Five Accounting Principles Every Entrepreneur in Dubai Needs to Know
An entrepreneur’s relationship with his company is analogous to that of a captain to his ship. Like the captain controls the ship and its crew, the entrepreneurs should steer every aspect of his business. Even if the critical roles and responsibilities of the company are physically handled by the employees, the entrepreneur should have adequate knowledge about the process. Accounting is such an indispensable process in an organization that an entrepreneur cannot afford to pay little attention to.
Adequate knowledge about the process will equip the business owner with ample power to check the financial health of the business whenever required even if he is outsourcing the requirement to accounting firms in Dubai. An entrepreneur is not required to have to be well-versed in accounting because he is required to channel his skills and decision-making abilities to multiple processes within the organization. What he needs to do is learn the five accounting principles every entrepreneur should know and leave the rest to the best accounting firms in Dubai.
1. Debt Repayment
A company that has taken a debt needs to serve it based on the conditions agreed upon while it was taken. The organization’s focus is needed on the amount needed for a monthly repayment of the debt. The accountant can be broken down into many forms to be recorded in the financial records. The entrepreneur, however, should be able to identify and sum them. The business owner should take care of ensuring that the accountant has also factored the interest into the debt. If the entrepreneur doesn’t have deep knowledge about the process of accounting, then he can use a rough estimate.
2. Cash Inflow
The cash flow can be compared to the blood in the body. When the flow of blood to the organs stops, it’s a sign of death. Similarly, the cash flow is all about how much money is coming in and how much is going out. The company may die when the inward flow of money stops. The entrepreneur should understand that the cash flow is about the money generated from the sale of goods or services and doesn’t take into account that cash coming from investors. Entrepreneurs should also prevent themselves from adding any future payments into cash flow.
3. Recurring Expenses
Every company has important expenses that can be split up into recurring and fixed expenses. The recurring expenses could be those expenses the organization has to make the company run. The most easily identifiable forms of recurring expenses are the monthly salaries of the employees and the cost of raw materials (if the company is in the manufacturing business). There are also some fixed expenses that the company needs to meet only once and hence its impact on the financial health of the business is not as big as the recurring expense. Try to ensure that the value of debt repayment and recurring expenses are lesser than the cash inflow or else it’s a sign that the company is in a problem.
4. Value Added Tax
The VAT-registered businesses or taxable persons are required to file a VAT return to the Federal Tax Authority (FTA) at the end of each tax period. While filing a VAT return in Dubai, UAE, the entrepreneur is summarising the value of supplies and purchases the taxable person has made during the tax period. Filing the VAT returns on time is a legal compulsion for VAT-registered businesses and defying the obligation will attract penalties. The entrepreneur should ensure that the accountant has documented financial records such as tax invoices and books of accounts as specified in the UAE VAT Law. The VAT registration and VAT deregistration in Dubai should be done at the specified time. Also, the company should ensure that the VAT returns are filed on time. Consult the best accounting firms in Dubai that provide VAT consultancy services for complying with tax obligations.
5. Customer Retention Rate
Novice entrepreneurs often latch on to the myth that it is the products and services that constitute the business. However, it is actually the customers that define the business. Chartered Accountants in Dubai suggest that entrepreneurs should focus on how often their customers make repeated purchases. Yes, the number of times the customers buy the products or services should be prioritised over the number of customers. The mobile phone companies and other businesses that make gadgets know well about this. Look at their strategy, they kept on making upgraded versions of successful gadget models to lure the customers to repeat the purchase. Ensure that the company’s accounting process takes into account ‘how many customers are there, how much they pay the company and how often they buy. These aspects of accounting need not be complex at all but consult with the best Chartered Accountants in Dubai to adopt a more transparent accounting process in the company.
Outsource the Accounting Needs to Accounting Firms in Dubai
This is not the sixth point in the list of accounting principles already mentioned in the article. However, there are no qualms in considering this as the ‘invisible sixth tip’. Chartered Accountants in Dubai could be the next in command to the entrepreneur when it comes to ensuring the financial health of the company. The accountant executes all the necessary actions to keep the business moving.
However, an accountant needs to have immense experience, extreme talent and knowledge about the UAE regulations. Recruiting in-house accountants in Dubai that possess all these qualities would be a tough job for the entrepreneur. The best alternative is to outsource the accounting needs to the best accounting firms in Dubai such as Jitendra Chartered Accountants (JCA). JCA possess years of experience in processes such as accounting, auditing and VAT consultancy services in Dubai. Entrusting JCA’s highly qualified Chartered Accountants in Dubai with the accounting requirements is the first step to a successful business.