A list of Critical Business Expenses that Entrepreneurs fail to Prepare for
It goes without saying that running a business is an expensive affair. Rookie entrepreneurs spend more energy, money and time on launching their businesses. Inexperienced entrepreneurs contemplate more about the money they can make out of their venture rather than the expenses they will incur while running their business. It’s a grave mistake, which can be corrected with the help of accounting firms in Dubai.
Newbie business owners are alert about what it takes to launch their business such as equipment costs and cost basis for their main products. However, they often ignore some expenses that are critical for the sustenance of their business. Ignoring such expenses in the planning phase will present you with some rude shocks down the road. To avoid such mistakes, let’s go through some of the top mistakes that entrepreneurs often fail to prepare for:
Expenses Related to Taxes
As you all know, the UAE will soon cease to be a no-tax region as corporate tax will come into effect from June 2023. Also, businesses have been subject to Value Added Tax (VAT) since 2018. Taxes can get complicated fast, even if you are not a big corporate group. You must know how much of your revenue must be kept aside for VAT and corporate tax in the UAE.
You must do proper research and build the tax costs into your profitability model. This type of planning and stratification will save you from a rude awakening at the time of tax return filing in the UAE. Administrative penalties could break the neck of SMEs during the tax season. Business owners without a VAT or corporate tax strategy can seek the help of accounting firms in Dubai to develop the same.
Most businesses put insurance-related expenses at the bottom of their list while considering the costs for a new business. Even though a diverse range of business insurance is available in the market, you may not need all of them. However, you must have a firm understanding of what your requirements are. For instance, you may need general liability, product liability or even professional liability insurance policies, depending on your business. Analyse the cost of your insurance requirement and squirrel away appropriate money for it.
It’s common for entrepreneurs to project their rent costs into their company’s financial models. However, they turn a blind eye to the cost of utilities. Depending on the size and location of the business, you may end up paying a huge amount of money every month on internet costs and bills for electricity, phone service, water, janitorial services, gas etc. Get a clear picture of the utility costs and add them to your company’s financial model during the planning phase itself. Seek advice from accounting firms in Dubai for further guidance.
If you are working with a considerably good number of employees, you will be doling out significant employee expenses every month. The employee expenses even include basic needs such as the cost of office supplies you have purchased to make the employees work productively. The expenses also include reimbursements for business-related travels, food or other costs incurred while they carry out their duties.
Software Subscription Costs
Software subscription costs are inevitable in an era when digital transformation has become the key to business success. You may need to subscribe to software while running a content marketing campaign, keep track of your inventory or get specific jobs done. Though automation eases your job, the cost of subscription software packages always goes upward. If you are not prepared for such costs, you will face a tough time during the early stages of your business growth. Outsourcing your accounting function to accounting companies in Dubai will help you efficiently account for such costs.
Emergency Repair Costs
Any expense that comes with the prefix ‘emergency’ will give a tough time for entrepreneurs. You must be prepared for emergency repairs as anything can go wrong in your business anytime. A piece of equipment may fail, windows could be broken, someone may steal a piece of equipment, or laptops may stop functioning out of the blue.
Emergency repairs are expenses that you can’t predict or anticipate. Such unexpected expenses may derail an otherwise sound budget. The best solution is to leave room for common emergencies and unexpected expenses. Such an approach would help you to efficiently manage any expense.
Additional Human Resources
Entrepreneurs often underestimate the number of employees they need while running a business. Human resources often turn out to be an expensive process, especially if you are hiring full-time staff. That is the reason why business owners hire only a few full-timers at the start of their business.
However, when customer needs start ramping up, you may need to run around for hiring new employees. The cost of new hiring could create a major dent in your financial projections. Wise entrepreneurs come out of this situation uninjured by opting for alternatives such as outsourcing or hiring part-timers or freelancers. For example, you can save costs by outsourcing to accounting firms in Dubai instead of hiring a full-time in-house accountant.
Jitendra Chartered Accountants can Advise you on Expenses
New entrepreneurs often come out with a sound budget that includes major costs for starting their business. However, they ignore certain key expenses that they may incur while running the business. Investors need to research more to create a robust financial model, for which accounting firms in Dubai such as Jitendra Chartered Accountants (JCA) can help. JCA has more than 20 years of market experience and has assisted SMEs, startups and MNCs to develop sound budgets and robust financial management.
Availing of JCA’s accounting services in Dubai helps you to access a wide range of related services such as corporate tax planning, audit, VAT compliance, ICV certification assistance, corporate finance services etc. We also help you comply with mandatory requirements such as Economic Substance Regulations (ESR), Ultimate Beneficial Ownership (UBO), and Anti-Money Laundering & Combatting Financing of Terrorism (AML-CFT).