ASSESSING RECORD-KEEPING PRACTICES AND FINANCIAL LITERACY ASPREDICTORS OF FINANCIAL STABILITY IN SMES

Abstract

Small and Medium Enterprises (SMEs) in Nigeria face significant challenges, including financial instability, which contributes to high failure rates and hampers economic development and job creation. Poor record-keeping practices and limited financial literacy are critical barriers to effective resource management and operational sustainability. This study investigates recordkeeping practices and financial literacy as predictors of financial stability in SMEs. Specifically,
it examines the extent to which these factors influence financial stability. A descriptive research design was employed, with purposive and stratified sampling techniques used to select 200 respondents from a population of 935 SMEs. Data collection was carried out using a researcher designed questionnaire with a reliability coefficient of 0.89.The findings revealed that effective record-keeping enhances financial management, transparency, compliance, and access to credit,
fostering business growth. Financial literacy enables SME owners to make informed decisions, manage risks, and engage in long-term financial planning, promoting profitability and stability. Together, these practices equip SMEs with the tools to overcome challenges, secure funding, and maintain financial health. It is recommended that SMEs invest in financial literacy training, adopt systematic record-keeping practices, and utilize financial advisory services. Governments and financial institutions should also provide resources to enhance these capacities, ensuring sustainable growth in the SME sector.