Introduction of VAT from January 2018 in the UAE transformed the way local businesses operated. Most sectors including education, healthcare, transportation, financial institutions etc. were impacted. Under the VAT regime, these sectors had to adopt improved accounting, tax reporting and filing and the resultant documentation processes. Failure to maintain reliable, accurate and timely accounting records not only impacts the organisation adversely in terms of finance but also in terms of loss of reputation, fines and penalties. VAT reporting and filing now places heavy emphasis on transparent, reliable accounting practices and supporting documents for all entities registered for VAT with the Federal Tax Authority (FTA).
Benefits of good accounting procedure and practice
- Effective, reliable and insightful accounting records permit the management of a company to take effective and timely decisions regularly. This eventually helps in improved business management, consistent growth and profitability.
- Assists in forecasting cash flow requirements including requirement of funds and utilising working capital optimally and efficiently. This becomes especially critical under the VAT regime where VAT liabilities have to be settled in a timely manner.
- A good accounting process results in timely preparation of quotations, settlement of dues, follow up of receivables and other aspects of the business which is turn results in enhancing the reputation of the Company as a professionally managed enterprise.
- Detailed accounting records and their analysis provide insights into the financial health of a Company beyond the obvious profit and loss statement. They highlight areas of concern before they become critical and enable the management to take corrective steps. Ratio analysis is one such analytical tool.
- Systematic and detailed accounting records provide easy access to source documents and shed light on transactions entered into by an organisation. Easy and timely retrieval increases efficiency, facilitates timely and informed management decisions and becomes a vital support tool in case of litigation.
- Timely and accurate accounting records enable an organisation to meet its reporting obligations to regulators, banks and financial institutions, tax authorities and exchanges.
- Accurate and detailed accounting facilitates tax planning, tax claims and rebates.
- Maintenance of accounting records for a registered entity is mandatory in most major jurisdictions and helps entities to comply with the law.
Components of a good accounting practice
- At a minimum, professional accounting records will generate an income statement, balance sheet, cash flow statement and ledger movements. Extended accounting coverage will include inventory reporting, ageing analysis of debtors and creditors, highlight tax and other statutory liabilities and provide an overview on the financial health of an organisation.
- In case of privately-owned companies, sole proprietary businesses and partnerships, distinguishing between personal and company business and expenses and owner withdrawals and expenses and recording them accurately form the basis of reliable operating results of an organisation.
- It has become imperative to use comprehensive and yet easy to use accounting software that meets the accounting and reporting requirements of an organisation. Reliable accounting software exercises controls, eliminates errors, highlights the performance of an entity at a glance and ensures that all financial transactions are accurately recorded and properly reported to meet statutory and management requirements. Investment in such a software pays for itself many times over in terms of reliability and ease of reporting.
- Good accounting practice ensures that confidentiality is maintained, information is shared on a need to know basis, there is division of duties to avoid conflict and collusion and inbuilt checks and balances are in place to ensure that financial risks faced by an organisation are effectively mitigated. Regular backup both onsite and offsite ensures that financial data will always be available in case of a disaster and financial data can be quickly restored.
Why outsource to a professional accounting firm?
Concentrating on key deliverables and outsourcing other functions to third parties is gaining more traction each day. It has become common place for companies to outsource accounting, payroll, accounts payable, tax reporting and such other activities to professional firm of accountants. Similarly, hotels outsource housekeeping, security, transportation and other such vital but not key activities to third parties.
- Smaller companies cannot justify the cost of a fulltime accountant especially when the volumes are low and the attrition rate is high and the associated risks even higher.
- Outsourcing of accounting, payroll, accounts payable, tax and other such functions to a professional accounting firm ensures that an entity derives not only the benefit of a fulltime accountant but also the full depth of the expertise of the Firm without paying a commensurate cost.
- Professional accounting firms bring relevant and up to date accounting knowledge, awareness of statutory laws including taxation, payroll etc. and the obligations of an entity vis-à-vis reporting to various bodies.
- One further advantage of outsourcing is that it protects the organisation from the disruption of employee attrition. Providing seamless and reliable service to clients then becomes the responsibility of the firm despite staff turnover.
- An organisation derives the benefit of knowledge and experience of a Firm and its partners rather than being restricted to the knowledge of one employee. This safeguards the well-being of the organisation.
- Outsourced accounting firms bring unbiased and a wider industry experience to an organisation helping the management take timely decision coupled with facts and figures extracted from financial statements.
- Outsourced firms often take up various matters with tax bodies, exchanges etc. and help their clients in navigating sometimes treacherous regulatory paths to avoid paying fines, penalties and loss of reputation.
Why PKF UAE?
PKF UAE has significant experience of maintaining the accounting, payroll, HR, AP and VAT records of companies in the UAE since the year 2000. It has a dedicated team of 19 professionals out of its Dubai Internet City office who undertake a range of activities for more than 100 clients each month. The practice is partner led with qualified and experienced managers and staff forming the core team. The division has received some glowing testimonials from its clients whom it has serviced over a long period of time(www.pkfuae.com). Providing personalised services in a timely manner at a reasonable fee level has been the driving force of PKF UAE.
Let your accounting obligations be our responsibility!