Financial reporting challenges in small and medium enterprises in Tanzania: the case of small and medium enterprises in Dar es Salaam

This study investigated the financial reporting challenges in SMEs in Tanzania. The study was carried out by way of a survey of a sample of 50 SMEs located in Dar es Salaam and face to face interview with a few respondents using structured interview guide. The respondents were divided into three groups i.e. owners/managers, accountants and respondents from Tanzania Revenue authority, entrepreneurs and tax consultants firms. The result of the study revealed that financial reporting in SMEs in Tanzania is very poor and do not comply with accounting standards. Secondly it was found that there are weak accounting controls in SMEs and thirdly the use of professional accountants in SME is very limited due to high costs of recruiting and maintaining them. Thirdly, owner/managers did not seem to make use of financial records in making decisions. Additionally, payable tax for almost all the sampled SMEs was not based on booked profits since the current TRA tax regulations requires only companies with a turnover of more than twenty million shillings to produce audited financial statements together with tax returns. The researcher recommends that all the stakeholders for SMEs, that is, the Government through the SME department in the Ministry of industries, Trade and Marketing, development partners, and business development service (BDS) providers embark on a strategy that will encourage and facilitate SMEs to keep good financial records. Good financial records are helpful in making sound financial decision and also in protecting assets from then and mismanagement. NBAA may also help by facilitating the designing of a simple accounting system that is suitable for small businesses.