Chapter 1

THE PROBLEM AND ITS SETTING

Introduction

In a business, financial records are essential because it can have a big

impact in obtaining and persuading more investors. Disclosure of business

financial performance, not only for the reason that it is required but also it will

give a little information to the public on how the business performs. Financial

recording is important to set guidelines that are useful in knowing when and

how to report income and expenses in an entity’s record (Kulzick, 2000). The

purpose of which is to reflect its financial condition to measure the

performance of the organization. In general, financial recording is developed

to keep track on the business’ income and expenses.

In Uganda, research found out that the major problem faced by SMEs

is lack of or inadequate financial recording practices which result into

continuous low performance level. In Western Uganda, research found that

SMEs are the driving force for the promotion of the country’s economic

development (Turyahebwa Sunday & Ssekajugo, 2013).

Globally, the most successful companies use financial recording as a

basis for performance (Bowen, Schoppe, & Vasse, 2009). According to

(Onaolapo and Adegbite 2014), the variation in financial performance of Small

and Medium Enterprises (SME’s) can largely be explained by the level of

financial recording. To achieve the goals in business success, organization

 2

should comply this method called financial recording to process the financial

transactions appropriately.

Financial recording practices have been used ever since the first

farmer occurred. While adequate start-up funding and an accounting

system that works for your business are vital to a sound financial

management system, both are only starting points in the development

of a sound financial plan.

In Philippines, specifically in Metro Manila, a research was issued on

March 20016 which was conducted by Cybthia P. Cudia, a full-time professor

in DSLU. In her research, that was examined using a simple descriptive

statistic it was found out that mostly of the SMEs adhere to the prescribed

financial recording for SMEs by PFRS while few of them disagree to this, but

in consideration that some SMEs fail to comply properly their financial

recordings and tend to avoid the compliance of financial recording to

regulatory bodies.

In Digos City, most establishment are small and medium-sized

enterprises and most of the businesses in this city have natures such as t-

shirt and tarpaulin printing, trading, service and manufacturing concerns like

tiles had hard times in complying their respective financial recordings.

STATEMENT OF THE PROBLEM

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This study aims to know the effectiveness of financial recording compliance

practices in business success. Specifically, it aimed to answer the following

questions.

1. What is the level of effectiveness of the financial recording

compliance practices and business success in terms of:

1.1 Financial record keeping

1.2 Record keeping practices

1.3 Financial record management and use

2 What is the level of business success of small enterprises in terms

of:

2.2 Planning

2.3 Funding a Successful Business

2.4 Branding, Marketing and Image

2.5 Sales to drive revenue

2.6 Managing people, Process and Benefits

2.7 Operations and Accounting

2.8 Retaining Customers, Maintaining Communication

2.9 Technology

2.10 Personal Decisions, Actions and energy

2.11 Mentoring and Community involvement?

3 Is there a significant relationship between financial records keeping

and business success?

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Hypothesis

The hypothesis was tested using 0.05 level of significance.

HO. There is no significant relationship between financial

recording compliance and business success.

Review of Related Literature

This part of the research output presents various reviews of the

related literatures that can assist the readers to fully understand diverse

histories and other literary articles that have relevance to the study.

The term Small and Medium Enterprises (SMEs) is generally

used to indicate all businesses apart from international and/or

multinational companies, which assumes a wide range of definitions

and measures (APEC, 2003; Moha Asri and Manan, 2010; Rosman and

Mohd Rosli, 2011). However, the definition of SMEs differs from country

to country around the world. The SMEs are sometimes defined in terms

of size of the business and the workers or the number of employees.

Though the number of employees can express the size of a business,

but this size also varies from country to country as previously

mentioned. Additionally, Blackburn and Jarvis (2010) emphasized on

different sources of reporting for the SMEs statistics in terms of

employment, turnover and asset. Moreover, the World Bank also

 5

defines SMEs in term of the number of employees, total assets and

annual sales (Ayyagari et al., 2005; Moha Asri and Manan, 2010).

Financial Records Practices Management and Use.

Several groups keep records if they are to perform coherently,

efficiently, effectively and ensure profitability (Ozotambgo, 2015; Trived

& Shilpa, 2010). Good financial records, can greatly improve many of

the management decisions a business owner and or manager takes,

including decisions about marketing, personnel, borrowing, pricing,

inventory, and product development (Muchira, 2012). Such financial

records include; income statement, statement of financial position

(balance sheet), the statement of Cash flows, and the financial internal

control system records that check the accuracy of company

transactions (Ssekajugo et al., 2013)

Financial Recording Attitudes and Qualifications.

It is imperative for every business and venture to practice and

manage its finance in one way or another through proper financial

behavior. In the context of this study, the entrepreneurial financial

behavior is referred as an entrepreneur who behaves and takes action

on financial issues regarding Small and Medium Enterprises’ (SMEs)

operations. Since the present study is conducted on Malaysian SMEs,

the financial behavior therefore indicates an individual who has an

action or reaction of financial practice of SMEs under the specified

 6

circumstances. In fact, an individual’s attitude, behavior and action can

be measured through subjective norm (Fishbein and Ajzen, 1975).

Fundamentally, an individual’s action explains behavioral intention and

actual behavior in social psychology (Fukukawa, 2002; Millar and

Shevlin, 2003).

Surprisingly, Moore (2003) reported that the business activities of

majority of people cannot be figured out and even understand in term of

their financial actions. Even though the financial action and behavior are

the main source of financial practice (Iturralde, et al., 2010), this is not

often recognized by those who are in the process. As clearly explained

by Eagly and Chaiken (1993), the performance of any action or

behavior begin with a person’s thought and /or knowledge. Similarly, the

financial attitude, behavior and action for financial practice are the

individual’s performance, which is achieved through financial

knowledge.

Records Keeping.

It is widely believed that record keeping has a significant impact

on financial performance of a given business. For instance, Onaolapo

(2014) asserts that record keeping gives substantial information about

the financial strength and current performance of an enterprise and

therefore managers find those records useful in making decisions.

 7

Maseko and Manyani (2011) and Amoako (2013) both agree that

financial record keeping and financial transparency are inseparable.

Complementarily, Muchira (2013) emphasizes that good record keeping

will make any business partner or investor more aware of what is going

on in their businesses and it will save them money.

In most developed and developing economies, a growing number

of Small and Medium Enterprises (SMEs) need proper assessment

regarding the entrepreneurial abilities that can bring about business

success (Hussain et al., 2006; Rudmann, 2008; Adeyemo, 2009). This

section has basically reviewed the previous the relevant literatures in

line with the objectives of the present study. As such, this section starts

with the definitions and concepts of SMEs. In addition, the literature

review also focuses on the literature related to the determining factors

of the entrepreneurial attributes for the business success of SMEs and

other underlying issues.

Financial record keeping has turned into the establishment on

which present day organizations flourish for development and

maintainability (Ademola, Olukotun, Samuel, and Ifedolapou, 2012).

Organizations are exceedingly subject to money related records kept in

the books of records demonstrating distinctive exchanges, for example,

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deals, buys, salary, and installments by an individual or associations

(Dawuda and Azeko, 2015).

Business Success

Planning

Planning is the best way to keep the business grow; for it helps

the business owner to think through issues and understand problems. It

is the shorter-term plan 12 months as compared to the longer-term

strategy plan. The shorter term enables greater accuracy in completing

the action steps to achieve the key initiatives, Stoney Wilson (2014). He

also added that you need a destination and you need a map to get

there. That is the role of a business plan. Key to the exercise is an

honest SWOT analysis— strengths, weaknesses, opportunities and

threats.

Funding a Successful Business

Adequate and appropriate funding is an ongoing necessity for a

healthy business. Jerry Mills (2016), notes that with a growing company,

it is always a matter of ‘when,’ not ‘if, which provides financial and

strategic solutions to small and mid-market companies. He advises

business owners to develop a relationship with their bank before the

need for a loan arises. Observing that it is typical to rush to the bank

with an urgent need in an emergency, recommending community banks

 9

as easier to work with than national ones, Mills suggests seeking a loan

or a credit card when the business does not need it, and using it just to

develop credit and a personal relationship with the bank.

Branding, Marketing and Image

In this strategy, your business has more ways to interact or to

connect with the customers. In today’s always-on and connected world,

there are more channels to reach people, but Lane notes the essentials

are still in good communication. Take the time to understand your

customer and consider how your customer reacts to what you are

saying. It is best to be simple, direct and defined in terms of what is

being communicated. Lane emphasizes the importance of strategy as a

foundation for any marketing effort. It is easy to create marketing

materials, but the magic comes if you have strong strategy behind that,

that’s focused on objectives you have and targeted to customers you’re

trying to attract.

Social media can be a tremendous asset to any business by

building a network of followers, friends and supporters it can count on,

but, Lane cautions, there must be value provided in the relationship.

Sales to drive revenue

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Sales are primary act in the course of being in business that

provides predictable revenue growth, Toney shares six important

aspects of sales. These are “Society” knowing who is being targeted

and who is the ideal client; “Silo” means identifying the niche(s) the

business can dominate; “Solution” is recognizing the problems which

the business can solve that no other businesses can solve; “Strategy” is

developing a plan; “Structure” means accountability, management and

compensation of the sales force; and “Systems” is the methodology that

the business deploys. A common problem, according to Toney, is

having the wrong type of salesperson for the desired role. But even

before that, the owner must be able to articulate exactly why his

company exists; for instance, whether its strategic purpose is the

resolution of a problem or to move a product.

Managing people, Process and Benefits

What makes a business successful? Stephanie Waldrop (2016),

said “it has a lot to do with its ability to attract and retain quality

employees who will be the face of the business”. A benefits program as

part of a company’s compensation package is a tool to build loyalty

within an employee pool. It shows how much an employer cares about

them. And employers who care get employees who care. It is much

better to have these kinds of strategies for it will help your business

create a strong relationship with people.

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Operations and Accounting

Accounting is important when you are starting a business. It is

one of the lifeblood of the business. According to Chuck McLane

(2015), you have to know what you are getting yourself into, and

numbers can help you figure out if it will be overwhelming, if you can

handle it, if you need help. Creating a model of the cash flow enables a

business to get a better sense of the timing of inflows and outflows, so

that when money comes in, the business owner does not distribute too

much too early and then not have enough when debt repayment comes

due or for deductions for fixed income, or payroll or sales tax, or other

obligations. McLane (2015), notes that dealing with customer debt is

another issue. How risky is the client? Should the business collect a

retainer up-front? It is important to understand the norms of the industry.

According to O’Keefe that there are specific tips for this in which get an

EIN (Employer Identification Number) instead of using a Social Security

Number, because of the threat of identity theft. When you give 1099s to

vendors at the end of the year, use your EIN and business name. Keep

your business account separate from your personal account. For

financial reporting, establish good policies and procedures from the

beginning. Have consistent policies and procedures in place, so that as

you add people to the organization, you will continue to record

transactions in the same consistent manner.

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Retaining Customers, Maintaining Communication

The focus of this strategy is to be trying to build a relationship, not

just complete a transaction. Whatever you build today, in 60 days 30

companies can copy that product. But they can’t duplicate the people,

the interaction with your customers that you put in place to have that

contact with your customer.

This may mean going a step beyond whatever prompted the initial

contact. Using his company as the example, he says that, in solving a

customer’s issue, the service consultants ask the customer what he is

trying to accomplish with his business, so as to understand how he’s

relying on GoDaddy. Find out why they are using you and help them

find whatever success you can in using your product or service. That is

when they get emotionally attached to your company. This is important

in proactive contact as well as in reactionary response to complaints.

Wirtjes (2015), acknowledges that technology enables many

functions to be automated, such as virtual assistants programmed to

handle FAQs. Artificial intelligence has come a long way over the last

10 years. But what sets a business apart is delivering a personalized

experience. For this reason, even a real person may not accomplish

that relationship-building if the conversations are too rigidly scripted.

Technology
 13

Technology is important for its ability to help all businesses scale

to provide repeatable and consistent results with what they do for their

customers, as Clint Harder (2015). He also points to the advantage

technology brings by enabling business owners and executives to

connect directly with all the people they do business with customers,

partners, vendors. Cloud outsourcing has become appropriate for

businesses of all sizes, Harder observes, explaining that instead of a

business consuming technology with its own capital and bringing it into

its physical location, the cost is an operating expense remotely

delivered.

Under the broad umbrella of “technology” are items developed for

specific types of businesses or industries, and the smaller companies

that do not have a department dedicated to researching and updating

advances that could be useful to them get that type of advisory and

forward-looking education from vendors they partner with for their IT.

Harder stated.

Personal Decisions, Actions and energy

People who are successful are generally never satisfied with the

status quo; they need to keep creating. But Patricia Noel Drain (2016),

said that make sure you are satisfying your needs when you are leading

the company. Forgetting about yourself and only taking care of others is

not being a good leader. She also recommends, in fact that put yourself
 14

on your calendar and when pushing out of the comfort zone, the most

important thing is to “stay true to you. To grow their business, she had

found that people have to be happy in it.

The oft-quoted advice is “Work on your business, not in it.”

Creating systems for all aspects of the business operation enables the

business owner to delegate responsibility, and Drain notes that creating

systems is what creates the value in the company. Determine where

you build the systems based on your own passion. This elevates the

business to still be the visionary for the company.

Mentoring and Community involvement

Visibility and connections enhance the growth potential of a

business. Community involvement provides opportunity for a

businessperson to benefit in both areas in addition to helping make a

positive impact on the community he or she is part of. Christy Moore

(2015), describes it as the power of having deep relationships and

connections with other community leaders, so they can leverage that

connection to help with whatever they are trying to achieve. .

Working on their community project helps participants develop self-

awareness one of the most-cited leadership skills, Moore added which

helps them become even stronger leaders. As you build your network,

you are enhancing your connections, which you can leverage to achieve

more for the community and yourself.

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Theoretical and Conceptual Framework

There were related studies examined about the effectiveness of

financial recording compliance practices in business success.

Globally, the most successful companies used financial records

as a basis for performance (Bowen, Schoppe, & Vassa, 2009). Indeed,

according to Onaolapo and Adegbite (2014), the variation in financial

performance of Small and Medium Enterprises (SMEs) can largely be

explained by the level of accounting record keeping.

Financial record keeping has become the foundation on which

modern businesses thrive for growth and sustainability (Ademola,

Olukotun, Samuel, & Ifedolapou, 2012). Businesses are highly

dependent on financial records kept in the books of accounts indicating

different transactions such as sales, purchases, income, and payments

by an individual or organizations (Dawuda & Azeko, 2015).

There were studies about poor financial record keeping were

given by Onaolapo et al. (2014) whose study found out that poor

financial recordkeeping manifests through lack of knowledge, low level

of education, inadequate trainings and limited resources. Despite

having all the above studies, there is limited research on the effect of

financial record keeping on financial performance of organizations in

Uganda especially in development groups. Therefore, this study was

conducted to find out the effect of financial recordkeeping on financial

 16

performance of development groups in Kasese, Rubirizi and Rukungiri

districts in Western Uganda.

It is widely believed that record keeping has a significant impact

on financial performance of a given business. For instance, Onaolapo

(2014) asserts that record keeping gives substantial information about

the financial strength and current performance of an enterprise and

therefore managers find those records useful in making decisions.

Maseko and Manyani (2011) and Amoako (2013) both agree that

financial record keeping and financial transparency are inseparable.

Complementarily, Muchira (2013) emphasizes that good record keeping

will make any business partner or investor more aware of what is going

on in their businesses and it will save them money.

According to Lesirma (2014) indicated a positive relationship

between record keeping and financial performance of Savings and

Credit Cooperatives (SACCOs) in Nairobi County. Research by Chelimo

and Sophia (2014) revealed that about 60% of small businesses fail

within the first three years due to management inefficiencies brought

about by poor record keeping. This is in line with Ademola et al. (2012)

whose study agrees that poor records can lead to financial

inefficiency of small and medium enterprises hence leading to

poor organizational performance.

Several groups keep records if they are to perform coherently,

efficiently, effectively and ensure profitability (Ozotambgo, 2015;

 17

Trived & Shilpa, 2010). Good financial records, can greatly improve

many of the management decisions a business owner and or manager

takes, including decisions about marketing, personnel, borrowing,

pricing, inventory, and product development (Muchira, 2012). Such

financial records include; income statement, statement of financial

position (balance sheet), the statement of Cash flows, and the financial

internal control system records that check the accuracy of company

transactions (Ssekajugo et al., 2013).

Several empirical studies show that survival rates of small firms

which use strategic planning techniques are higher than those of non-

planning firms (Sexton and van Auken, 1982; Capon and Farley, 1994;

Birley and Niktari, 1995). This holds true particularly for start-ups

(Castrogiovanni, 1996; Delmar and Shane, 2003). Ineffective strategic

planning is regarded as one of the main reasons for firm failure (Noble,

1999), and can be reduced by a higher degree of strategic planning

(Perry, 2001). These results seem to contradict the perspective that

SMEs could neglect planning because they might lack the required time

and resources (Robinson and Pearce, 1984). In addition, most of the

empirical literature shows that strategic planning contributes

significantly to success in SMEs. In one of the first reviews of studies

about the relationship between strategic planning and financial success,

Armstrong (1982) examined the performance impact of systematic

 18

business planning (i.e., having objectives, generating strategies,

evaluating strategies, monitoring the process and commitment to the

process) and concluded that planning positively affects success.

The preparation of financial plans and projections, fund

management, including receivable and inventory accounts, analysis of

financial data, methods applied in making financial decisions, and

decline of profit margin (Mottawaa, 2000), each of which is discussed

briefly.

There are certain advantages to funding by loans, such as financial

leverage, which enables the use of borrowed money to obtain higher

returns that exceed the costs incurred by such loans, to the benefit of

business owners. However, a high level of funding by loans entails risks

that weaken the financial standing of the project, thus increasing the risk

of default and failure to meet the obligations resulting from loans

provided, annual interest, along with the original loan as scheduled.

Moreover, increasing funding by loans results in higher costs in

obtaining more funds. Since the risk factor becomes greater, creditors

seek more guarantees as a safeguard against such risks. Also,

increased funding by loans leads to tougher conditions attached by

creditors to loans provided to small businesses. These conditions may

include the possession of a minimum limit of cash, setting a certain

ceiling for the amount provided, and imposing restrictions on dividends

given to stakeholders. Such conditions curtail the space allowed for

 19

business management when taking critical decisions to run activities.

The above studies reaffirmed the negative impact resulting from

increased funding by loans, citing increased loans as a major cause of

financial crises facing these projects prior to bankruptcy (Cromie 1991;

Bardell 1998; Dutia & Davidson, 1991).

Talking about branding, marketing and image, it is all about on

how to promote your product or your business. Brands have been

around for a very long time already. The earlier days, people used to

mark their cattle or clay pots with a burnt mark (Keller 2008, 2.). Today

the word brand has gained more and more abstract meanings. A brand

means all the inceptions, associations, descriptions, ideas and promises

that develop in consumers’ minds about a product or business

(Brändäys 2007-2010). Brand is the added value for what the consumer

is ready to pay more, compared to an ordinary, unnamed product that

fulfills the same desire (Laakso 2003, 22). Keller (2008, 2) concludes

American Marketing Association’s definition of a brand as follows:

“whenever a marketer creates a new name, logo, or symbol for a new

product, he or she has created a brand.”

Not only physical products can be branded but many other things;

services, distributors, online products and services, people and

organizations, sport, art and entertainment, geographical places and

ideas according to Keller (2008, 10-26).

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A strong brand can deliver for a company market leadership, a

stable or sustainable competitive advantage, international reach, a

platform from which to expand activities and long-term profit. It is a huge

asset for companies, in brand marketing terms it is equity (Arnold 1998,

1-5).

A market refers to a group of firms producing market offerings

that vie for the patronage of a group of buyers. There are different

characteristics on achieving market success these are: a greater

sensitivity to differences in consumers' needs, wants, tastes, and

preferences, higher quality goods and services, greater innovativeness,

higher productivity, and greater economic growth (Ellig, 2001).

Therefore, we argue that these five outcomes constitute represent

market success.

In favor of outcome 1, Vickers (2003, p. 143), in discussing the

relationship between competitive markets and consumer welfare,

maintains: “Competition is good for consumers for the simple reason

that it impels producers to offer better deals, lower prices, better quality,

new products, and greater choice.”

Moreover, he argues, “More effective competition to deliver what

consumers want and need makes for better served consumers” (p.

146). As to outcome 2, Goldman (1991, p. 277) points out that one

reason for the ultimate failure of the Soviet Union was that, though it
 21

could increase the quantities of goods manufactured, it could not

improve the level of quality, and “With the growth of high technology

and miniaturization, it was quality that counted.” As to output 3, Clark

(1954) emphasizes that innovation is required in a “dynamically

progressive system,” and research indicates that innovation is the main

driver of economic progress (Grossman and Helpman, 1991, 1994). As

to output 4, Krugman (1994, p. 18) observes that nothing is as important

for economic welfare as the rate of productivity growth: “Compared with

the problem of slow productivity growth all our other long-term economic

concerns foreign competition, the industrial base, lagging technology,

deteriorating infrastructure and so on are minor issues.” As to output 5,

economic growth is highly valued because it leads to increases in

standards of living (Barro, 1990).

The preceding discussion implies that “market success” should

be identified with five desirable outcomes. Therefore, as to public policy,

factors related positively to these outcomes should be encouraged;

factors related negatively should be discouraged

A sale to drive revenue is a way of striving to fulfill these

principles and maximize the revenue earned by these activities will be

challenging. We believe that these principles lead to a set of

characteristics that the commercial enterprises should exhibit in their

operations.
 22

The premise of these “characteristics” is the assumption that if

revenue-generating activities are developed through collaboration with

others at the Institution, their purpose and operation is transparent, their

performance is measured and accountable, and they are conducted

with judgment and integrity they are more likely to align with the

Smithsonian mission. Past discussions of SBV that extended beyond

simple financial performance often lacked the strong underlying context

that a clear exposition of what is desirable and undesirable provides.

Such characteristics become powerful tools to describe an

activity. They are needed to have informed discussions about operating

performance, and to make decisions about the performance of

leadership. Activities that have these characteristics can enhance

adherence to the principles, improve financial performance, and result

in more effective working relationships with the museums and other

programmatic parts of the Smithsonian. We recommend that once these

characteristics or a similar list have been discussed and agreed upon,

they become important components of the criteria used for hiring,

performance evaluation and compensation decisions of enterprise

executives as well as for those museum and central staff executives

with whom they interface, SBV, Task Force Report (2008)

Farlow (2012) stressed that leading and managing people plays a

vital role to organizations and most especially to the workforce like

 23

managers and employees and an integral part of the operations and

policies of the companies. As a matter of fact, ability to lead is not only

expected to managers and leaders but it has become a necessity that

will enable them to become effective and efficient in their field of

expertise and specialization as combined with skills, knowledge and

attitude. Increasing demands and concerns have increased significantly

by companies and organizations with regards to the ability of managers

and leaders to lead and at the same time increase their awareness on

the changing roles and responsibilities that will be encountered in

workplace setting and thus, being fully aware of their role in establishing

a good and ideal ways and means in leading and managing people.

According to Hesser (1999) pointed out that, leadership is a two-fold

phenomenon that encompasses the individual and organizational

leadership. Individual leadership is practically how the individuals

manage themselves as leaders and managers that will influence others

to follow. It has been said that you cannot lead if you yourself cannot

manage your personal affairs. On the other hand, organizational

leadership requires the leader’s ability to lead with his knowledge, skills

and attitudes that will install control and management over the corporate

or organizational functions. This is viewed by the fact that leaders know

how to lead and willing to sacrifice personal preferences for the sake of

organizational benefits and success.

 24

In operations and accounting Information is useful for reducing

uncertainty in operations management decision-making. Decision-

making in organizations takes place in the context of uncertainty or

disagreement over both the objectives and consequences of action

(Hopwood 1980). The usefulness of management accounting for

decision-making in the context of management accounting systems3

has been a point of study by many researchers. Mia and Chenhall

(1994) state that the role of the management accounting systems has

evolved from a historic orientation incorporating only internal and

financial data to a system meant for attention-direction and problem

solving tasks. In that new, future oriented role these systems also need

to incorporate external and non-financial data focusing on marketing

concerns, product innovation and predictive information related to

decision areas.

One of the first definitions of relationship marketing is attracting,

maintaining and enhancing customer relationships (Berry, 1983:25-28).

Other definitions of relationship marketing include one by Porter (1993:

14), which states that relationship marketing is the process whereby

both parties – the buyer and the provider – establish an effective,

efficient, enjoyable, enthusiastic and ethical relationship: one that is

personally, professionally and profitably rewarding to both parties.

According to Kotler (2001:7), relationship marketing aims at building

 25

long-term mutually satisfying relations with key parties such as Kasthuri

Poovalingam and Dayaneethie Veerasamy customers, suppliers,

distributors – in order to earn and retain their long-term preference and

business. Although the notion relationship marketing is rising as a new

phenomenon, such marketing activities are practiced back to the pre-

industrial era. The concept of relationship marketing was first put up by

Berry (1983). In his research work, Berry (1983) found that companies

have started valuing their existing customers, and they have started

taking customer relationship as an asset to the business that can

enhance the customer base and profitability of the firms. In simple

words, one can state that relationship marketing deals with creating and

enhancing the relationship with the customers of the companies for

sustainable benefits. Kotler (1997) also feels that it is beneficial for the

companies to build long-term relationships with their customers, rather

than to focus only on transactional based strategies as retaining

customers will prove profitable for the companies (Kotler, 1997) .

Information technology emerges as an essential asset of modern

firms’ competitive advantage, because it connects all business functions

and supports managerial decision processes - both essential conditions

for the attainment of the organization agility level. In any company, IT

has a dominant effect on competitive advantages in either cost or

differentiation. Porter (1996) stated; the IT is affecting competition in

 26

three fundamental ways: It changes industry structure and, in so doing,

alters the rules of competition. It also creates a competitive advantage

by giving companies new way to outperform their rivals and it spawns

whole new business, often from within a company’s existing operations.

Mentoring and community involvement. Robshaw (2001) argues

that the most important decision for any entrepreneur is choosing what

sort of business he or she wants, yet most entrepreneurs give little

thought to this aspect. As Robshaw points out, businesses fall into three

categories, depending on the entrepreneur’s motivation: the job

option/survival business, the lifestyle business, or the growth business.

For an entrepreneur, recognition and a sense of achievement are

fundamental motivators which have significant consequences in the way

entrepreneurs approach and manage their businesses. Entrepreneurs

need to align their personal goals with their business goals. Hopson and

Scally (1991) offer the notion that individuals have the choice of either

pinball living or self-empowerment. Balls in a pinball machine have no

life of their own; while self-empowerment, on the other hand, is a

process by which individuals increasingly take greater charge of

themselves and their lives.

A mentor or advisor is an essential asset to a growing company.

They can warn of problems on the horizon, help craft solutions to

problems and be a sounding board for the entrepreneur. A mentor’s

 27

many years of experience can save a business from major errors and

costly mistakes with just a few words. From the available literature it can

be argued that intervention at pre-start and start-up stages of a

business is beneficial in reducing the known high failure rates (Deakins

et al, 1997). One of the problems in the UK has not been when

interventions have taken place, but how those interventions have taken

place. The impact on the small firm and the ability of the entrepreneur to

learn from mistakes is poorly understood. Yet, theoretically, in the early

stages of business development, such interventions should have a

major impact. Deakins, comments that the entrepreneur, through

experience, acquires the ability to learn. Rarely is this learning process

planned, but it is the result of a series of reactions to critical events in

which the entrepreneur learns to process information, adjust strategy

and take decisions.

Beresford and Saunders (2003), who evaluated MBA graduates

in their role as mentors to small business projects, found that whilst

academic skills were initially identified as essential requirements, it was

the inter-personal skills, such as listening, which were considered to be

more important. The balance of a head and heart approach to

mentoring is described by Pegg (1999) in the application of his

mentoring model which helps people to focus on the challenges,

choices, consequences, creative solutions and conclusions. In

discussions between mentor and mentee, two main methods are used:
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‘pulling’ and ‘pushing’. Pulling calls on the ability to offer a sanctuary; to

offer a safe place where the mentee feels able to share their agenda,

interests and goals and to offer support by listening, asking the right

questions and drawing out the mentee’s own answers to problems.

Pushing, on the other hand, calls on the ability to offer stimulation; to

offer International Journal of Evidence Based Coaching and Mentoring

Vol. 4, No.2, Autumn 2006 Page 10 creative ideas, challenges,

knowledge, success stories, models and tools, leading-edge thinking

and wisdom.
 29

Figure 1 shows the relationship of the independent variable and

dependent variable of the study. The financial recording compliance

practices are the independent variables of the study while the business

success is the dependent variable.

Independent Variables Dependent Variable

FINANCIAL RECORDING BUSINESS SUCCES

 PLANNING
 FUNDING A SUCCESSFUL
BUSINESS
 BRANDING, MARKETING
AND IMAGE
 SALES TO DRIVE
 RECORD KEEPING REVENUE
ATTITUDE  MANAGING PEOPLE,
PROCESS AND BENEFITS
 RECORD KEEPING  OPERATIONS AND
PRACTICES ACCOUNTING
 RETAINING CUSTOMERS,
 FINANCIAL RECORD MAINTAINING
MANAGEMENT AND COMMUNICATION
USE  TECHNOLOGY
 PERSONAL DECISIONS,
ACTIONS AND ENERGY
 MENTORING AND
COMMUNITY
INVOLVEMENT

Figure 1. Schematic Diagram Showing the Variables of the Study

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Significance of the Study

This study was contemplated to know the effectiveness of the

financial recording compliance practices in business success.

Definition of Terms

The following terms are simply defined conceptually and

operationally for better understanding of the study.

Financial Recording. This refers to the set of common methods or

standard operating procedures you develop for carrying out accounting,

financial reporting, budgeting and other activities related to business

finances. Financial record is a formal document representing the

transactions of a business, individual or other organization.

Business success:

Achievement of an action within business goals. When your

business career is over, success has other dimensions that for many

business owners are as significant or more than monetary rewards.

From that of keeping financial recording could be also one way of their

business success.