Financial information and the management of small private companies

Jill Collis

164 citations0/0 files storedJournal of Small Business and Enterprise Development

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Accounting and Organizational Management Financial Literacy and Behavior Business, Education, Mathematics Research

Abstract

This research is drawn from a survey of 385 private limited companies in the UK that fall within the 1999 EU size thresholds for a small company. Examines the use of financial information in small companies, as financial management is critical to their success and survival. The purpose of the research was to identify the sources and utility of financial information used and the results show that the majority of small companies adopt practices that include formal methods of planning and control. There is a strong emphasis on controlling cash and monitoring performance in the context of maintaining relationships with the bank. The most widely used and most useful sources of financial information are the monthly/quarterly management accounts and cash flow information in various forms. Multivariate analysis reveals that the utility of the periodic management accounts is contingent upon the size of the business and the receipt of management advice from the auditor/accountant. The findings of this research have important managerial implications for the directors and their advisers.

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References

1976Theory of the firm: Managerial behavior, agency costs and ownership structure 1970Determining Sample Size for Research Activities 1985Positive Accounting Theory 1995Understanding the small business sector 1987Relevance Lost: The Rise and Fall of Management Accounting 1968Dimensions of Organization Structure 1997Reflections on a contingent view of accounting 1997Business Research

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