Management Accounting and Profitability in Private Healthcare SMEs

Management Accounting and Profitability in Private Healthcare SMEs

Riikka Maarit Holopainen (University of Eastern Finland, Kuopio, Finland), Mervi Niskanen (University of Eastern Finland, Kuopio, Finland) and Sari Rissanen (University of Eastern Finland, Kuopio, Finland)
DOI: 10.4018/IJPPPHCE.2019010103
OnDemand PDF Download:
No Current Special Offers


The purpose of this article is to examine the management control practices in small and medium-sized health care enterprises (SMEs). Previous studies suggest that there are often few, if any, comprehensive management control systems (MCS) or there is lack of systematic management accounting or performance management (PM) monitoring in even fairly large SMEs. The first contribution of this article is to present nine years of financial data of micro companies. The data itself is quite unique and not open data for everyone. On one hand, it gives further information about diverse and complex combinations of the profitability process in the small companies and how the MA systems affect it. Based on the contingency theory conception, this article finds that the management accounting practices such as a budgeting system or increased cost knowledge of the company influence the company's performance. Further, some of the contextual factors such as size and age of the company affected the company's performance in this study.
Article Preview

1. Introduction

The aim of this paper is to investigate the impact of managerial planning and the use of management accounting systems (MAS) on SME performance. The performance of the company has been measured in several ways in earlier literature. Arnold et al. (2010) measured organizational performance as strategic flexibility and supply chain performance. Instead Bitichi et al. (2010) measured performance as revenue growth, profitability growth, productivity or return on investments (Arnold et al. 2015; Bitici et al. 2010). In this paper the performance is measured with one of the profitability indicators EBIT/SALES. In order to get the broad picture of the performance of the company, we build our analysis on the contingency theory framework and on the contextual factors of small firms (size, strategy, environment, and organisational structure) and we also include into our research the owner managers’ role and the effect of business partners, which can both be important factors in the profitability of a company (Drazin R & Van de Ven A., 1985; Jänkälä, 2007).

Previous studies have investigated MAS in some specific industries such as new economy firms (Granlund & Taipaleenmäki, 2004), small technology firms (Laitinen, 2001), public sector organisations (Järvenpää, 2007, 2009) or restaurant chain companies (Ahrens & Chapman, 2007). However, it can be argued that the literature on the role of the management accounting of SMEs is still scarce (Garengo et al., 2005).

Managers often prefer the management systems as imperfect but adequate for the task (Ahrens & Chapman, 2007). This reduces the need for the development of MAS. Accordingly, previous research has indicated that there are often only a few, if any, systematic management control systems (MCS) or performance management (PM) tools in SMEs (Garengo et al., 2005, 41; Granlund and Taipaleenmäki, 2005; Laitinen, 2001). Contrary to this, it has also been shown that some SMEs in some industries such as high technology firms use very sophisticated MCS (Laitinen, 2001).

The data of this study, collected from healthcare companies from Eastern Finland, has many special features. The healthcare industry is a labor intensive service business. Traditionally, healthcare companies have been small companies although during the last few decades, many big national and international companies have become involved in this business. Further, in Finland, these companies often have only a few big customers such as municipal organizations. Based on these features, the healthcare industry has its own challenges to gain growth and profitability. (Rissanen et al., 2011).

Complete Article List

Search this Journal:
Open Access Articles: Forthcoming
Volume 6: 2 Issues (2022): Forthcoming, Available for Pre-Order
Volume 5: 2 Issues (2021): 1 Released, 1 Forthcoming
Volume 4: 2 Issues (2020)
Volume 3: 2 Issues (2019)
Volume 2: 2 Issues (2018)
Volume 1: 2 Issues (2017)
View Complete Journal Contents Listing