The use and effectiveness of financial performance measures in small and medium enterprises (SMEs) retail businesses in Cape Town

Abstract

Small and Medium Enterprises (SMEs) that are operating in the retail industry in South Africa are perceived not to measure their financial performance, which may be detrimental to business performance, competitiveness and sustainable growth. The aim of this study is to determine the extent to which owner-managers of SMEs in the retail industry are using financial performance measures such as financial statements and ratios in their business operations. Basically, the study is aimed at determining types of performance measures used by SMEs, the effectiveness of those Financial Performance Measures (FPMs) and also to determine whether the use of these ratios result in sustainable growth and competitive advantage. A questionnaire was distributed to about 200 SMEs operating in Cape Town, South Africa. The findings were therefore based on the analysed data from the questionnaire and that helped to provide useful information about the use of financial performance measures by SMEs in South Africa to the Small Business Department and also in terms of reducing the failure of SMES. The findings will also help SMEs regarding the use of financial performance measures which can help them to sustain their business performance growth and competitive advantage.