5 Accounting Challenges for SMEs in 2021: How to Overcome Them?
As with any other industry, a big wave of change is sweeping across the accounting industry in line with the challenges posed by the post-pandemic scenario. Accounting firms in Dubai have identified and empowered themselves to help their clients achieve their business goals despite the challenges. In 2021, the role of accountants has changed from transactional accountants to holistic advisers as small businesses need actionable insights to face unprecedented challenges.
The necessity for holistic advice has promoted businesses to outsource accounting services in Dubai rather than relying on in-house professionals. Outsourcing has proven to be the most effective strategy to contain the challenges that businesses face in 2021 such as cash flow, digital transformation, tax reforms and introduction of new regulations etc. So, if you are an entrepreneur looking to enhance your business prospects, read ahead to get a glimpse of the top accounting challenges in 2021.
1. Keep an eye on Cash Flow
Cash is always the king in every business and there is no better time than the post-pandemic era to realise this. In a previous blog, we had written about how cash flow problems forced two well-known companies into liquidation in 2020. The story of e-commerce firm Sprii and Gulf Greetings is a lesson for keeping an eye on credit control and cash flow. The risk of cash flow can be mitigated by implanting strict payment terms, tightening the credit control policy, accurate accounting, and prompt issuance of invoices among many other things.
2. Think Ahead to Embrace Digital Transformation
When Coronavirus struck the world in 2020, businesses in the UAE were forced to embrace digital transformation on an ad hoc basis. The big firms were somewhat successful in doing so but many small companies are still struggling. The world of finance, especially accounting, has witnessed unprecedented digital transformation as Fintech and blockchain gained prominence.
In a recent article, Deloitte predicts that cloud-based Enterprise Resource Planning, automation, and cognitive innovation will gather pace. It says blockchain will contribute significantly to this change. Keeping pace with the ever-changing technology will continue to be the biggest challenge in the coming years which will reflect in reporting, planning, budgeting, forecasting, etc. To beat the digital challenges, businesses need to work with the best accounting companies in Dubai instead of a single accounting professional.
3. Place Disaster Preparedness on Top of your List
Covid-19 pandemic exposed the vulnerabilities of most of the businesses across the world including in the UAE. The pandemic broke the spine of many small and big businesses as they were not prepared for a disaster of this scale. Many companies lacked a disaster management policy and that cost them dearly.
As new variants of the virus are being discovered in many parts of the world, entrepreneurs and their accountants should implement measures for disaster preparedness. Setting aside an emergency fund will be a sensible idea that will enable the entrepreneurs to stay afloat amid any likely disaster. We no longer want any companies to go into premature liquidation promoted by disasters such as a pandemic.
4. Efficient Tax Management is Key to Success
One great advantage for UAE entrepreneurs is that they need not worry about personal tax or corporate tax. However, the presence of VAT at 5% requires the businesses to comply with tax obligations such as VAT registration, VAT return filing, VAT deregistration etc. A strong accounting team is necessary to efficiently manage the VAT obligations for businesses operating in the UAE.
In a post-pandemic UAE, entrepreneurs should be stringent about ensuring tax compliance as violations may lead to hefty fines from the Federal Tax Authority (FTA). Also, they should be vigilant about new reforms implemented by the government in the tax regime to ensure compliance. For example, the cabinet recently announced amendments to the Tax Procedure Law which is regarded as a major overhaul of the tax administrative penalty regime in the UAE. Accounting firms in Dubai can help businesses effectively deal with such tax challenges.
Comply with Regulations & Legal Obligations
Major regulatory changes were introduced in the UAE economy starting with VAT in 2018 and followed by the Anti-money Laundering and Combatting Financing of Terrorism (AML / CFT) law. This has been followed by Economic Substance Regulation (ESR) and Ultimate Beneficial Ownership (UBO) laws. All these regulations require businesses to maintain proper documents and file reports/notifications to ensure compliance.
A company that closes down also needs to ensure compliance with some of the regulations. For instance, it is mandatory for a company under liquidation to maintain a Real Beneficiary Register (RBR) to the licensing authority within 30 days from the date of the liquidator’s appointment. Also, the administrators of the company or the liquidator are required to maintain the registers for a period of minimum at least five years from the date of liquidation. The introduction of regulatory reforms increases the compliance burden on the entrepreneurs and accountants are required to ease the challenges for the companies.
Beat the Challenges with Jitendra Chartered Accountants
Small businesses face several challenges in the post-pandemic period and accounting is the biggest among them. A good number of small firms struggled to stay afloat during the pandemic and this blog was written as a guideline for entrepreneurs to drive their businesses forward in 2021. To successfully tackle the challenges mentioned here, small business owners are advised to avail the services of the best accounting firms in Dubai such as Jitendra Chartered Accountants (JCA).
JCA’s highly qualified accountants help the small businesses to accurately maintain the records apart from providing services such as payroll, VAT return filing etc. We also help the companies efficiently meet the requirements including ESR, AML / CFT, UBO etc. Consult with JCA’s accountants to run the business in the UAE without any hassle.