Does Book-Keeping Contribute Toward High Failure Rate of Business During First Year of Operation?

A Case of South Africa

Abstract

The high failure rate of businesses during the first year of operation is a well-documented phenomenon globally, with South Africa being no exception. This research investigates the role of book-keeping practices in contributing to this high failure rate among South African small and medium-sized enterprises (SMEs). By examining the relationship between financial management, particularly bookkeeping, and business sustainability, the study aims to determine whether inadequate or poor bookkeeping practices are significant factors in the early demise of businesses. The population size that was targeted consisted of 311672 small businesses that were registered with the CIPC in South Africa during the first quarter of 2023 and were no more than a year old. To sample a population with a 0.1 per cent chance of selection and to remove bias, essential random sampling was employed using Excel Quantitative Management (QM). Consistent with similar studies, a sample size of the study was 150 new SMEs. Data was collected through semi-structured interviews with SMEs owners. The findings reveal a strong correlation between poor bookkeeping practices and business failure, highlighting the need for enhanced financial literacy and the adoption of effective bookkeeping systems. This study investigated lack of bookkeeping practices contributes to the high failure rate of business during the first year of operation.