Accounting is one of the oldest yet one of the most important functions which a business can perform. It is so essential that no matter the size or the nature of the company, each and every Business should avail of accounting services. Therefore, maintaining the books of Accounts are deemed mandatory for a business in the UAE. Here are some of the questions that will help you know why accounting is an essential service for your business.

What do you mean by Accounting for a Business?

The accounting function of a business is one of the most crucial functions which should be performed by all companies irrespective of the size and nature of the Business. This function is so essential that Accounting is considered the language of Businesses. This is because the management can understand the complete financial picture of the Business after the comprehensive analysis of all the financial records.

Accounting can be defined as a process in which all the business's financial transactions are recorded, summarised, and analysed. This will allow a lot of benefits to the management of the company, such as understanding the present economic conditions of the company, setting up a budget and will also help in setting a path for the future of the Business. Furthermore, accounting is helpful to the business and can also be very helpful to the investors of the company, both present and potential. It will assist the investors in making informed decisions about investing in the company.

Many different services required by the business, such as Tax Filing Services, Payroll Services, Accounting Analysis, and many others, need the accounts to be prepared beforehand to perform. For more details about Accounting in UAE, refer to our blog titled “All about Accounting in UAE”.

Benefits of Availing Accounting Services

Accounting can have numerous benefits for the business. Let’s have a look at these benefits that can be derived from the Accounting service:

Decision Making

Decision Making

Accountancy and Bookkeeping services help an organisation make decisions regarding purchase, expansion, promotion, demotion, budget preparation and many other important business decisions. Such services allow the management to take decisions considering both the Internal and the External business environment..

Legal Requirement

Legal Requirement

Accounting books are to be maintained transparently and clearly so that it helps in simplifying the audit process and provide the necessary information about the legal requirements to be followed. According to the laws in UAE, proper accounting records of the company are to be maintained at least for the previous five (5) years, and failure to do so will have severe legal implications for the company.

 Sustainability

Sustainability

The clarity in the accounting records will help the business sustain itself in the competitive market by providing clear and accurate information about the business to the investors and providing all the necessary data to the management to make the critical decision for the future of the industry.

Tracking Malpractice

Tracking Malpractice

It becomes easier for any firm to track any financial malpractice in an organisation if the accounting records are maintained. Moreover, on finding any discrepancy, these malpractices can be rectified so that the business faces no more problems in the future.

Budget Preparation

Budget Preparation

The budget plays a significant part in the life cycle of the business. With proper accounting, the company will be able to prepare the budget for the future. It will also provide the flexibility to the management to increase or decrease the budget as per the company's requirement. These budgets, either for the whole company or the entire department, can be prepared or controlled.

Averting Financial Crises

Averting Financial Crises

After accounting, all the information are recorded in the form of statements, and these recorded statements are evaluated and analysed continuously. This will help the management have a deeper understanding of the company and the present and upcoming trends in the business environment. The analysis of these records will reduce the risk of a financial crisis occurring in the organisation.

These are some of the benefits which can which management can avail by implementing accounting for the business. To know more about the benefits of accounting to a company refer to our blog titled “8 Reasons to entail Bookkeeping and Accountancy practices for SMEs.”

Why is Accounting Important to a Business?

There are many advantages of accounting to a business. The main objective of Accounting is to record, summarise, and analyse all the business's financial transactions. Thus, it helps both the management of the company as well as the investors of the company. Accounting is a necessity for companies of all shapes and sizes.

Many people believe that some businesses, especially small businesses and start-ups, do not require accounting and bookkeeping for their business. Even the smaller companies will require accounting assistance from time to time. For more, you can check out our blog titled “Why is Accounting an Important Function - Especially for Small Businesses.”

Some of the benefits of availing Accounting Services are:

  1. It helps maintain all the company's records, and these records can be used at any point in time for the purpose of Tax Filing, Analysis, or making plans for the future of the Business.
  2. The Analysis of all the transaction records helps in understanding the current financial standing of the company.
  3. All the different records will help the company to keep track of the finances of the company. These records can also be used when the company is looking to arrange for loans and can also be presented in a court of law.
  4. The records of the company will also tell us about the compliance situation of the Business. Having the knowledge of compliance is very important for the management as non-compliance can lead to various penalties and other problems for a business.

There are many more advantages that a business can avail if the management opts to avail the accounting services. The administration should take care that the accounting services are imparted only by professionals who will take care of all the financial aspects of the Business.

What is the Difference between Accounting and Bookkeeping?

When we talk about Accounting, the term bookkeeping is also thrown around. Many people have the notion that Accounting services are equivalent to Bookkeeping services, which is an entirely wrong assumption. There are differences between these two. Some of the differences between the two are explained below:

  1. The accounting process includes Recording, Summarising and analysing all the company's financial transactions, whereas the act of bookkeeping includes recording all the company's financial transactions. Therefore, there is no analysis involved in the process of bookkeeping.
  2. The process of Accounting is associated with the analysis of the financial transactions of the company and then taking decisions for the future of the Business. In contrast, bookkeeping is associated only with the recording of all the transactions of the Business.
  3. We can say that the Accounting process is inclusive of the Bookkeeping process. Still, Bookkeeping is a step in the complete procedure of Accounting and forms the basis for the Accounting process so that the Accountant can help the management in taking decisions.

There are various other differences between Accounting and Bookkeeping. This is why it is required to conduct the necessary research by the management so that no problem to the Business in the future.

What are some important things to Evaluate before Choosing an Accounting firm?

Availing the services of a professional in the field of Accounting is a very important decision for a business and can change the financial condition of the business for better or for worse. Choosing the accounting department of a business has to be done with the utmost care as this will not only help the workings of the Business but will also allow the company to enhance its goodwill among the present and potential investors.

Here are some important points to keep in mind before evaluating a business.

  1. The fees charged by an accounting firm should be well within limits. If the firm is charging more, then the Business will have to think hard if the services provided by the firm are really necessary for the Business or not.
  2. The number of services provided by a firm is very important to know by the management. There are firms that will also provide services related to accounting which will save time. They will already have all the accounting data of the company, and this will make it less time taking for these firms to process the information.
  3. The certifications of the firm are very important criteria to check with great care by the management. The Certifications will help the management to understand which are the different areas in which the firm is comfortable providing its services. The control can also check the reviews of the firm to make a better and informed decision.

Apart from the points given above, there are a number of different factors which the Business should keep in mind while choosing an Accounting firm

The accountant, either a firm or an individual, plays a very important role in the growth and development of the business. Therefore, the accountant handling the creation and analysis of the books of accounts must possess certain qualities which will help the growth and development of the business. To know more about the qualities accountant's should possess, you can go through our blog titled “12 ways Accountants are a boon to your business”.

 

What is Outsourcing, and what are the Advantages of Outsourcing Accounting Functions?

Outsourcing is a practice in which some of the business activities are allocated to a third party or a different company. Such activities are primarily repetitive or which has to be performed again and again. This takes up a lot of time of the management; thus, the resources are used up. Therefore, it can be a strategic move for the business to improve its present condition

With the help of outsourcing, it will be possible for the companies to focus the maximum energy and resources of the company on what is the most required activity of the Business. A business can conduct outsourcing as a measure for cost-cutting or make the exclusive use of resources available to the company.

There are a number of advantages of outsourcing the accounting services of a company. These are:

  1. This practice will save the essential resources of a company, such as money and will also help the management properly focus on the core product or services and make it better.
  2. The firms to which the accounting is outsourced will have all the latest technologies and will also be updated with the latest iteration of the rules and regulations of the jurisdiction, which will, in turn, help the business fulfil all the compliance requirements.
  3. With the management being able to receive better and detailed information about the company, it will be able to make better decisions for the Business. It will also be able to plan the future for the company.
  4. When an activity is outsourced to a third party, the company is free from investing its resources in repetitive activity, which provides the Business with flexibility, allowing the Business to try out new product lines.

To know what more advantages are offered by outsourcing the accounting, feel free to read out the blog titled “Advantages of Outsourcing your Accounting Functions.”

How can Accounting Software help your Business?

In recent years we have seen a rise in the numbers of Small and Medium Businesses in general. These are businesses that do not have huge funds and may feel that availing of professional accounting assistance is not necessary for their business. Still, they can not be further from the truth. In order to save funds and use them in some other activity, these businesses might be inclined to remove the Accounting function altogether. They might feel that it is a repetitive activity and uses up a lot of company resources. And saving these resources can be a massive boost to the business.

There are various ways by which the accounting software can assist the Business. These are:

  1. It can help monitor the company activities, record all the transactions and provide a small summary of the transaction and can also help the employees of the Business by monitoring their activities.
  2. The accounting software will track all the activities which are performed in the Business, and this will allow the management to understand if any fraudulent activity is happening in the Business
  3. Many softwares have the option of shoeing a live dashboard that will show the present condition of the Business. This can be very helpful for the management for quickly understanding the presence of the Business.

There is a huge contribution of technology in shaping the ways businesses work today. To know more about the advantages of using Accounting Software, please give a read to our blog titled “How does Accounting Software help to Improve Productivity?”

Why is Accounting Necessary for Small and Medium Businesses?

In recent years we have seen a rise in the numbers of Small and Medium Businesses in general. These are businesses that do not have huge funds and may feel that availing of professional accounting assistance is not necessary for their business. Still, they can not be further from the truth. In order to save funds and use them in some other activity, these businesses might be inclined to remove the Accounting function altogether. They might feel that it is a repetitive activity and uses up a lot of company resources. And saving these resources can be a massive boost to the business.

But this is a wrong thought, and there are some reasons which can help a Small and Medium Business require accounting function:

  1. The accounting process can provide all the necessary details about a business to both the management as well as the inventor. This will help the management in understanding the present condition of the Business and making a plan for it, and it will also assist the investors in making an informed decision about the company.
  2. The accounting process will also help the management understand the company's tax situation and provide help in filing the company's taxes. Tax filing can be a real intricate issue for a business, and it is imperative to tackle such cases, or the business might have to pay huge fines and other penalties.
  3. Maintaining the business records, at least for the last five years is the correct practice and should be followed by all the businesses.

For more details on why Accounting is important for Small and Medium Enterprises, you can go through our blog titled “The importance of Accounting for SMBs in 2021.”

JAXA Accounting Services

At JAXA, we aim at streamlining our clients’ accounting and administrative systems. We provide a wide range of services that include:

  • Maintaining accounting records and secure database
  • Preparing management reports
  • Preparing and maintaining sales and purchase ledger
  • Reconciling bank statements
  • Generating creditor listings and inventory reports

Why JAXA?

Being a financial consultant in Dubai, we understand the crux of the business establishment process. We assure our clients in providing reputation building, maximizing credibility, and standing out from their competitors. We hold ISO 9001-2015 certification and follow the International Financial Reporting Standards (IFRS) to main professionalism in our deliverables that made us one of the top audit firms in Dubai. Currently, we hold more than 1500+ clients at a global count that includes multinationals, limited liability, offshore companies etc., and are registered with free zones like Jebel Ali, Dubai Airport, Ras-Al-Khaimah, and Sharjah Airport etc. Our team experts are members of the Institute of Chartered Accountant of India (ICAI) and hold high industry experience in the field of Finance, Auditing, and Financial Advisory Services that guides you in the financial journey of your business.

FAQs

What is the corporate tax rate in Dubai?

There is no corporate tax in the UAE, except for foreign banks and the oil industry.

What is IFRS?

IFRS stands for International Financial Reporting Standards. These set rules have been designed in order to bring transparency and a common rule in the world of business affairs across boundaries. The UAE Commercial Law came into force on 1st July 2015 and mandates the application of IFRS rules to all companies while preparing their accounts.

Are the IFRS applicable to SMEs?

Yes, IFRS apply to SMEs in the UAE as well.

What are the records to be kept as per the applicable laws?

Every company is required to keep accounting records showing its transactions to accurately reveal at any time the financial position of the company and enabling the partners or shareholders to confirm that the accounts of the company are properly kept in accordance with the provisions of the Commercial Companies Law or any other applicable Laws. Such records include, but not limited to, bank statements, sales and purchase invoices, payment and receipt vouchers, LPOs, contracts/agreements, etc.

What is the period for which accounting records are to be kept?

Every company is required to keep its accounting books in its head office for a period of at least 5 years from the end of the financial year of the company.

Are electronic copies accepted?

A company may keep an electronic copy of the original documents and records kept.

What are the benefits of using proper accounting software?

A proper accounting software:

  • Reduces the time spent on manual processes
  • Provides greater accuracy, with minimal errors
  • Generates real-time financial information
  • Can create automated invoices, credit notes and receipts
  • Employs innovative financial technology
  • Saves money on resources
  • Leads to faster record-keeping, which generates more business

Accounting Services in Dubai