Employee Training, Managerial Commitment And The Implementation Of Activity Based Costing; Impact On Performance Of SMEs

Abstract

This article examines the implementation of activity-based costing (ABC) in the SMEs sector in a developing country. The consequences of ABC on the evolution of management accounting and its impact on the accounting processes, particular as it relates to organizational cost performance has been a subject of discourse in the past two decades. This study provides some insight into the conspicuous paradox that in spite of the theoretical benefits of ABC, very few SMEs in South Africa adopt it and that a material number of those that employ ABC do not actually implement it. It is a preliminary study which begins by describing the differences between the traditional and the ABC cost systems; particularly examining the impact of employee training and managerial commitment to ABC implementation. An overview of some literature on ABC and the value of ABC implementation in SMEs sector is provided, reporting some experiences of South African SMEs in implementing ABC. A framework for the implementation of ABC in SMEs and impact on their performance is presented. Using survey data collected from SMEs (n = 149), the results and discussions indicate the prominence of both employee training and managerial commitment as precursors to effective implementation of ABC and that its implementation impacts on SME performance. Implementation of ABC precedes the creation of a costing system that provides management with reliable cost information. The paper concludes by providing, managerial implications, limitations and proposed future research.