Role of Management Accounting Controls in Nepalese Small Businesses

Abstract

Decision-making, performance monitoring, and strategic planning management accounting controls (MACs) are crucial tools for decision-making, performance monitoring, and strategic planning in small and medium-sized enterprises (SMEs), particularly in resource-constrained contexts such as Nepal. Although vital, little has been conducted on the adoption of MACs and their impact on developing Circular Economy (CE) innovation in Nepalese SMEs. The paper employs a descriptive-correlational research design with a quantitative nature in Dhangadhi sub-metropolitan city, surveying 116 respondents across 22 SMEs, which include manufacturing, services, cooperatives, agriculture, and trade. The data gathered was analysed with the help of SPSS and SmartPLS, using descriptive statistics, correlation analysis, regression analysis, and structural equation modelling. Results indicate that there are positive and significant relationships between MACs and CE innovation (r = 0.56) and business performance (r = 0.62), and that CE innovation also relates positively with performance (r = 0.58). According to multiple regression, the combination of MACs and CE innovation is the strongest predictor of business performance (R² = 0.536), without any multicollinearity or autocorrelation problems. The findings indicate that MACs are an important factor in the adoption of CE and improved performance, where CE innovation partially mediates the connection between accounting controls and business performance. These lessons offer theoretical and practical advice on what SMEs must do to strengthen internal accounting regimes and incorporate sustainability-oriented practices in order to attain both financial and environmental benefits.