Small firms play vital roles in the process of industrialization, sustainable economic growth encouragement of entrepreneurship. Employment generation reduction of poverty and contribution to the Gross Domestic Products (GAP) of many countries and Nigeria is not an exception. They perform such vital roles through Innovation and the production of various goods and services which empower the process of economic development. For small firms to carry out such important tasks, they need credit facilities in terms of short and long-term loans. The process of sourcing such funds as well as the effective utilization and efficient management of the funds constitute major challenges for the accountants of Seems.

The challenges require the involvement of well trained/professional accountants which Seems lack the resources to attract. Therefore, role of the accountants in Seems is often broader than the conventional definition of the accounting function. Apart from the basic accounting functions of providing the accounting information, auditing, tax matters, the Seems accountant is responsible for providing general leadership in all aspects of financial decision making like working capital management, budgeting and financial planning.

It has been noted by researchers that the failure to effectively discharge these broad financial management functions have contributed largely to global financial crisis (so;stoma, 2010). Similarly careless or poor financial management practice has been Identified as one of the reasons for small business failures (McMahon and Holmes, 1991; Ferryman, ton between successful and failed small businesses lie in their approach to the generation and utilization of accounting information.

Over the years, there has been a significant increase in government efforts to promote the financing of businesses by initiating policies which help small and medium scale businesses to source funds for business operations. Nigerian banks can access alienable funds from government ND international financing institutions like the World Bank which uses the Central Bank of Nigeria (CB) as the arrow head for on-lending to small businesses (Uttering, 2012; Larcenous, 2003; Anyway, 2002).

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In spite of the various sources of fund made available to them, accessibility to both short-term and long-term credits from banks has not been easy for Seems because of the poor risk perception which fund providers have of small firms. The poor risk perception can be reduced if quantitative and qualitative financial information details of firms can be ascertained, adequate collateral provided and effective banking relationships established (Okapi, & Nebulae, 2010).

Qualitative and quantitative financial details provide required information about the quality of a firm in terms of size, profitability and leverage levels Nerve & Mistaken (2010); as well as asset base and sales volume (Okapi, 2007). Researchers argue that firms that excel in such variables enjoy easier access to credit at lower interest rate and lower collateral requirements Okapi (2007); Cole & Woolen, 1995; New & Banks, (1995).

Fund providers could be reluctant to provide loans even if they are available, here there is absence or incomplete financial information to convince the lender of the financial position of the firm. Therefore, the emerging tasks of the accountant in small firms is not only to provide routine accounting services, but to assist the firms in accessing adequate finances at affordable cost, and to awake the consciousness of the owner manager to the need to adopt proper financial management practices to enhance the growth and profitability of a firm. The tasks could be summarized under the four headings including: I.

To ascertain the funding requirements of the firms as well as affordable mix of funds squired by the firm. It. To ascertain if the fund needed is available in a definite financial institution at affordable cost. Iii. To communicate financial information details to fund providers as required in order to reducing risk perception of fund providers of small firms. ‘v. To ensure that funds are managed properly by applying proper financial management techniques in vital areas as investment decisions, capital budgeting, and working capital management.

The objective of this paper is therefore, to identify and highlight trends in financial management practices of small rims, which will assist the accountants in Nigeria in understanding the financial environment in which small firms operate and their required contributions in carrying out financial management functions. THEORETICAL AND EMPIRICAL BACKGROUND It is a fact that the basic theory of business finance that the operating characteristics such as availability of capital, type of business, ownership structure can affect the sources and amount of capital requirement (Keen, 2001).

Firm characteristic also affect operating performance, which in turn affects accessibility to funds ((safer, 2012). Experience has also shows that a firm ‘s search for capital starts with the identification of the nature and mix of the operational and capital needs of the firm relative to the investment preferences of capital funds providers (Taste, & Anyway, 2005). According to Keen (2001), the key considerations of fund providers include the type of the firm to be financed, tenor of the financing, expected return on the investment, growth potentials of the firm and its risk management track record.

Banks extend credit facilities to businesses ranging from short-term overdraft facilities to medium and long-term loans and advances. But whatsoever the type, access to bank facilities depends on ability to provide adequate quantitative and qualitative financial information about the past and current operations as well as a well articulated future plans of the business to support loan requests (Mumble, 2002). The services of an accountant are therefore required to package loan proposals whether such services are rendered on full time or part timed basis.

So many empirical studies which had been carried out on financial management practices of small businesses in developed countries, have thrown up two important ices of information namely that the quality of management accounting information utilized within a small business organization has a positive relationship with the entity’s performance; and that significant efforts and progress have been made in encouraging SEEM owner-managers to install and apply accounting information systems (McMahon and Holmes, 1991).

The availability of affordable computer software has played an important role in improving the accounting information systems of Seems. Many operational accounting functions of Seems like payroll accounting, preparation of accounts receivables and payable, general ledger, sales analysis and inventory are now computer aided. The availability of computerized accounting systems has not only improved the standard of financial reporting in small businesses but has also shortened the time required by firms to produce summary information in the form of balance sheets, income statements, funds statements, bank reconciliation and operating summaries.

However, the actual application of financial reports by owner-managers is hampered by the inability of a majority of them to correctly interpret such reports and utilize them in managerial decision making. Recent and old financial management literatures targeted on small enterprise owner- managers emphasize the importance of developing skills in reading and interpreting financial statements to monitor the financial health and progress of firms (Cole, and Woolen, 1995; Constant and Martin, 1982; McMahon, 1986; Meredith, 1986; Walker and Petty, 1986; Barrow, 1988).

Benefits of the use of quality financial statements of cost of a firm on a frequent or regular basis as well as help to maintain up-to-date figures on contribution to profit of individual products or product lines (McMahon and Davies, 1994). It can also help in comparing a firm’s performance with industry figures. Effective use of financial ratio analysis in managerial evaluation, planning and decision making can increase business profitability, growth and survival (McMahon and Holmes, 1991).

Another aspect of financial management practice which creates problems for small firms is working capital management. Working capital is necessary for carrying out the day-to-day operations of a firm. It is defined as current assets less current liabilities, which involves the maintenance of proper balance in the management of cash, debtors, stock and creditors. Cash management quenches, includes formal methods like fixed percentage of sales, purchases, or expenses as well as naive practices for detecting aging overdue accounts and enforcing the application of credit checking systems.

It can be viewed that very few firms apply quantitative techniques such as “economic order quantity’ in optimizing inventory levels and many businesses rely on accounting systems which do not provide information on inventory turnover, reorder level, ordering costs and carrying costs. The practice of Financial Management in Nigeria In Nigeria, most owner-managers in Nigeria perceive their businesses as their private affairs and therefore do not accept any responsibility to be accountable to any one or to be transparent in their operations.

Such a mind set is counterproductive and ill conceived because most of such businesses depend on funds sourced from public institutions. Some of them even feel that the services of qualified accountants can be dispensed with. They don ‘t know that the accountants Job entails much more than the keeping of accounting records. The task of an accountant starts with the designing of accounting systems suited to the needs and peculiarities of the particular business.

Thereafter, the accountant ‘s task stretches to the capturing of business transactions, in proper and relevant books of accounts. The follow-up Jobs which are more fundamental to the survival and performance of the business include financial decision making involving financing decisions, working capital management, budgeting processes and planning. Due to the low level of accounting expertise available to small businesses key components of these accounting responsibilities are completely ignored, down played or improperly discharged in the organizations.

Discussion It can be deduced therefore that the application of financial management techniques remains inadequate in most of the small firms in Nigeria. Many owner managers of small firms believe that the methods of financial management and capital budgeting practices that apply in developed countries would not work well in this country because the economic and social environments of developed countries are substantially different from that of Nigeria. Financial management techniques and therefore cannot apply them in financing and capital budgeting decisions.

Important decisions like the purchase of equipment or expansion of facilities are based more on intuition, instinct and past experience than on scientific evaluation. In most situations, the issue of survival is often the top priority concern of the small businesses. Long-term strategic approaches to financing and capital expenditure decisions are hardly contemplated. The short-term approach makes them to finance capital projects using loans from friends and families, or short term bank loans with the high interest rate.

Small businesses have very much limited internal (in house) capacity to handle the key accounting and financial management functions. Their counterpart in plopped countries could experience similar staff limitations but can easily outsource the services to part-time consultants in large small business consulting services markets which exist in advanced economies Overall, the discharge of accounting and financial management functions in small businesses in Nigeria is very much limited.

It concentrates on the generation of basic financial operational data without providing the follow-up analysis to guide financing and investment decisions. This serious limitation impacts negatively on the performance of the firms and account for the high incidence of slow growth and high failure rate among the rims. CONCLUSION The importance of financial information cannot be overemphasized. Firms face increasing pressure from banks and other fund providers as well as economy regulators to provide all sorts of financial information about their operations.

A number of factors inhibit the preparation and presentation of financial information by small businesses. Such factors include lack of qualified staff and the inability of owner managers to appreciate the right of stakeholders to have access to such information. Again many firms find it expensive to maintain the services of qualified accountants to provide such information. Some other firms are apprehensive that divulging much accounting information about their operations would expose them to higher tax liabilities.

Evidence available in this study suggests that the state of accounting and financial management practice remains inadequate among small businesses in Nigeria. This raises doubts about the effectiveness of the growing number of well educated and professionally qualified accountants that are turned out yearly by institutions of higher learning in Nigeria. It also calls to question the enormous resources channeled into programmer for small business empowerment by governments in Nigeria.

RECOMMENDATION Considering the enormous important of financial management to small business should recognize the fact that no business enterprise, irrespective of its size and field of operations, can survive and perform optimally if its’ accounting and financial management functions are not handled by competent and capable hands. 2. Competent and qualified staff can be hired and retained in-house for that purpose. Where it is not feasible to secure and retain full time staff of the right caliber, then the services could be out-sourced to qualified small business consulting firms to provide them on part-time basis. 3.

Good accounting record should be maintained by the firm to ensure that all financial transaction is tracked down to avoid leakage in financial transaction. 4. Cash should not be used as gauge for performance, but the financial report should be used rather to gauge performance. Most firms only run on cash basis. They only monitor their cash position without taken cognizance of their debt position. 5. The government should make laws that would guide the debt recovery and credit payment system within Nigeria. The current system where your ability to recover debt depends on your firms aggressiveness and boldness left much o be desired.


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