Improved financial management training for small-scale industry – the Key Issue Process

Tim Rudkins

Most proponents of a strong small-scale enterprise (SSE) sector assert that SSE continues to suffer from a lack of proper financial management. However, the crux of the problem lies not with the SSE but in the training efforts in this sector. It is rooted in the inability of advisers
to distinguish between the goal they have established (better financial management) and the methods they have chosen to achieve this goal (financial accounting). In the minds of many advisers and trainers, financial management is synonymous with financial accounting; or they are so intimately
linked that the former is impossible without the latter. These misconceptions are held by experts and beginners alike, so much so, that many studies casually refer to a problem in one (lack of capital, poor cost control) as the logical outcome of the other (poor record-keeping) (Institute
for Small-Scale Industries, 1983, p. 19).The implementation of an accounting system for any enterprise requires an analysis and assessment of the organizational and environmental factors which influence the design and effectiveness of accounting systems. This paper attempts such an analysis,
with regard to the financial accounting systems currently offered to small enterprise. The misconceptions trainers possess about financial accounting, and the problems that arise, are examined with reference to the stated goal of improved financial management for the firm. Finally, it recommends
the abandoning of such systems in favour of a different approach to financial management, and describes how such an approach can be used successfully by the trainer in the field.