The Critical Role of Accounting Systems in the Financial Performance of Small and Medium scale enterprises (SMES) in Nigeria (A case study of Bauchi Metropolis)

Small and Medium Enterprises (SMEs) are significant contributors to economic development and job production, particularly in emerging countries like Nigeria. However, many SMEs struggle to attain long-term viability owing to poor financial management practices and insufficient accounting systems. This research explores the critical role of accounting systems—specifically bookkeeping and internal control in the financial performance of SMEs in Bauchi State, Nigeria. Using a quantitative study approach, data was obtained from 150 registered SMEs in Bauchi Metropolis via questionnaires. Pearson correlation and regression analysis found a significant positive relationship between bookkeeping, internal control, and financial performance. Bookkeeping accounted for 68.5% of the variation in financial performance, whereas internal control explained 94.4%, demonstrating its vital role in financial success. The results underline the necessity of implementing structured accounting processes to promote transparency, limit risks, and maintain compliance. This study offers practical insights for policymakers, SME owners, and financial institutions, while also addressing a large research vacuum on the role of accounting systems on Nigeria’s SME sector. Further study is required to examine different financial behaviors and increase the geographical scope to enhance the generalizability of the results.