Computerized Accounting System Adoption and Financial Performance of Selected Small and Medium Enterprises in Makindye Division of Kampala Uganda

ABSTRACT This study was an attempt to establish the relationship between computerized accounting system and small and medium enterprises financial performance in Kampala, where computerized accounting system was the independent variable and small and medium enterprises financial performance was the dependent variable. The study was guided by the following objectives; (i) to determine the profile of respondents (ii) to determine the level of computerized accounting system adoption among small and medium enterprises in Kampala (iii) to determine the level of financial performance among small and medium enterprises in Kampala (iv) to establish whether computerized accounting system is significantly correlated with small and medium enterprises financial performance. The study followed a descriptive correlation design. The sample under study comprised of 140 purposively selected small and medium enterprises obtained from Uganda Revenue Authority website. The parameters used to select the respondents were (i) number of employees employed by SME ranging from 1 to 100 (ii) those who are using computers in their operations (iii) based on the researcher’s judgment and observations. The findings of the study revealed that there was a positive significant relationship between computerized accounting system adoption and small and medium enterprises financial performance. The study also revealed that the majority of small and medium enterprises in Kampala were owned by Ugandan men graduates of less than 30 years operating as sole traders with a business life span of 3-5 years. Majority of them used computers and maintained financial records without the help of skilled staff. Poor working capital management and low leverage issues were reported; further these businesses had no plans of listing on the stock exchange in future. The study recommended that the government and its agencies should encourage more women to join this sector by organizing women-oriented workshops and necessary skills training to equip them appropriately. The government should further reduce on the formation costs and procedure of initiating other forms of businesses so as to encourage partnerships, limited liability, franchises etc. Granting of subsidies and waiver of taxes should be considered by the state to encourage small businesses to adopt such a system so as to boost their competitiveness. Debt financing should be considered as a source of finance among small businesses as well as plans to list in the stock market in future, since these two can significantly increase their capital base. x