Relationship between Accounting Outsource Drivers and Financial Performance of small and Medium Enterprise in Nigeria

Abstract

The focus of this study was accounting function as a member of support activities of the organization which its undisturbed implementation within (in-house) or outside (outsource) the organization must be achieved at an appropriate level of quality and cost. This leads to the issue of boundary decision that simply connotes that the chosen location for the production of a product or service should positively support the profit-maximization motive of the organization. The target population of the study are the SMEs in three Geo-political zones of Southern part of Nigeria consisting of 5,907 SMEs. The sampling technique adopted was a two-stage sampling technique applied chronologically as follows: stratified and simple random sampling techniques which produced an observation of 411 used for the study. Both primary and secondary data options were explored with the main aim of making sufficient data available for the study. Structured Questionnaires were used to collect primary data from the respondent organisations and the secondary data was obtained from the Annual Financial Reports of the respondent organisations for the 5-year period covering 2008 to 2012. Structural Equation Modelling (SEM) was employed to analyse the data by using both the SPSS 23 and Smart PLS packages. The findings of the study show that there was significant relationship between accounting outsource drivers and the financial performance of SMEs in Nigeria as substantiated with the p-value of less than 0.05 recorded by each construct of the Independent variable (Accounting Outsource Drivers). Also, the study reveals that both firms size and firms age have no significant moderating effect on the accounting outsource drivers and the financial performance of SMEs in Nigeria as their actual individual p-value is greater than 0.05 level. One of the major recommendations of the study is that accounting outsource bridges the internal knowledge gap and creates avenue for the organizations to enjoy capability complementarity which is given as a situation in .which specialized capabilities obtained from outside enhance the value creation potential of a focal firms own capability endowments. Thus, where complementarities exist, the integration of internal and external capabilities enhances the potential financial performance firms realize.