Financial Accounting Practices and Business Sustainability: Evidence from Selected Registered Small and Medium Enterprises in Ekiti State, Nigeria

Abstract

MEs are key to Nigeria’s economy, but poor accounting practices and weak financial management threaten their sustainability and growth. This study investigates the impact of financial accounting practices on business sustainability among selected registered small and medium enterprises (SMEs) in Ekiti State, Nigeria. SMEs are vital to Nigeria’s economic growth, yet many face sustainability challenges due to inadequate financial management and weak accounting systems. Using a quantitative, cross-sectional survey design, data were collected from 280 SMEs through structured questionnaires. Descriptive statistics revealed that most SMEs reported moderate to high adoption of financial accounting practices, internal controls, and financial reporting, though the use of computerized systems was less prevalent. Pearson correlation analysis showed significant positive relationships between financial accounting practices, internal controls, financial reporting, computerized systems, and business sustainability. Multiple regression analysis indicated that all four variables had significant positive effects on business sustainability, with financial accounting practices having the strongest standardized effect (β = 0.298, p < 0.01). The model explained approximately 52% of the variance in business sustainability (R² = 0.520). Diagnostic tests confirmed the validity of the regression results, with no evidence of multicollinearity, heteroscedasticity, or autocorrelation. The findings align with previous studies, confirming that robust financial accounting practices, effective internal controls, regular financial reporting, and the adoption of computerized systems are critical drivers of SME sustainability. The study recommends that SME owners invest in accounting education, adopt best practices, and leverage technology, while policymakers should support capacity-building and access to affordable accounting solutions. These measures will enhance the long-term sustainability and performance of SMEs in Ekiti State and beyond.