Key Accounting Tips to Make Your Financial Statements Accurate
It is comforting to assume that the investors, board members and other decision-makers have absolute faith in their company’s financial statements. The management can rely on the numbers to make smart estimates of future cash flows and decide whether or not to invest in or acquire a company. We just presented here an ideal situation, but it need not be the case always. Corporate accounting remains still murky, especially for the companies that rely too much on in-house accountants and underestimate the vitality of accounting technologies.
The financial statements of a company include the income statement, balance sheet and the statement of cash flow. Failing to ensure the accuracy of financial statements may lead to wrong estimates of cash flows and prevent the management from making wise decisions. Companies need to stop neglecting the vitality of accurately making the financial statements for which they can enlist the services of accounting firms in Dubai. Our Dubai accountants in this blog talk on the top ways to ensure the accuracy of your financial statements. Let’s have a look at the key accounting tips:
1. Eliminate Wrong Financial Entries
Let’s start by focusing on the proper entry of financial data, which is paramount for creating an accurate financial statement. If your in-house professional is not competent enough, be warned of entering the data in the wrong accounts or committing math errors. The errors will stay right there if you have not deployed the right accounting software within the organisation. What costs you here is the overdependence on the in-house professionals which can be rectified by outsourcing your requirements to the best accounting firms in Dubai.
2. Reconcile Accounting Records
You must instruct your accounting professional to reconcile the accounting records with external records like bank statements, supplier invoices, credit card statements and other documents. The numbers should match. Ensure that the cash balance on the balance sheet is in perfect sync with the ending balance on your bank statement. Also, long-term liability balance needs to match with the total balances on long-term loan documents.
3. Check for Obvious Errors on Balance Sheets
Keep an eye on avoiding the apparent balance sheet errors. If you are running a small business, scan your statements for errors such as the negative cash balance. Analyse the income statement to scan for any likely errors. For example, cost of goods sold cannot be the same every month, considering the fact that the composition of your sales may differ each month. Also, there should be an entry for depreciation expenses if you have any fixed assets. Furthermore, don’t forget to make adjusting entries for accrued but unpaid expenses like interest expense and salaries expense.
4. Avoid Errors in the Cash Flow Statements
As an entrepreneur, you need to check whether you have made adjustments for non-cash expenses in the cash flow statements. The difference in the net cash balance between the previous and current periods should be in sync with the change in the bank statements. Always hire the best accountants in Dubai to ensure that all entries in the statements are proper.
5. Get Better at Inventory Management
If you come to know about any anomalies, do check with your bookkeeper or warehouse manager. Sometimes, anomalies like higher-than-normal inventory balance may happen due to the presence of an excessive amount of obsolete items in stock. Similarly, a high sales return may signify problems in quality control problems in your manufacturing facility or the facility of the supplier.
6. Say No To Manipulations
Corporate accounting process gets murkier if you choose to manipulate the books. For example, there is a tendency among the managers to deliberately exaggerate expenses or losses, such as bad debts or restructuring costs. This gives an opportunity for the managers to create cookie-jar reserves that they can report in future quarters to inflate profits artificially.
Managers also tend to tweak the numbers by resorting to manipulating production. This can happen with the companies having considerably excessive capacity. Avoiding these types of manipulation helps you make the financial statements in compliance with the generally accepted accounting standards such as IFRS. Entrusting the best accounting firms in Dubai with your accounting responsibilities helps you reinstate clean accounting practices within your organisation.
Outsource the Work to Best Accounting Firms in Dubai
Financial statements are indispensable for companies to make robust business decisions. The numbers that are in the financial statements help you devise strategies, determine the business success, estimate failure etc. However, many companies undervalue the importance of financial statements that obviously leads to business failures. In most cases, an incompetent in-house accountant is to be blamed for inaccurate financial statements. Luckily for the businessmen, help is on the way in the form of accounting firms in Dubai such as Jitendra Chartered Accountants (JCA). JCA’s team of accountants assists you in creating flawless financial statements that would help your company make sound decisions.