Enhancing accounting capability through the digitalization of financial reporting among MSMEs in Madiun Regency

Abstract

Micro, Small, and Medium Enterprises (MSMEs) play a vital role in regional economic development; however, many continue to face difficulties accessing external financing due to the absence of structured financial reporting. This study aims to explore how the digitalization of financial reporting can enhance the accounting capability of MSMEs in Madiun Regency, with a particular focus on the use of Modern Finance (MOFIN) MSMES, a digital reporting application developed by the researcher. Using a qualitative descriptive approach, data were collected through an in-depth interview with one MSME owner. The interview guide was developed based on key themes from Taasim and Yusof (2017), covering daily transaction recording, understanding of basic accounting principles, experiences with digital applications, perceptions of financial reporting requirements, and the need for accounting and digitalization training. The findings reveal that the MSME owner initially relied on irregular manual bookkeeping and had limited conceptual understanding of accounting. The introduction of MOFIN MSMES increased awareness of the importance of systematic financial reporting and demonstrated potential benefits such as automated statement generation and real-time cash-flow monitoring. However, low digital literacy remained a barrier to consistent adoption. The study concludes that combining accounting training with the implementation of digital tools is essential for improving MSME financial capability and strengthening access to financing. Future research should involve a larger number of MSMEs, compare multiple digital applications, and evaluate the long-term impact of digital reporting on business sustainability.