An Examination of Accounting Practices and Business Relationships of Micro-Businesses in Scotland

Purpose: This study examines the accounting practices of micro businesses, their challenges, relationships with accountants, business ethics and social responsibility.

Design/Methodology/Approach: Purposeful sampling and referral (opportunistic approach) were used to recruit participants for this qualitative enquiry. 20 face-to-face interviews with micro business owners were carried out in Scotland. The interviews were transcribed and analysed using a thematic approach.

Findings: The thesis finds that most micro businesses operate as a single entity and owners do not get a salary. The owners mainly learn their business by themselves or from a mentor. Most of the micro businesses used single entry bookkeeping and cash basis accounting. The knowledge of owners and time constraints emerged as key challenges of proper record keeping. It was found that the cost, time and complication of using an Accounting Information System (AIS) are the main barriers to its use. Most micro businesses recruit their accountant based on a recommendation. Although some micro businesses would seek advice from an accountant, the owner’s family and Business Gateway are the most used sources of advice. This research identified a number of challenges running a business ethically and also found that some of the micro businesses were carrying out unethical activities. In general, the researcher found that micro businesses’ ethics are the personal ethics of the owners.
A number of social responsibility related activities were identified relating to the local community and motivated by religious belief, in the case of Muslim owners. A number of overall challenges to micro businesses were identified, such as online businesses and superstores, employees, time, Brexit, cash flow, the tax and VAT burden, and financial difficulties.

Practical implications: Micro businesses owners can seek advice from an accountant to improve their accounting practices rather than using only statutory services. Moreover, the accounting community can look into improving the relationship with micro businesses. Better support and training from government and HMRC is needed together with a reduction in the tax burden.

Originality/value: There have been some studies relating to accounting practices in small and medium enterprises (SMEs) carried out in other countries, but hardly any related to microbusiness have been explored, and none were found that looked at all these aspects in one holistic study. A considerable number of newly identified factors have been added to the body of knowledge. As a result, this research provides a wider view of accounting practices, business relationships of micro businesses and challenges in Scotland.
Therefore, the study contributes to knowledge by providing the first rounded view of accounting practices and the business relationships of micro businesses. This study provides a better and clear understanding of the micro business operation and relationships, in terms of accounting practices, accountant relationship, business ethics and social responsibility.

Keywords: Micro business, accounting practices, ethics, social responsibility, accountant relationship.