The effect of cloud accounting and financial inclusion on the financial performance of MSMEs in West Java, Indonesia: the mediating role of accounting literacy

Micro, Small, and Medium Enterprises (MSMEs) play a vital role in national economic growth via job creation and contribution to gross domestic product. The success and sustainability of MSMEs in the digital era are closely associated with business actors’ ability to understand accounting literacy, as well as to optimally utilize cloud-based accounting technology and financial inclusion services. This study aims to examine the relationship between cloud-based accounting and financial inclusion and the perceived financial performance of MSMEs, with accounting literacy as a mediating variable. The approach used is descriptive quantitative with the Partial Least Square (PLS) method, analyzing data from 118 MSMEs in West Java Province. The results indicate that cloud-based accounting and financial inclusion are positively and significantly associated with perceived financial performance, both directly and indirectly through accounting literacy. Furthermore, accounting literacy was positively and significantly associated with the perceived financial performance. These findings indicate that the relationship between cloud-based accounting systems, financial services access and perceived financial performance is more strongly associated with higher levels of accounting literacy. This research affirms the importance of synergy between accounting digitalization and strengthening accounting literacy, which is associated with digital transformation and sustainable competitiveness of MSMEs in Indonesia.