Abstract
This study examines the accounting practices and the challenges of microbusinesses employing fewer than 10 people. While several studies have been conducted in other parts of the world, the focus on micro-businesses’ accounting practices and their unique challenges remains largely unexplored in the Scottish context. Micro enterprises play a vital role in the Scottish economy, yet limited research has specifically focused on how these businesses manage their accounting practices.To gather data for this qualitative study, a total of 20 face-to-face interviews were conducted with micro-business owners in Scotland. Purposeful sampling and referral (opportunistic approach) were used to recruit participants. The interviews were transcribed and analysed using a thematic approach. The process of identifying themes was informed by both the literature and fieldwork through a cyclical research process, where the researchers moved back and forward between the literature review and the empirical data.
The findings reveal that most microbusinesses use single-entry bookkeeping and cash basis accounting. The knowledge of owners and time constraints emerged as key challenges for maintaining proper record keeping. In some cases, the calculation of profit and loss does not reflect the actual financial position of the business. The study also found that the cost, time and perceived complication of using an Accounting Information System (AIS) are the main barriers to its adoption among micro-businesses.
The insights gained from this study provide a clearer understanding of micro-businesses’ accounting practices and the challenges they face. The findings can be useful for government and non-government agencies in designing training programmes to improve accounting knowledge and record keeping among micro-business owners. Organisations such as local councils, Business Gateway, the Federation of Small Businesses in Scotland and government bodies can use this information to introduce support schemes aimed at improving accounting practices in micro-businesses. In addition, professional accounting bodies such as ACCA, ICAEW and ICAS, as well as educational institutions, can gain a deeper understanding of how micro-businesses practise accounting and use this knowledge to train future accountants to better support these businesses.
Finally, this study highlights that micro-businesses are often treated as part of SMEs in existing research, despite their distinct characteristics. Therefore, it is recommended that micro-businesses should be considered separately in future research in order to better understand their specific accounting practices and challenges.