Small business owners in the UAE have lots to deal with. For those who manage their own company finances, accounting processes can sometimes get neglected. For authorities, this is very concerning. There are financial practices that are simply too costly and risky to ignore from their importance. Among the most vital accounting tips small businesses should remember is to never forget to maintain financial statements.
Reasons Why Your Business in UAE Needs Financial Statements
Shareholders would want to see results. They’re also curious as to how a company is doing. You will need shareholder confidence if you want them to not take away control of the company operations from you. A financial statement is one the best ways in inspiring confidence amongst shareholders. Although company data does not have sensational revenue, it demonstrates attestation to detail, control, and a full understanding on financial management.
Maintain financial records
Statements are proof of the current and previous financial health of a company in essence, they’re recorded data. Where proof of the company’s finances is required like during loan applications or negotiations, audits or filing tax returns in UAE, having financial records that are accurate can greatly reduce admin work, errors and stress from errors, time wastage, and errors that are caused by pouring out old data which are potentially incorrect.
Make management decisions
By producing updated and accurate reports of the financial situation of the business, you’ll be able to make well-informed business decisions regarding the direction in which you want your business to take. Through the careful analysis of your balance, cash flow, and income statements, you’ll be able to review financial data and create changes as you deem fit. For instance, you’re noticing pattern of overspending, the months in which income dips or evident decline of a specific product’s sales. The changes may not seem very obvious. Financial statements can be the way of discovering them prior to them becoming a huge issue of the business.
Entice investment opportunities
In the world of investments, cash is always the king. There are some investors that might have taken interest on your business as it’s innovative, unique or new. The investors may be willing in taking a risk; however, they’ll want empirical evidence on the fact that they will be getting their money back plus more.
Financial statements will let you showcase your business’ success and growth in a way that the investors appreciate. Financial statements can also let you forecast the projected revenue, which would help in enticing investors even when the business carries a certain risk.
Read more: Facts You Should Know About Fraud Auditing
If you want to ensure that your business does not neglect its responsibility of maintaining accurate and up-to-date company financial statements, then seek the help of experts. At Farahat & Co, our team has a reputation for experience and excellence. Our team is the best auditors in UAE at all that they do and have the accounting and audit skills in getting them done. We work hard for every client until they’re completely satisfied. With our decades of experience in the industry, we help businesses develop key solutions that produce results. To learn more, call us today!
You may want to know Audit for Profit and Loss Statements in UAE: Why It Is Needed
What are the kinds of financial statements my business should retain?
There are generally three kinds of financial statements small businesses must never forget to maintain and produce.
- Income reports – income reports provide an accurate representation regarding the money-making abilities of a company for a specific period of time, either quarterly or monthly. The reports allow the company administration and third parties to see where exactly company funds are being earned and spent.
- Cash flow statements – cash flow statements are documents which use data that are created from financial reports, balance and income, to show the financial progress of a business over a certain period of time. The reports provide details as to whether or not a company is profitable and if profits increase or decrease over time. Cash flow statements are done on a yearly bases, but they should be produced by the business at any time of the ear should you wish to see an update of the company’s financial situation.
- Balance sheet – a balance sheet is a representation of a business’ wroth at any given time. It takes into account the financial assets of the business, liabilities, shareholder equity, and capital in order to report how much money the business owes and owns.
Should Invoices be kept?
Incoming and outgoing financial transactions that occur between a business and third parties are to be kept. If invoices are not produced for transactions of a business, it’ll become very hard to create financial statements that are accurate and maintain accounting and bookkeeping practices. Always make sure that your business has a financial statement that records all transactions, even for small purchases that are made for the business.