The influence of demographic variables on financial record-keeping in small- and medium-sized enterprises in the South African informal sector

Abstract

Orientation: Financial record-keeping is a pivotal management tool to analyse profitability, solvency and liquidity, and contribute towards financial efficiency and organisational performance.Research purpose: The purpose of the research is to explore financial record-keeping practices by small- and medium-sized entities in the informal sector with specific reference to selected demographic variables.Motivation for study: The contribution of the informal sector to economic growth has recently gained momentum. Financial record-keeping has been identified as keystone to the success of small- and medium-sized entities.Research approach, design and method: Quantitative data obtained from the national Survey of Employers and the Self-Employed (2017) acquired from Statistics South Africa were utilised, yielding a final sample of 1658 respondents.Main findings: By means of binary logistic regression, the research established that various demographic variables influence financial record-keeping practices in the informal sector in a statistically significant way. Moreover, it was found that the majority of small- and medium-sized entities do not practise financial record-keeping.Practical/managerial implications: Interventions should underscore addressing the perceived absence of financial record-keeping practices in the informal sector. Whilst the National Development Plan (NDP) extrapolate the informal sector contributing to job creation by 2030, the effect of these demographic variables on financial record-keeping practices should be taken into cognisance.Contribution/value-add: The evidence generated by the research presented could be utilised when debating developing or expanding the informal sector. The theoretical contribution relates to modernisation, structure and dependency of the informal sector specifically contributing to the development of a theoretical framework underscoring the influence of demographic variables.