Accounting Information for Business Decision Making and Performance Assessment in Small and Medium Enterprises (SMEs)

Accounting information is an important element for a business whichis useful for business decision making and performance assessment. Theaccounting information is resulted from financial reporting process. Howeverbased on previous researches, not all SMEs apply accounting and do financialreporting in their business. Then how SMEs get accounting information andmanage their business? This research will explain what kind of accountinginformation owned by SMEs and how they use it for business decision makingand performance assessment.Data taken in this research were from 75 SME using convenience samplingmethod. Data were gathered through interview and questionnaire to the managerof SMEs in Central Java, Indonesia. The analysis technique is descriptivequantitative analysis technique.The results of this study explains that the accounting information whichowned by SMEs in the form of documents, records, and reports. They havepurchase and sale receipt as their document, they have record of cash inflows/outflows and sales also they have simple operational reports, only few of themmade financial statement. The results showed that most of SMEs only havecash inflows/ outflows report, it means that they can get information aboutAccounting Information For Business Decision Making And PerformanceAssessment In Small And Medium Enterprises (SMEs)94cash availability that usually provided by Statement of Cash Flows. Howeverthe results showed that most of SMEs do not have Income Statement, BalanceSheet, and Statement of Changes in Equity, but they can get accountinginformation for daily business management. Based on the research, SMEswhich do not have Income Statement, they get information of profit fromrecord of sales in comparison with record of expenses, including purchases.Some of SMEs which have only cash transaction they estimate the profit fromrecord of receipts in comparison with record of disbursements. SMEs whichdo not have Balance Sheet, they get information of asset from record of cashflows, inventory and list of equipment, they also get information of liabilitiesfrom record of account payables and bank loan document. SMEs which do nothave Statement of Changes in Equity, they estimate the increased equity byincreased cash, inventory, equipment, as long as there is no difficulty to paytheir liabilities. The accounting information owned by SMEs can be classifiedas statutory accounting information, budgetary information and additionalaccounting information.The results showed that SMEs use both, written information and unwritteninformation for business decision making and performance assessment. Theyuse their memories, estimation and third party information they earn from themarket, their suppliers and customers as unwritten information. Managers ofSME also have other benchmarks to help them in assessing performance, such asincreased of their equipment and supplies, their ability to pay debt, increased oftheir investment, production, and purchasing. Performance assessment in SMEsis not only measured by the financial side, but also the non-financial side, suchas increased customer, fulfillment their own target/capacity, increased number ofemployees, increased owner welfare, customer satisfaction which is measuredby increased repeating customer, increased employee benefits and employee’sperformance which is measured by their attendance.Most of the SMEs do not apply double entry bookkeeping, therefore thisstudy suggests recommends some simple basic records that must be ownedby the SMEs in the form of a simple single entry bookkeeping in accordance95 with their own account. SMEs must have at least seven accounts as theirbusiness records: (1) cash inflows/ outflows, (2) sales, (3) expenses includingpurchases, (4) inventory, (5) account payables, (6) account receivables, (7) listof equipment, accompanied with estimation of depreciation expenses. Recordof customer order is additional record which is important for planning andproduction or service schedules