Analysis of the Implementation of Digitalization of Financial Statements in Micro, Small, and Medium Enterprises

Micro,


A B S T R A C T
Micro, small, and medium enterprises (MSMEs) that use a digitalized financial reporting system can gain easier access to financial services. Structured and accurate financial reports can assist them in applying for loans or obtaining financial support from financial institutions or investors. This study aimed to explore the use of digitizing financial reports for MSMEs in Tulungagung Regency, Indonesia. This study is qualitative observational research. The data used in this study are primary data and secondary data. As many as 30 MSMEs in the culinary field, which are still operating in Tulungagung in 2023, were included in this study. MSMEs are not yet optimal in utilizing digitization due to several reasons, including limited MSME resources, lack of understanding, and limited knowledge of MSME owners who may not have sufficient understanding of the benefits and process of digitizing financial statements and fear of data security and confidentiality. MSMEs may worry about the security of their data when using digitization systems, preference for conventional methods, implementation of digitization systems requires adjustment and integration with existing systems in MSMEs, technical challenges such as inadequate technological infrastructure, limited internet access, or lack of technical skills in operating the system can be an obstacle for MSMEs to use digitization of financial statements. and services, and take advantage of programs and assistance provided to increase their capabilities.
Digitizing financial reports allows MSMEs to analyze their business performance in greater depth. By having access to historical data and the ability to produce more detailed reports, MSMEs can analyze profitability, liquidity, cash flow, and other financial aspects. This information assists in strategic decisionmaking, financial planning, and identification of business opportunities or risks (Bannock, 2019).
In some cases, MSMEs that use a financial report digitization system can gain easier access to financial services. Structured and accurate financial reports can assist them in applying for loans or obtaining financial support from financial institutions or investors. In digitizing financial reports, MSME financial data can be stored safely in a database or cloud storage system. This helps protect data from the risk of loss or physical damage. Moreover, with the right data backup and recovery system, MSMEs can recover their financial data quickly in case of hardware failure or other unforeseen events (Dehghantanha, 2021). This study aimed to explore the use of digitizing financial reports for MSMEs in Tulungagung Regency, Indonesia.

Financial statements
Financial statements are a very important tool for obtaining information about the wishes of certain parties with an interest in financial reports. Financial statements are more meaningful to interested parties when analyzed in more detail, providing information that supports policies to be followed. Financial statements are sheets of paper with numbers written on them, but it's also important to think about the real assets behind the numbers. Priyati stated that financial statements are the end result of the process of recording, managing, and controlling financial transactions in a business unit, which aims to make decisions both inside and outside the company relating to the company's financial condition and performance. Financial statements can be used as a tool to communicate with interested parties using the company's financial information. The financial statements consist of balance sheets, income statements, changes in equity, cash flow statements, and notes to financial statements (Faisal, 2020;Hamari, 2016;Ibrahim, 2018).

Digitization
Digitization refers to the process of translating a piece of information, such as a book, sound recording, image, or video, into bits. The bit is the basic unit of information in a system computer. Digitization is the process of converting all forms of printed or other documents into digital forms of presentation (International Finance Corporation, 2020 (Reis, 2020;Rialti, 2020).

Methods
This study is qualitative observational research. Furthermore, researchers can also classify or group, or create themes for the selected data. Coding is the process of marking the data that has been grouped.
Groups of similar data are given the same code.
Through coding, researchers can produce new categories or themes. Through coding, researchers produce themes or categorizations of research data which are findings. Based on the resulting themes, the researcher then makes brief and systematic descriptions so that the themes found become clearer.
The next step is to look for relationships between one theme and another. The results of the construction of relationships between themes or categories then need to be interpreted so that other people understand them.

Results and Discussion
The results of the study show that some of the 20 research samples in small culinary businesses in  (Rogers, 2003).
They may worry that they will not be able to operate the system effectively or have difficulty solving technical problems. MSMEs are often faced with many business demands that require attention and resources. They may allocate their budget and time to other things that are considered more urgent or important than adopting the digitalization system.
Lack of understanding about the benefits and process of digitizing financial reports may be a factor why some MSME owners are reluctant to adopt this technology. Some MSME owners may not realize the potential benefits that can be obtained through digitizing financial reports. They may not have sufficient information about how digitization systems can improve efficiency, accuracy, and better data analysis in managing their business finances.
Digitizing financial reports requires changes in the way MSME owners manage and report their financial data. Some MSME owners may be reluctant to change the routines and processes they are used to for fear of inconvenience or difficulties in adapting them. MSME owners may perceive the digitalization of financial reports as a complicated and complex process. They may feel that learning and operating digital systems will take up too much time and resources. As previously mentioned, SMEs often have limited resources, including time and skills. They may feel that it is impossible to allocate sufficient time and resources to adopt a digitalized system (Salomon, 2020).
MSMEs are concerned about the security of their data when using digitization systems. They feel that their data is safer and more protected if they use manual or traditional financial reports. Fear of data security and confidentiality is one of the reasons why some MSME owners are hesitant to use a financial report digitization system. Some MSME owners may have a strong belief in manual or traditional methods of storing and managing their financial data. They may perceive that using a manual system can provide a higher level of security and control over their data.
Fear of cyber crimes, such as hacking or data theft, can make MSME owners reluctant to store their financial data in digital format. They may feel that their data is more secure from attacks or security breaches if it is stored manually or confined to their physical environment. Some MSME owners may feel that they do not have sufficient knowledge or technical skills to protect their data by using a digitization system. They are concerned that a technical error or inability to manage data security could cause unwanted loss or damage. MSMEs that collect customer data, such as personal or financial information, may be concerned about the responsibilities and risks associated with managing and protecting this data. They may feel that using digitized systems may increase the risk of breaching the privacy of their customer's data (Sheng, 2012).
It is important to realize that data security is a serious issue that MSMEs need to pay attention to.
However, it is also important to recognize that a good and trusted digitalization system can provide better data security than manual methods. In many cases, using the right digital systems, coupled with the right security measures, can provide a higher level of security than manual financial reporting. Some MSME owners may feel comfortable with the manual financial reporting method they have used so far. MSME owners who have used the manual method of compiling financial reports may have developed certain habits and skills in using the system. They are comfortable with familiar routines and don't want to change the way they are used to working. Some MSME owners may find the manual method simpler and easier to understand than using a digitalization system which may be considered complex. They feel that with the manual method, they have full control over their financial reporting process. MSME owners may believe that conventional methods are sufficient to meet their financial reporting needs. They may feel that the manual system is effective enough in producing the information they need to make business decisions. MSME owners with limited resources, be it financial or technological, may find that the investment in the digitalization system is not worth the benefits they expect. They may prefer to use available resources for other things that are considered more important or urgent (Wamba, 2019;Susha, 2021).

Conclusion
MSMEs have not been optimal in utilizing digitization due to several reasons, including limited MSME resources, lack of understanding and limited knowledge of MSME owners may not have sufficient understanding of the benefits and process of digitizing financial statements, fear of security and confidentiality of MSME data may be concerned about the security of their data when using a digitization system, preference for conventional methods, implementation of a digitization system requires adjustment and integration with existing systems in MSMEs, technical challenges such as inadequate technological infrastructure, limited internet access, or lack of technical skills in operating the system can be obstacles for MSMEs to use digitization of financial statements.

References
Andreani F, Jamaran I. 2020. Digital financial inclusion of micro, small, and medium enterprises