for rejecting the null hypothesis or to confirm an alternate

hypothesis. In the literature review section, the main null and alternate hypotheses were

documented.

3.6 Ethical Issues

In general, the main ethical issues the researcher sought to ensure are as summarised

below.

Table 3.2: Ethical issues and deliverables

Ethical issue Deliverable

Participant confidentiality All data and information of the participants

was not disclosed to any one; only the

university and the supervisor in particular

would have access to the data on grounds of

authenticating the dissertation and its

findings

Anonymity of respondents The sample was requested in earnest not to

disclose the name of the organisation or their

personal names

Right to withdraw from research Through the information sheet and consent

32

form the respondents were informed of their

right to withdraw from the researcher without

even asking for permission prior or ad hoc

33

4.0 CHAPTER FOUR: DATA ANALYSIS

In this part of the dissertation, the data analysis for the questionnaire was

administered. The main key findings were elaborated so as to re-address the objectives of the

study. In recall the objectives of the research read as follows:

a) To analyse the types of book-keeping systems in Thai restaurants

b) To evaluate the supported relationship between book-keeping and financial


c) To assess the contribution of bookkeeping to achieve sound financial management in

Thai Restaurants

d) To recommend strategies in bookkeeping to facilitate effective financial management

in Thai Restaurants

Thus, the questionnaire was analysed in a manner which addressed each of the

objectives. On the other hand, the hypotheses were equally tested using the data from the

questionnaire so as to confirm or reject existing propositions; the tests were important

because they were used to envision management policies in accounting that could be adopted

in Thai Restaurants; this way enable bookkeeping practices have the impetus to enhance

sound financial management.

The first part of the data analysis was to confirm that the questionnaire items and the

data variations in them were reliable. In chapter three, it had been said that Cronbach’s Alpha

was used to test reliability of the data used to develop primary research; the threshold needed

to be over 0.7. See exhibit 4.1 below for the test results generated using SPSS program.

Exhibit 4.1: Reliability test using Cronbach’s Alpha

Case Processing Summary

N %

Cases

Valid 99 100.0

Excludeda 0 .0

Total 99 100.0

a. Listwise deletion based on all variables in

the procedure.

Reliability Statistics

Cronbach's

Alpha

N of Items

.991 27

In the data results above, it can be seen from the case processing summary that the

valid data was 99 and this is equivalent to the targeted sample. Thus, there was no missing

data; not even exclusion of data. The reliability statistics depicted that in the 27 items used in

the questionnaire, all of them were reliable given the Cronbach’s Alpha of .991. In that case,

34

it meant the questionnaire was reliable to address the objectives of the study. The next

concern was to present the descriptive statistics on general information of the participants.

Recall, the sample respondents were those owning or managing SMEs restaurants in

Thailand; or having influential management roles in the same enterprises.

4.2: Descriptive statistics on general information of the respondents

The main descriptive statistics captured included: mean, mode, median and standard

deviation. The reason is because they give a descriptive analysis of the central tendency and

dispersion rates among the general information. See exhibit 4.2 below.

Exhibit 4.2: Descriptive statistics on general information N for

Variable N N* Mean StDev Median Mode Mode

How long have you been i 99 0 2.2020 0.8079 2.0000 3 44

Please how do you rate y 99 0 1.5657 0.4982 2.0000 2 56

How frequent do you use 99 0 2.586 1.407 2.000 1 29

Do you do bookkeeping by 99 0 1.8081 0.3958 2.0000 2 80

In your business who doe 99 0 2.3838 0.8170 3.0000 3 59

The data has been generated using Minitab and the main parameters presented; for

instance, it shows that when the participants were asked how long they had been in the

restaurant industry, a mean of 2.2020 represented that they had taken a period of 3-4 years.

The same trend can be shown using a graphical trend below. The standard deviation was

0.8079 meaning there was no variations in the feedback that 3-4 years was the average period

the respondents said to have been in the restaurant. In figure 4.1 though there is indication

that a higher count was evident in the code 3 which in the questionnaire represented age

category of +5 years and this can be explained also by the mode at 3 meaning this was the

most repeated situation.

35

Figure 4.1: Frequency distribution over the period in the restaurant industry

321

50

40

30

20

1 0

0

Co

un

t

How long have you been in the restaurant industry?

In the second survey for general information, the participants were asked to categorise

their enterprise as either a small enterprise or a medium enterprise. Here, the mean score is

seen to be 1.5657 which in the questionnaire would represent code 2 or “a medium

enterprise”. Therefore, on average it can be assumed that the participants worked or managed

or owned medium enterprises. The mode is at 2 also depicting that the highest repeated

response was on this. See figure 4.2 below for a visual illustration.

Figure 4.2: Frequency distribution over the category of the enterprise

21

60

50

40

30

20

1 0

0

Enterprise Category: 1 = Small 2= Medium

Co

un

t

Please how do you rate your restaurant business capacity?

The third general information referred to the frequency with which the participants

used bookkeeping in their enterprises. This was an important survey because it tied to the

research question number one where the extent of the use of bookkeeping was sought.

36

Precisely, this survey can be used to determine whether the use of bookkeeping is higher or

lower so far among Thai restaurants. The mean was 2.586 which meant on average the

respondents rated it as “somewhat often” in terms of the frequency for the use of formal

bookkeeping. And actually when one looks at the modal score it was 1.000 and in the

questionnaire the code represented the response for very often; again depicting that use of

formal bookkeeping has been fairly practiced among Thai Restaurants. In that case, if the

researcher were to respond to the research question 1 it would be said that indeed Thai

Restaurants as reported by the owners and managers have been open to the use of

bookkeeping. The above trend can be said to have been a consistent feedback since the

standard deviation was 1.407. See figure 4.3 below.

Figure 4.3: Frequency distribution over the rate of use of formal bookkeeping

54321

30

25

20

1 5

1 0

5

0

1 .00 = Very Often 2.00 = Often 3.00 = Somewhat Often 4.00 = Rarely Often 5.00 = Neve

Co

un

t

How frequent do you use formal bookkeeping?

Moving on with the analysis for the general information, the participants were asked

who did bookkeeping for them; and whether it was themselves. In the results, it was seen that

the mean score was 1.8081 which in the questionnaire code represented the response for “no,

I have an Accountant”. It means, for the participants bookkeeping in their enterprise was

done by an accountant as compared to themselves, as owners or managers of the business.

See figure 4.4 below.

37


21

90

80

70

60

50

40

30

20

1 0

0

1 .00 = Yes 2.00 No, I have an Accountant

Co

un

t

Do you do bookkeeping by yourself?

In the graph above it can be seen that the highest frequency was “2” which means

“No, I have an Accountant”. In that case, the owners and managers of Thai Restaurants

preferred to have accounting professionals in their business to do bookkeeping on their

behalf. Actually this related with another survey which sought the same issue but in a

different way. See figure 4.5 below.


321

60

50

40

30

20

1 0

0

1 .00=Our full time accountant 2.00=Myself, as the business owner 3.00=A part-time consultant accountant

Co

un

t

In your business who does bookkeeping for you?

As can be seen from figure 4.5 above it is that “3” has highest distribution meaning

majority of the participants held that they had on board a part-time accountant that did

bookkeeping for them. Actually, data in figure 4.4 and 4.5 was not in great variance and this

38

can be proved using a test of difference namely two sample t-test where Minitab can use this

to tell if two samples between groups differ in their mean values. See the results in exhibit 4.3

below.

Exhibit 4.3: Test of difference on questionnaire item 4 and 5 using 2 sample t test

N Mean StDev SE Mean

Do you do bookkeeping by 99 1.808 0.396 0.040

In your business who doe 99 2.384 0.817 0.082

Difference = μ (Do you do bookkeeping by yourse) - μ (In your business who does

bookk)

Estimate for difference: -0.5758

95% CI for difference: (-0.7561, -0.3954)

T-Test of difference = 0 (vs ≠): T-Value = -6.31 P-Value = 0.000 DF = 141

Given the confidence interval of 95%, it was affirmed that since the P-Value was .000

then the alternate hypothesis had to be accepted. In such a test it is alleged as follows:

H0: The difference inherent in two population means amounts to the hypothesized difference

Ha: The difference inherent in two population means exceeds the hypothesized difference

Therefore, the significance was .000 meaning Ha has to remain and so questionnaire

feedback for 4 and 5 were not as hypothesized different from each other. Hence, they can be

used in this study interchangeably when addressing issues of bookkeeping implementation

across Thai Restaurants. They can also be treated as equal variables with same meaning in as

far as the “who” does bookkeeping is concerned.

Having presented the general information which captured main issues such as: length

of operation in the industry, enterprise capacity, frequency of use of bookkeeping, and the

executer of bookkeeping. The next step was to develop more analysis so as to address

objective 2 of the research.

4.3: Objective 2: Supported relationship between book-keeping and financial


In order to address this objective, the first attempt was to look at the feedback results

on bookkeeping and those of financial management. Here, the researcher sought to describe

the data using central tendency and dispersion trends. After that proceeded to develop

analytical evaluations on the relationships across each of these variables. Remember, earlier it

was indicated that the dependent variable was financial management and independent

variable was going to be bookkeeping practices in Thai Restaurants.

4.3.1 Description on bookkeeping practices in Thai Restaurants

The results are as shown below using descriptive statistics.

39

Exhibit 4.4: Descriptive statistics on data feedback on bookkeeping

N for


Do you do consistent boo 99 0 1.6364 0.9198 1.0000 1 66

What mode of bookkeeping 99 0 1.9293 0.7727 2.0000 2 40

What methods are current 99 0 2.0707 0.7035 2.0000 2 50

Which accounting transac 99 0 3.293 1.154 3.000 3 41

Does your business requi 99 0 1.5455 0.5005 2.0000 2 54

What specific tools are 99 0 2.404 1.039 2.000 2, 3 33

What is your key motivat 99 0 2.293 1.430 2.000 2 39

In order to see the details of the questionnaires fully see appendix B and items 6-12

were all talking about bookkeeping practices. Now, for questionnaire item 6 it can be seen

that when the respondents were asked about whether they did consistent bookkeeping in their

restaurants, the mean response was at 1.6364. and the mode being 1. Averagely, it could be

assumed that somehow the participants indicated there was no consistent bookkeeping in the

restaurant. On the contrary, a mode of 1 meant that majority of the participants believed they

had consistent bookkeeping practiced in their restaurant.

The second survey sought to analyse questionnaire item 7 which asked the

participants the mode of bookkeeping they preferred the most to use in their restaurants; in

the feedback results it was seen that the mean score stood at 1.9293 and the mode also at 2.

On this backdrop, the researcher had reasons to believe that double-entry system was widely

preferred among Thai Restaurants. Moving on, questionnaire item 8 related to the one above

as it sought to establish the methods of bookkeeping currently being practiced by Thai

Restaurants. The responses from the respondents indicated that with a mean of 2.0707,

computerised bookkeeping was on top as a bookkeeping facility. Actually, the same can be

backed using the modal response at 2 saying a higher frequency on the responses fell on

computerised bookkeeping.

Turning to questionnaire item 9, the scope was to establish the kind or type of

transactions the respondents recorded most in their books of accounts. Here, the mean score

was seen to be 3.293 which when compared to the questionnaire fell on “Sales”. It means on

average perception; sales were the major transaction going to the bookkeeping; the same can

be confirmed given the modal pattern at 3. In questionnaire item 11 the question paused was

on the type of specific accounting tools the respondents used to manage their bookkeeping. In

the feedback results, it could be seen that the mean score was 2.404. This was indication that

the average response fell on the use of “Quick Books, Exclusively” as the tool for

bookkeeping!

40

It meant, for the average participants’ quick books was exclusively used as the

specific tool to manage bookkeeping in Thai Restaurants. But then the mode for this response

was 3 meaning a higher count of the participants was for the idea that “Microsoft Excel,

exclusively” was the specific tool used to perform a greater part of the bookkeeping practices.

Here, the researcher felt it would have been good to understand what exactly or what form of

bookkeeping did the participants use the specific tools for? By limitation, this did not emerge

and was not investigated as it needed follow up interviews or focus groups with certain

respondents so as to establish exactly why they used Quick Books or Microsoft Excel Office.

Lastly, questionnaire item 12 paused the question which sought to establish the

motivation behind doing bookkeeping in the business. The mean for this response was 2.293

which fell on “monitor cash flow”; and the mode was at 2. For that reason, monitoring cash

flow was the main key motivation why the respondents did bookkeeping.

Overall, the researcher was interested to see if there were any high variations within the

responses for the bookkeeping; and whether there were significant mean differences. The

presence of significant mean differences between the groups was a way to judge whether

there were incidental relationships in each of the responses for bookkeeping across the board.

Thus, any relationship among them upon establishment of significant mean differences would

be said to exist and not as a result of mere chance. The results for equal variance tests are as

shown below using Minitab program; here, the researcher was keen on Levene’s value.

Exhibit 4.5: Test of Equal Variance for response results’ variations for bookkeeping practices

Individual confidence level = 98.3333%

Tests

Test

Method Statistic P-Value

Multiple comparisons — 0.793

Levene 2.69 0.003

With a confidence interval of 98% and a Levene significance of .003 it was purposed

that an equality of variance existed within the groups of data responses on bookkeeping. For

that matter, the responses from which different samples had been drawn had an equality in

their variances. Due to this, the researcher believed that the data trends for bookkeeping

captured using the responses from the respondents were statistically significantly different

from each other. Thus, a relationship within them was incidental. It was not that the response

trend for each of the answers given for the bookkeeping related to others by chance. With that

in mind, the researcher became more confident that establishing the relationship between

41

bookkeeping and financial management in this dissertation was not based on mere opinion

but actually there existed interlink in all the responses the participants shared through the

questionnaire.

4.3.2 Description on feedback results on financial management in Thai

Restaurants

In this part of the analysis, the focus was to build insights as to the general

trends of the data responses regarding financial management in Thai Restaurants.

In that case, central tendency and dispersion rates were used to achieve this end.

In the questionnaire this was represented by survey items 13-26. It was also a

major data pact since it represented the dependent variables of the study. See

exhibit 4.6 below of the results output.

Exhibit 4.6: Descriptive statistics on feedback results for financial management

N for


In this business, we end 99 0 2.687 1.242 2.000 2 49

We are always focused to 99 0 2.747 1.280 2.000 2 51

We are able to control o 99 0 2.808 1.243 2.000 2 36

We are capable of detect 99 0 3.222 1.165 3.000 3 27

Our procurement processe 99 0 2.525 1.452 2.000 1 39

We are able to channel a 99 0 2.3030 0.8743 2.0000 2 60

We efficiently manage ou 99 0 2.980 1.270 3.000 2 34



We efficiently prepare t 99 0 2.717 1.348 2.000 2 36

We are able to track any 99 0 1.919 1.226 1.000 1 50

We efficiently monitor o 99 0 2.970 1.366 3.000 2 29

We rarely experience low 99 0 2.364 1.241 2.000 2 45

We rarely fall into liqu 99 0 3.222 1.139 3.000 3 42

In the responses for the financial management, the participants were required to show

the extent to which the issues mentioned applied to them; this way analysing the sought goals

and objectives for undertaking financial management practices at the enterprise. To see

exactly how each survey item was framed the reader can refer to appendix B bearing the

questionnaire. In order to have made more meaning of each feedback the researcher

developed a schedule as shown in exhibit 4.7 below.

42

Exhibit 4.7: Summary on analysis of Exhibit 4.6

Financial Management Questionnaires Average Mean Average

Narrative

We endeavour to have a stable cash flow 2.687 Somewhat Extent

We are always focused to have a steady working capital 2.747 Somewhat Extent

We are able to control our cash budget weekly or monthly or yearly 2.808 Somewhat Extent

We are capable of detecting financial loss immediately 3.222 Somewhat Extent

Our procurement processes are controlled 2.525 Somewhat Extent

We are able to channel all cash into priorities in the business and save more at the

same time

2.303 Large Extent

We efficiently manage our everyday cash flow 2.98 Somewhat Extent

We efficiently manage our everyday working capital management 3.111 Somewhat Extent

We efficiently manage our everyday inventory activities 2.808 Somewhat Extent

We efficiently prepare tax returns without delay 2.717 Somewhat Extent

We are able to track any financial transaction without delay 1.919 Large Extent

We efficiently monitor our debtors and creditors 2.97 Somewhat Extent

We rarely experience low cash flows in the business 2.364 Large Extent

We rarely fall into liquidity crisis (insolvency) in our business 3.222 Somewhat Extent

The evident outlook as shown in exhibit 4.6 above is that there was no indication of a

super or higher financial management initiative and intended goals among the respondents. It

is in the sense that majority of them indicated to have perceptions towards financial

management at “Somewhat Extent” or “Large Extent”. However, it could still be said that a

lesser optimistic outlook emerged because the modal value for each response differed by

being slightly lower from the reported mean scores. In the questionnaire, what the researcher

sought was to understand the extent to which each of the issues applied to them in respect to

their financial management practices.

For instance, the modal values in exhibit 4.6 are largely at 2 and few instances having

1 and 3. In the coding process “2” was representing “Less Extent”. Based on the trends and

variations in the dataset, the researcher was sure that financial management practices among

Thai Restaurants needed more professionalism and focusing; hence this is what led to the

establishment of the relationship of bookkeeping in improving the situation and expectations

of the participants in lieu of financial management practices. The interrelatedness between

bookkeeping practices and financial management practices was performed using a linearity

analysis as shown next.

4.3.3 Relationship analysis using correlation matrix

The bivariate analysis between bookkeeping and financial management is as

shown below under exhibit 4.8.

43

Exhibit 4.8: Correlation analysis between bookkeeping and financial management

44

In a correlation analysis the emergent issue is the strength of association

between two or more variables (Lawner et al, 2008). In statistical analysis, the

metrics for the correlation coefficient has variations ranging from +1 to -1. Then,

where the coefficient falls around +1 then such is regarded as a situation for a

“perfect degree of association” within the variables (Khatree, 2008). So, on basis

of what had been established so far about bookkeeping and financial management

practices in Thai Restaurants, what comes to mind is the probable association

among them.

Clearly, all the coefficients as shown in exhibit 4.8 were above 0.7 meaning a

strong and positive association existed between the trends emergent on

bookkeeping practices and financial management practices in Thai Restaurants.

Basically, it could be inferred that the semi-optimistic outlook on financial

management practices in Thai Restaurants had positive association to the

outcomes such as lack of consistency in bookkeeping, use of double entry system

and computerised bookkeeping, or the use of Quick Books et cetera. To reiterate

is that all emergent issues on bookkeeping did show positive association to

financial management outcomes as perceived by the participants.

4.3.4 Relationship analysis by testing hypothesis

In this part, the researcher sought to look deeper into the main references so as

to test a few hypotheses; in the end establish relationship between aspects of

bookkeeping noted earlier and financial management. The hypotheses are

developed next. SPSS software was used to test all hypotheses.

H1: Mode of bookkeeping has significant relationship to efficient management of working

capital


ANOVAa

Model Sum of Squares df Mean Square F Sig.

1

Regression 156.796 1 156.796 524.794 .000b

Residual 28.981 97 .299

Total 185.778 98

a. Dependent Variable: We efficiently manage our everyday working capital management

b. Predictors: (Constant), What mode of bookkeeping do you prefer most in your restaurant

Now, given the p value for Anova at .000 it would be deemed that H1 must be

confirmed. However, this was in the context emergent whereby the mode of bookkeeping

was seen to be largely double-entry while efficient management of working capital was seen

to be wanting more enhancement. Therefore, the best way to put it is that hypothetically, the

45

somewhat extent efficient management of working capital among Thai Restaurants had

significant relationship to the wide use of double entry bookkeeping.

H2: Modes, methods, and tools for bookkeeping positively influence the ability to track any

financial transaction without delay

Table 4.2: Test of H2 Coefficientsa

Model Unstandardized Coefficients Standardized

Coefficients

t Sig.

B Std. Error Beta

1

(Constant) -.488 .174 -2.813 .006

What mode of bookkeeping

do you prefer most in your

restaurant

.610 .164 .384 3.716 .000

What methods are currently

in place for carrying out

bookkeeping in your

business

-.548 .199 -.315 -2.759 .007

What specific tools are you

currently using for your

bookkeeping

.984 .111 .834 8.852 .000

a. Dependent Variable: We are able to track any financial transaction without delay

It was seen that double-entry system (.000), computerised bookkeeping (.007), and

use of Quick-Books (.000) on average usage did show to positively influence the ability to

track any financial transaction without delay. More precisely, the latter case was said to be

“large extent” (See Exhibit 4.7) meaning such has been orchestrated by modes, methods, and

tools for bookkeeping used in Thai Restaurants. Therefore, H2 is confirmed!

H3: There is dependence between the key motivations of bookkeeping practices and major

setbacks often experienced in the business


Chi-Square Tests

Value df Asymp. Sig. (2-

sided)

Pearson Chi-Square 279.487a 20 .000

Likelihood Ratio 214.799 20 .000

Linear-by-Linear

Association 74.810 1 .000

N of Valid Cases 99

a. 23 cells (76.7%) have expected count less than 5. The minimum

expected count is .12.

A Chi-Square test was used to validate H3 because both the variables were categorical

in nature. The Pearson Chi-Square was .000 meaning H3 could not be rejected! To be

precise, was that by recall monitoring of cash flow was emergent as the average motivation

46

hence did associate positively with the response for inadequate cashflow as the major setback

experience among Thai Restaurant operators. Better still; there was dependence between

motivation to do bookkeeping to monitor cash flow and affirmation of inadequate cashflow

as a major financial setback.

47

5.0 CHAPTER FIVE: CONCLUSION

Overall, the present dissertation has described and explained the degree to which

bookkeeping influences the realisation of sound financial management among Thai

Restaurants. Given the quantitative nature of the study, the findings can be generalised to

other sectors of business and rely on its assertions to articulate on the effects of bookkeeping

on financial management of firms. At the end of the literature review, the researcher

developed a model which indicated that facets of bookkeeping such as tools, methods and

modes should symbiotically support the course of bookkeeping. Due to the complexity of the

model not everything was addressed and only a few aspects of bookkeeping were tested

against financial management effectiveness. In future the researcher proposes that the

establishments of this dissertation be relooked into again and there be more exploration of the

effects of bookkeeping on financial management effectiveness.

In light of the findings in the dissertation, it was seen that across Thai Restaurants

there is adequate evidence that bookkeeping is not scarcely practiced. Actually, in one way or

another the managers and owners of the enterprises indicated that their businesses are doing

bookkeeping either manually or electronically. The other indication was that for the average

Thai Restaurants, bookkeeping is done by accountants either on full time or part-time basis.

But then the present study failed to indicate how such has impacted on the effective financial

management of Thai Restaurants; hence, in future research it would be worthwhile to discuss

more with illustrations whether accounting role in bookkeeping enhances sound financial

management of firms. In principle, the accountant is the executor of bookkeeping because it

has to be a rationally guided process; in that case, they should assist managers and owners of

Thai Restaurants to benefit from the bookkeeping and in the end achieve overall effective

financial management.

Moving on, the primary findings brought the supported relationship between

bookkeeping and financial management in Thai Restaurants. In the assertions made under

financial management practices, it was purported that there could be still a lot to be desired.

In other words, the researcher felt that there were not much optimisms among the respondents

that they had achieved effectiveness in financial management. And most importantly, the

investigation was more towards the how bookkeeping might have been a reason for the

beliefs and perceptions expressed by the respondents. The wide ranging relationship was

measured using a correlation matrix which was presented in exhibit 4.8 in chapter four; in

this correlation matrix it was apparent that there was high linear relationship indicating that

48

the outcomes of bookkeeping could not be ignored in the gains or sluggishness emanating

from financial management practices. It means the owners and managers of Thai Restaurants

must endeavour to have best strategies for bookkeeping to be able to effectiveness in their

financial management. Probably, it would be appropriate to invite experts in bookkeeping to

train the accounting professionals on modern transactions controls and monitoring and the

manner in which to consciously achieve sound financial management. The key thing to be

remember is that this very dissertation established that bookkeeping has linear relationship to

financial management hence being a vital function of a business.

All in all, the dissertation was highly quantitative and its results were based on the

numerical connection of data; it would be worthwhile next future research on the same to

explore the key variables of the work and qualitatively determine how financial management

can be absorbed in bookkeeping; in the end make the latter a real enhancer of sound financial

management. It should be automatic that by virtue of doing spontaneous bookkeeping a

business achieves sound financial management. In the future as well, there should be

conscious and deliberate rechannelling of the tools., methods, models and types of

bookkeeping towards doing only those practices that will enhance financial management of

firms. In fact, the researcher proposes that the accounting regulation should not only ask

companies to state the reporting framework for making financial statements; but also include

bookkeeping because actually this is at the core of everything else. It is through bookkeeping

that a company is able to delve into other financial evaluations. Therefore, if bookkeeping is

not done properly, then there would be other accounting hiccups and errors.

49

6.0 CHAPTER SIX: RECOMMENDATIONS

The recommendations in the present research include the following:

i. On a regulatory level, there should be provisions requiring auditing of bookkeeping

processes as a way to enhance business sustainability. The same could call for the

justification of guided bookkeeping processes to see to it that best practices are the

order of the day in SMEs. In the end achieve better financial management strategies

that equally enhance shareholder value and overall profitability.

ii. An examination of the various tools used in bookkeeping would be an added value to

the findings of the present research; then each should be assessed in how it contributes

to sound financial management of firms especially monitoring and evaluation. This is

because such will save many SMEs energy and resources to investing in tools of

bookkeeping that do not have value to the business neither to sound financial

management.

iii. On basis of the hypotheses tested in this dissertation, it would be good to for the

management to ensure there is symbiotic relationship among tools, modes and

methods of bookkeeping; this is because such combined effect to financial

management makes it much beneficial to the enterprise. Therefore, Thai Restaurants,

for instance, should assess how they can re-align their entire bookkeeping protocols to

ensure they move in one direction in terms of safeguarding a better framework for

financial management.

50

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53

APPENDIX

APPENDIX I: ETHICS CONSENT FORM

54

55

56

APPENDIX II: QUESTIONNAIRE

RESEARCH QUESTIONNAIRE

This is a questionnaire sent to you so that you may help me complete my Bachelor’s Degree

that I am currently undertaking in Cardiff Metropolitan University. I am glad and thankful for

your assistance. You can withdraw from the research if you may and any information

disclosed by you shall remain private and confidential.

SECTION A: DEMOGRAPHIC CHARACTERISTICS OF PARTICIPANTS

Q1. How long have you been in the restaurant industry?

1-2 years (24)

3-4 years (31)

+5 years

Q2. Please how do you rate your restaurant business capacity?

A small enterprise (43)

A medium enterprise

Q3. How frequent do you use formal bookkeeping?

Very often (29)

Often (26)

Somewhat often (13)

Rarely often

I do not do it at all

Q4. Do you do bookkeeping by yourself?

Yes (19)

No, I have an accountant

Q5. In your business who does bookkeeping for you?

Our full time accountant (21)

Myself, as the business owner (19)

A part-time consultant accountant

57

SECTION B: QUESTIONS ON BOOKKEEPING

Q6. Do you do consistent bookkeeping in your restaurant?

Yes (66)

No

Never heard of one

Q7. What mode of bookkeeping do you prefer most in your restaurant?

Single Entry System (33)

Double-Entry System (40)

None of the above

Q8. What methods are currently in place for carrying out bookkeeping in your business?

Manual Bookkeeping (21)

Computerised Bookkeeping (50)

None of the above

Q9. Which accounting transactions do you record most in your books?

Cash Receipts and Disbursement (9)

Purchases (10)

Sales (41)

All the Above

None the Above

Q10. Does your business require to pay taxes?

Yes (45)

Not at All

Q11. What specific tools are you currently using for your bookkeeping?

Ledger books, Exclusively (21)

Quick Books, Exclusively (33)

Microsoft Excel, Exclusively (29)

All of the Above

None of the Above

Q12. What is your key motivation to carry out bookkeeping in your business?

Track profits and Losses (33)

Monitor Cash Flows (39)

Future capital sourcing i.e. bank loans

Inventory Management

Keep track of debtors and creditors (10)

Monitor demand trends of Products

58

SECTION B: QUESTIONS ON FINANCIAL MANAGEMENT

Please tick in the box provided accordingly on the extent to which the issues stated apply to

you in as far as your financial management practices are concerned

Very Large Extent 5

Large Extent 4

Somewhat Extent 3

Less Extent 2

Very Less Extent 1

1 2 3 4 5

13 In this business, we endeavour to have stable cash flow 49

14 We are always focused to have a steady working capital 51

15 We are able to control our cash budget weekly or monthly or yearly 36

16 We are capable of detecting financial loss immediately 5 29

17 Our procurement processes are controlled 3

9

11

18 We are able to channel all cash into priorities in the business and save more at the same

time

1

1

40

19 We efficiently manage our everyday cash flow 9 43

20 We efficiently manage our everyday working capital management 1

1

40

21 We efficiently manage our everyday inventory activities 1

2

47

22 We efficiently prepare tax returns without delay 1

9

36

23 We are able to track any financial transaction without delay 5

0

27

24 We efficiently monitor our debtors and creditors 1

4

29

25 We rarely experience low cash flows in the business 2

4

45

26 We rarely fall into liquidity crisis (insolvency) in our business 6 18

27. Which major setbacks do you often experience in your business?

Liquidity crisis (14)

Lack of Capital (19)

Inadequate cash flow (45)

Bad debts

None the Above

All of the Above

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