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FACTORS AFFECTING OUTSOURCING OF ACCOUNTANCY SERVICES BY SMALL AND MEDIUM ENTERPRISES IN KENYA


Mathenge Douglas Thoithi

Jomo Kenyatta University of Agriculture and Technology, Kenya


ABSTRACT

SMEs are important to economic growth and are essential to economic development in Kenya. However, many of them do not have skilled accountancy personnel and the infrastructure necessary to implement existing accountancy rules and regulations. They therefore opt to outsource this business function and this trend has been growing and this could be due to many factors. Given the growing trend of outsourcing of accountancy services by SMEs, it is important to understand the factors affecting this practice. The top 100 SMEs in 2012 were used for this study. Primary data from the purposively sampled SMEs was collected by use of semi-structured questionnaires filled by the senior managers, CEOs or Finance Managers of the SMES. The study found that SMEs outsource accountancy services. Outsourcing is aimed reducing and controlling operating costs, enhancing access to an external and relatively at low cost structure. Lack of in-house expertise is a factor in SMEs’ outsourcing decision-making. External expertise gives SMEs competitive advantage and increases their chances of survival in the current market. SMEs take a broader view of accountancy outsourcing by isolating their core competencies. New technologies enhance SMEs’ growth and maintain the standards provided under International certifications like ISO. SMEs have relatively high ICT uptake with computers and internet infrastructure being used in their accountancy areas. SMEs need to manage demand efficiently through outsider’s automation, process maturity and latest technology, and obtain technologies which otherwise will not be available from within. The study recommends that SMEs should intensively and expansively focus on outsourcing services based on cost, availability of in-house expertise, core competencies, and technology.


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