Financial Performance Implications of Digital Transformation in Accounting Practices: An Empirical Study of Small and Medium Enterprises

Abstract

Digital transformation in accounting practices has been recognized as a strategic resource for improving the financial performance of small and medium enterprises (SMEs). However, little is known about the impact of digital transformation on SMEs' financial performance. This study employs a quantitative research approach with a descriptive and causal research design to examine the relationship between digital transformation and the financial outcomes of SMEs across different industries. The study aims to assess whether the adoption of digital tools such as cloud accounting, AI-driven financial analysis, and automated bookkeeping leads to measurable improvements in profitability, cost efficiency, and financial transparency. The correlation analysis shows a strong positive relationship (r = 0.68, p  0.01) between the level of digital tool adoption and financial performance, indicating that SMEs with higher adoption rates experience better financial outcomes. The findings provide practical guidance for policymakers, business owners, and accounting professionals, guiding them in decision-making processes related to technology adoption.