The term accounting is often thrown around during tax season. Before we look into how important proper accounting in UAE is for business, let us cover the basic:
what is accounting?
Accounting is the term used in referring to the detailed and systematic recording of an organization’s financial transactions. There's a lot of types from accounting for corporations to forensic accounting, management accounting, government accounting, and accounting for SMEs.
How is Accounting in UAE necessary for Businesses?
Accounting plays a crucial role in business operations as it helps in tracking income and expenditures, provide management, investors and regulators with quantitative information on the business’ finances that can be used in decision making, and ensure statutory compliance.
There are three financial statements that are generated by records of a company.
- Income statement – the income statement offers information regarding the profits and losses of the company;
- Balance sheet – it gives a clear picture with respect to the business’ financial position on certain dates or period; and
- Cash flow statement – the bridge between balance sheet and income statement of an organization. It provides a report on the cash that is generated and spent within a particular period of time.
It is critical for a business to keep its financial records accurate and updated if it wishes to stay afloat and profitable. Below are some of the main reasons why accounting isn’t only beneficial, but necessary for a business regardless of its size.
Helps a business evaluate its performance
The financial records of your business reflect the result from operations, including the organization’s financial position. In other words, records from accounting help in understanding what is really going on with the business financial-wise. Not only will updated and accurate records help you and your partners in keeping track of gross margin, expenses and possible liabilities, it can help as well in comparing your current data to previous accounting records. Additionally, you will be able to appropriately allocate the resources of the business that are available.
Helps ensure statutory Compliance
Local laws and regulations can vary from an emirate to another; however, proper accounting procedures and systems in UAE can help in ensuring statutory compliance for the business – saving it from fines and penalties that can hurt a business’ bottom line severely.
Proper accounting for a business, regardless of its size and where it is in the country, can help ensure liabilities such as Value Added tax and other forms of taxation and regulations are properly addressed on time.
Helps in creating future projections and company budget
Future projections and budgeting are the defining aspects that make or break businesses. Financial records that are taken from proper accounting systems can play an important role with these two crucial tasks.
Projections and business trends are all based on historical data of a company’s finances and they are carried out in order to make sure that the business is profitable. Financial data is appropriate and can be relied on when they are borne out of well-structured, properly implemented accounting processes.
You may interested in reading: How Forensic Accounting in Fraud Examination is Helping Corporate Governance?
Helps in the maintenance of financial statements
Businesses are required in maintaining their financial statements properly as they will be reviewed by auditors when the businesses are scheduled for an audit. Needless to say, it’s essential that a business has proper accounting methods and records, so it is always prepared for when regulators in the country order an audit.
If you’re interested in a more prosperous future for your business, we advise you to seek the help of specialists in accounting in UAE. When considering accounting and bookkeeping services or even business consultants, a single call makes all the difference! Call us today as we have a team of certified public accountants in UAE ready to help you. We can also answer your questions and concerns regarding accounting services in Dubai and relevant regulations. Call now!