Financial Reporting Quality and Business Sustainability in Micro-Small Enterprises: Education, Business Scale, and Technology

Abstract

Micro, Small, and Medium Enterprises (MSMEs) play a central role in driving economic growth across ASEAN and Indonesia, contributing 44,8% to regional GDP and employing 97% of the national workforce. Despite their significance, MSMEs face persistent challenges in financial literacy, technology adoption, and the quality of financial reporting. The 2024 Business Fitness Index reports that Indonesian MSMEs scored only 48 out of 75 in financial health, with 75% still relying on manual bookkeeping and just 34% utilizing digital tools. This study examines the influence of education level, business scale, and information technology utilization on financial reporting quality and its implications for business sustainability. Data were collected from 130 Micro and Small Enterprises in West Jakarta through purposive sampling. The analysis used Partial Least Squares–Structural Equation Modeling (PLS-SEM) with SmartPLS 4.0. Results indicate that education level and technology utilization have a significant positive effect on financial report quality and business sustainability. However, business scale does not show a significant impact. These findings highlight the need to enhance financial literacy and digital adoption among Micro and Small Enterprises to improve reporting quality and support sustainable business performance.