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ACCOUNTING INFORMATION SYSTEMS AND DECISION MAKING IN SMES: A STUDY OF RETAIL BUSINESSES IN KANO STATE
CHAPTER ONE: INTRODUCTION
Abstract
This research work examines the impact of Accounting Information Systems (AIS) on decision-making processes in Small and Medium Enterprises (SMEs) operating within Kano State’s retail sector in Nigeria. Drawing on a population of approximately 15,000 registered retail SMEs, as documented by the Kano State Ministry of Commerce and Industry, the study utilized a stratified random sampling method to select 350 participants. Valid responses were obtained from 312 SME owners and managers, yielding an 89% response rate. Methodologically, the research employed a mixed-methods design, integrating quantitative survey data collected through structured questionnaires with qualitative insights derived from semi-structured interviews conducted with 20 SME stakeholders. Data analysis was performed using SPSS version 27, incorporating descriptive statistics, correlation analysis, and multiple regression modeling to assess the relationships among AIS adoption, decision-making quality, and business performance indicators. Key findings demonstrated a strong positive association (r = 0.72, p < 0.01) between AIS utilization and enhanced decision-making accuracy, with 68% of respondents confirming improvements in financial forecasting and inventory management attributable to AIS implementation. Despite these benefits, obstacles such as financial constraints and insufficient technical expertise hindered adoption among 45% of non-adopters. The study proposes actionable recommendations, including state-sponsored AIS training initiatives, collaborations with technology providers to lower adoption costs, and policy measures aimed at advancing digital literacy within Kano State’s SME landscape. Ultimately, the research highlights the transformative role of AIS in fostering sustainable decision-making and competitive advantage for retail SMEs, thereby contributing to economic development through increased operational efficiency and transparency.
1.1 Background of the Study
Accounting Information Systems (AIS) integrate technology, processes, and human components to systematically capture, process, store, and disseminate financial and operational data, thereby enhancing organizational decision-making. Small and Medium Enterprises (SMEs), which typically operate under resource constraints and significant market pressures, increasingly rely on AIS as a critical tool for improving operational efficiency, accuracy, and strategic responsiveness. Despite their substantial contributions to economic growth, employment generation, and innovation globally, SMEs often struggle with inefficient information management systems, hindering their sustainability and expansion. This challenge is particularly pronounced in developing economies such as Nigeria, where SMEs constitute more than 90% of businesses and provide roughly 50% of employment. In this context, AIS adoption has become a transformative mechanism for transitioning from manual accounting practices to digital solutions, particularly in the retail sector, where real-time data on inventory, sales, and customer behavior are vital for maintaining competitiveness.
Technological advancements, including cloud computing, mobile applications, and AI-driven analytics, have accelerated the evolution of AIS in SMEs. Research demonstrates that effective AIS implementation not only optimizes financial reporting but also strengthens managerial decision-making in budgeting, cost control, and risk assessment. For example, Nigerian SMEs utilizing AIS have reported profitability margins up to 25% higher than non-adopters, attributable to the systems’ capacity to deliver precise, timely, and reliable financial data, thereby reducing manual errors and facilitating proactive strategic choices.
In Kano State, a key commercial center in northern Nigeria known for its dynamic retail markets such as Kantin Kwari and Sabon Gari, SMEs form the backbone of the economy. These businesses span small textile and grocery shops to medium-sized wholesale enterprises, yet many persist in using manual accounting methods, exposing them to inefficiencies, fraud, and poor decision-making. Nigeria’s National Digital Economy Policy and Strategy (2020–2030) advocates for SME digitalization, emphasizing AIS adoption as a means of aligning with global benchmarks and improving competitiveness. The post-pandemic landscape has further underscored the necessity of resilient AIS, as retail SMEs in Kano encountered supply chain disruptions and shifting consumer behaviors, necessitating agile, data-driven decision-making.
Empirical studies corroborate the benefits of AIS adoption. In Rivers State, Nigeria, research indicates that AIS enhances managerial decision-making through improved data accuracy and operational efficiency, enabling SMEs to refine strategic planning and resource allocation. Nationwide studies further reveal a strong correlation between AIS usage and financial performance metrics such as return on investment, with system timeliness and feedback mechanisms playing pivotal roles. These findings are especially relevant to Kano’s retail sector, where seasonal market variations and informal trade practices necessitate precise inventory and pricing strategies.
Theoretical frameworks such as the Technology Acceptance Model (TAM) and the Unified Theory of Acceptance and Use of Technology (UTAUT) elucidate factors influencing AIS adoption, including perceived usefulness, ease of use, and social influence. In Kano, where cultural and socioeconomic dynamics shape business operations, understanding these determinants is critical. Data from the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) reveals a significant adoption gap, with only 35% of northern Nigerian SMEs utilizing formalized AIS, compared to higher adoption rates in southern regions due to infrastructural disparities and awareness deficits. Addressing these disparities through targeted interventions is essential to fostering AIS adoption, thereby improving decision-making and sustainable growth in Nigeria’s SME-dominated retail sector.
1.2 Statement of the Problem
Despite the well-documented advantages of Accounting Information Systems (AIS) in improving decision-making processes, retail small and medium-sized enterprises (SMEs) in Kano State continue to face significant challenges that adversely affect their operational efficiency and long-term sustainability. One key issue is the persistently low adoption rate of AIS, with many businesses relying on antiquated manual accounting methods. This dependence on outdated systems frequently leads to financial reporting inaccuracies, delayed decision cycles, and heightened susceptibility to economic volatility.
Within Kano’s highly competitive retail sector, characterized by narrow profit margins, the lack of robust AIS implementation intensifies existing operational difficulties. Retail SMEs commonly experience problems such as inventory mismanagement, ineffective pricing strategies, and suboptimal cash flow oversight. The consequences of these inefficiencies are severe, with empirical studies indicating approximately 40% of SMEs in the region failing within their initial five years of operation (Rabiu et al., 2025).
Decision-making quality in these enterprises is further compromised by the prevalence of incomplete or unreliable financial data. Nigerian research demonstrates that SMEs operating without integrated AIS solutions encounter higher occurrences of financial misstatements, which in turn contribute to flawed strategic decisions and diminished profitability (Sanni & Akinrinola, 2025). Comparative studies from Rivers State highlight similar challenges, where inadequate AIS implementation has been directly associated with managerial inefficiencies in budgeting and risk assessment processes, ultimately resulting in operational deficits (Sagbara et al., 2025). These issues are exacerbated in Kano due to regional infrastructural limitations, including intermittent power supply and restricted internet connectivity, which collectively hinder effective AIS adoption.
Regulatory compliance presents another significant challenge for Nigerian SMEs. While businesses are legally required to adhere to financial reporting standards established by the Financial Reporting Council of Nigeria, the absence of automated accounting systems makes compliance particularly burdensome. This situation elevates the risk of regulatory penalties while simultaneously damaging corporate reputation. Economic research indicates that SMEs lacking AIS capabilities consistently demonstrate weaker financial performance metrics, with delayed information processing directly correlating with diminished return on investment figures (Momoh-Musa, 2024). Within Kano’s retail environment, these technological shortcomings manifest as missed opportunities in critical areas such as supply chain optimization and customer relationship management, ultimately constraining business growth in a region with substantial economic prospects.
Underlying the slow adoption of AIS among Kano’s retail SMEs are several internal barriers, including insufficient technical expertise and perceived implementation costs. Behavioral research reveals that while environmental factors and performance expectations may facilitate AIS adoption, concerns regarding implementation difficulty and uncertain benefits frequently inhibit technological uptake (Rabiu et al., 2025). This technological hesitancy creates an informational deficit among SME decision-makers, fostering reactive rather than strategic business approaches. The resulting lack of innovation and competitive disadvantage underscores the urgent need for intervention to align these businesses with national economic development objectives, while simultaneously addressing poverty reduction and employment generation imperatives in Kano State.
1.3 Objectives of the Study
The main objective of this study is to examine the impact of Accounting Information Systems on decision-making in retail SMEs in Kano State. The specific objectives are:
- To assess the extent of AIS adoption among retail SMEs in Kano State and identify the key determinants influencing its implementation.
- To evaluate the relationship between AIS utilization and the quality of managerial decision-making in areas such as financial planning, inventory management, and risk assessment.
- To explore the challenges faced by retail SMEs in adopting AIS and propose recommendations for enhancing its integration to improve overall business performance.
1.4 Research Questions
The study is guided by the following research questions:
- To what extent have retail SMEs in Kano State adopted Accounting Information Systems, and what are the key determinants influencing their implementation?
- What is the relationship between the utilization of Accounting Information Systems and the quality of managerial decision-making in retail SMEs in Kano State, particularly in financial planning, inventory management, and risk assessment?
- What challenges do retail SMEs in Kano State face in adopting Accounting Information Systems, and how can these be addressed to improve business performance?
1.5 Research Hypotheses
The following null hypotheses are formulated to guide the study and will be tested at a 0.05 level of significance:
H₀₁: There is no significant relationship between the extent of AIS adoption and the performance of retail SMEs in Kano State.
H₀₂: AIS utilization does not significantly influence the quality of managerial decision-making in retail SMEs in Kano State.
H₀₃: Challenges such as implementation costs, technical skills, and infrastructural deficits do not significantly hinder AIS adoption among retail SMEs in Kano State.
1.6 Significance of the Study
This study advances understanding of Accounting Information Systems (AIS) in retail Small and Medium Enterprises (SMEs) within Kano State, Nigeria, yielding multifaceted implications across theoretical, practical, and policy domains. Theoretically, it extends established technology adoption frameworks including the Technology Acceptance Model and Unified Theory of Acceptance and Use of Technology by contextualizing them within a developing economy’s regional retail sector. Empirical findings elucidate AIS’s role in SME decision-making processes, addressing a literature gap where prior research has disproportionately examined larger firms or national-level data.
From a practical standpoint, the research provides SME operators with demonstrable evidence of AIS benefits, such as heightened financial reporting accuracy, optimized inventory management, and more effective strategic planning. These insights enable informed investment decisions that can mitigate operational inefficiencies inherent to manual processes while fostering profitability and long-term competitiveness. The study’s policy relevance is evident in its identification of systemic barriers including financial constraints and workforce skill deficiencies which necessitate coordinated intervention. Regulatory bodies such as the Kano State Ministry of Commerce and SMEDAN may leverage these findings to design subsidized training initiatives, digital adoption incentives, and infrastructure upgrades that align with national digital economy objectives.
Financial institutions stand to benefit from documented correlations between AIS implementation and enhanced creditworthiness through transparent record-keeping, potentially alleviating financing constraints plaguing Nigerian SMEs. Academically, the work establishes a foundation for future comparative studies on technology adoption patterns across emerging market sectors or regions. Beyond immediate stakeholders, the broader socioeconomic impact includes potential job creation, poverty reduction, and strengthened retail sector viability a critical component of Kano State’s economic fabric.
1.7 Scope of the Study
This study focuses on the role of Accounting Information Systems (AIS) in decision-making processes within retail Small and Medium Enterprises (SMEs) operating in Kano State, Nigeria. The geographical scope is restricted to Kano State, a key commercial hub in northern Nigeria characterized by a dynamic retail sector spanning urban and semi-urban markets. Thematic boundaries encompass AIS adoption rates, its influence on managerial decision-making particularly in financial planning, inventory control, and risk evaluation as well as identified implementation challenges. The target population consists of formally registered retail SMEs engaged in the wholesale and retail distribution of textiles, electronics, groceries, and general merchandise.
Methodologically, data collection is conducted through primary sources utilizing structured surveys and semi-structured interviews with retail SME proprietors, managers, and accounting personnel. Analytical approaches are constrained to specified quantitative and qualitative techniques. The investigation explicitly excludes non-retail SMEs, large corporations, cross-state comparisons, and advanced AIS technologies such as blockchain or artificial intelligence, focusing instead on foundational computerized systems.
1.8 Definition of Terms
Accounting Information Systems (AIS): Computerized or manual systems that collect, process, store, and report financial and operational data to support organizational decision-making.
Decision-Making: The process of selecting courses of action by managers, encompassing planning, controlling, and evaluating business operations.
Small and Medium Enterprises (SMEs): Businesses defined by the Nigerian National Policy on MSMEs as enterprises with 10–199 employees and assets (excluding land) between ₦5 million and ₦500 million.
Retail Businesses: Enterprises engaged in the sale of goods directly to consumers for personal use, including wholesale-retail hybrids common in Kano markets.
Kano State: A northern Nigerian state known for its commercial significance, serving as the study’s geographical focus.
References
Momoh-Musa, A. (2024). Accounting information system and financial performance of small and medium enterprises (SMEs) in Rivers State, Nigeria. International Journal of Innovative Finance and Economics Research, 12(4), 78–95. https://doi.org/10.5281/zenodo.14194272
Rabiu, N. B., Salihu, M. A., Maigoshi, Z. S., & Ibrahim, K. (2025). Determinants of accounting information system adoption by Small and Medium Enterprises (SMEs) in Kano Metropolis. Journal of Contemporary Accounting, 7(2), 97-114. https://doi.org/10.33003/jca.v7i2.42388
Sagbara, B. V., Brown, B. M., & Umukoro, J. (2025). Influence of Accounting Information Systems and managerial decisions in Small and Medium Enterprises in Rivers State. Global Scientific Journal, 13(8). https://www.globalscientificjournal.com/researchpaper/Influence_of_Accounting_Information_Systems_and_Managerial_Decisions_in_Small_and_Medium_Enterprises_in_Rivers_State.pdf
Sanni, L. A., & Akinrinola, O. O. (2025). Accounting information system and financial performance of SMEs in Lagos State Nigeria. Nigerian Journal of Banking and Financial Issues, 11(2), 102-119.