Startups and small businesses are the lifeblood of every economy. Over time, the UAE has created a favorable environment for entrepreneurs and small companies. However, there are an alarming amount of startup failures to go along with the stories of startup success. Cash flow concerns, as well as a variety of other issues, can be blamed for startup failure. With the expertise of top accounting firms in Dubai, many of these issues may be overcome. Meanwhile, we’ve compiled a list of successful accounting practices that every startup in 2022 should implement.
To be on the right side of the law in the UAE, entrepreneurs need to stay up to date on the newest regulatory changes. With the introduction of VAT in 2018, the accounting and bookkeeping burden on businesses has increased. Economic Substance Regulation (ESR) and Ultimate Beneficial Ownership (UBO) legislation followed. An accountant’s employment includes handling obligations such as completing VAT returns and keeping books of accounts following the VAT, ESR, and UBO rules.
Non-compliance with any of these regulations will result in hefty fines, which will ruin the company’s image in addition to incurring a financial loss. Most startups have just one accountant, who may not be able to keep track of all of the regulatory compliance needs. This is where the help of accounting firms in Dubai can help entrepreneurs.
Successful entrepreneurs know how to distinguish between their business and personal life. However, the same people make the grave error of combining personal and company spending. An entrepreneur who is unable to keep both expenses separate will lead to a rocky start-up journey. If you believe this applies to you, begin by setting up separate bank accounts for personal and company expenses (if you haven’t already).
Every business owner seemed to have realized the need of laying aside funds for the future since the outbreak of the epidemic. If an unexpected incident occurs, the emergency savings will come in helpful. It may occasionally assist you in making a tax payment when you are in a hurry. You can prevent charging up business credit cards by saving for the future.
The most difficult hurdle for businesses, especially in the pre-funding stage, is effectively managing cash flow. A month in which invoices go unpaid can be a nightmare for your business and jeopardize your ability to pay your payments. This frequently occurs when your clients do not pay on time. Payments, as well as terms and clauses for client activities, should be included in your terms and conditions. Paying late is a no-no. You should be prepared to enforce the repercussions if your invoices are due on account of a late-paying client. Don’t be concerned about losing a client; sticking to a chronic late payment can only harm your business.
Inventory management is an important cog in a company’s profitability wheel. When it comes to the things they sell, however, most startups and small businesses are unaware of basic inventory management methods. Some firms have insufficient inventory, preventing them from meeting client expectations. Many other businesses overstock things, causing money to flow out of your company. Customers will flee if you have too little product, and too much inventory will disrupt your cash flow.
Your company must choose a reliable cloud-based backup solution. If your accounting system isn’t up to par, important financial documents will be lost or destroyed. During a tax audit, the Federal Tax Authority (FTA) may require you to reveal some of your records, and your failure to do so could result in penalties. According to item number 7 of Cabinet Decision, No 53 of 2020 on UBO administrative sanctions, failure to protect UBO records from destruction or loss is a serious violation. Accounting firms in Dubai can advise you on the finest cloud-based storage options for your financial documents.
An effective accounting approach influences the success of startups in the UAE, from managing cash flow to maintaining compliance with legislation. Startups and small businesses, on the other hand, often lack a well-developed accounting team. However, the assistance of seasoned accounting firms in Dubai, such as Alya Auditors, can help a startup expand favorably. We have a staff of highly qualified accounting specialists who can assist you with VAT filing, ESR, and UBO needs, among other things. Startups can achieve greater company success by using Alya Auditors’ customised services.