The term "bookkeeping" refers to the systematic documentation and maintenance of economic transactions. All financial transactions should be recorded, including funds received, invoices generated, costs incurred, and so forth. The Dubai government mandates that all commercial enterprises keep detailed financial records, including assets, liabilities, and income. The records must be maintained in dollars and the national currency (UAE Dirham).
Regardless of the size of a business, bookkeeping is an unavoidable task. Hence, investing in an appropriate accounting program is essential for the business's success. You need solid accounting skills to operate a company smoothly in the United Arab Emirates. In addition, you will need to employ an experienced bookkeeping and accounting services provider in the UAE such as Fortius Consulting Services to handle all of your accounting and taxes needs.
Bookkeeping in Dubai, UAE, is not just a practice but also a platform that allows an organization to manage and trace its financial information and activities. Keeping records of financial transactions, including purchases, sales, and associated invoices, receipts, and other paperwork, is essential. Every business should adopt this approach, regardless of the its size. To be more specific, bookkeeping is done to clear up any confusion about essential business operations and cut down on unnecessary overhead costs.
How to Get Rid of the Most Common Accounting Mistakes in the UAE?
Businesses in Dubai are obligated to keep detailed records of all of their financial dealings. This often leads to some common bookkeeping mistakes. These errors usually come with complexities and risks that seem minor at first but escalate with time. If you're one of those businesses who maintains their accounts in Dubai, here are several pitfalls to watch out for: -
Failing to hire the right candidate
When it comes to choosing an accountant to handle the bookkeeping and accounting tasks for your business in the UAE, you have a variety of options. One of them is to engage a bookkeeper on a contract basis to handle these responsibilities. For the same purposes, you might hire a reputable financial advisory business. If you're running a startup on a strict budget, you can always put one of your current employees in charge of the accounts with a little bit of training. In any way, it might be expensive for your business if you don't choose the right service or candidate. Accounting errors, particularly those made while submitting tax returns, may have serious financial consequences for a business. In addition, it might harm your relationships with suppliers and customers.
Incorrectly categorizing the costs
When expenses aren't put into the right categories, personal and business costs get mixed up. This is a common accounting error which causes inconvenience when tax time rolls around. Charging personal costs to your company account (or vice-versa) might mislead you about your firm's finances. Profitability can only be ascertained with accuracy if revenues and expenditures are recorded in their correct buckets.
Inability to monitor your financial report
Small business owners often have to go into their own pockets to cover company costs. As a result, the company loses money and foregoes tax breaks since the costs that are eligible for reimbursement were not properly recorded. The company should have a system in place for keeping tabs on all of the costs that may be reimbursed.
Inefficient backup of the data
This is a crucial step that must be taken at all times throughout the accounting process especially in Dubai. With this method, businesses may recover past transaction information such as purchase and sales records. The data has to be stored and backed up efficiently and correctly so that it may be accessed whenever necessary.
Using inadequate bookkeeping programs
It makes no difference how experienced your accountant is if the company decides to put their money on software that isn't tailored to their specific requirements. There is a good range of software available in the market nowadays, especially cloud-based apps. It would be in the best interest of companies to invest some time and effort into finding and acquiring the appropriate accounting software to assist them prevent future problems with lost productivity and revenue.
Neglecting small costs
Make sure your organization keeps meticulous records of all financial dealings. It makes no difference how much money is involved. It may become troublesome if minor transactions are often overlooked. During the course of a year, it's easy for seemingly little expenditures to add up to the point where they create a mismatch in the books right around tax time. Such seemingly little outlays are sometimes the source of much larger losses or unsuccessful project completions down the road.
Irreconcilable bank accounts
The end of the fiscal year may be stressful for business owners who don't keep their personal and business finances separate. The term "reconciliation" refers to the act of checking for agreement between the two sets of books. When the cash balance and the bank balance are not in agreement with one another, reconciliation is necessary.
Challenges in communication
An appropriate atmosphere in which the bookkeeper may openly and regularly communicate with the other employees should be established by the company's founders or employers. To make informed and effective decisions, it is important for the bookkeeper to be aware of the current financial state and any forthcoming initiatives. Moreover, the bookkeeper assists to the assessment of the processes and strategies by which the projects may be carried out in an efficient manner and with the fewest possible costs.
Failing to keep bills and records
Even if your bookkeeper is very trained and you've invested in top-notch accounting software, you still need a safe place to save all of your invoices. Every invoice, no matter how small, should be kept in electronic form for tax and legal purposes. In the event of a payment dispute with a customer or a vendor, retrieving the relevant invoice might help to quickly settle the matter.
Overexposure to modern technology
In today's world, technological literacy is essential. But, it's possible that relying too much on modern conveniences might be damaging as well. The integrity of the data saved may become compromised under certain conditions. Such an incident may be avoided by having a backup plan in place. Not really in books or manually, but rather a more reliable and user-friendly data storage platform or device.
Omission of small cash and credit transactions
To cover unexpected or minor costs that arise on a daily basis, a supply of petty cash is maintained on hand. The smallest purchases are often paid for with petty cash. Neglecting to report them in the general ledger would result in future accounting errors.
Avoid Common Accounting Errors With Fortius
So, these were some accounting mistakes that are easy to fix, but if you ignore them they may create havoc for your company. It's best to avoid making these mistakes early on in the work process because they cause small issues and problems from time to time even when the organization is running well. Yet, it's also essential that you promote a positive working atmosphere by establishing and keeping good rapport with your staff and bookkeeper in Dubai. This makes it more simple and more pleasant to operate in today's highly competitive environment. Do you have a business in the UAE? Are you looking to improve your bookkeeping accuracy? Fortius offers bookkeeping and accounting services to help you learn how to identify and avoid common bookkeeping errors in the UAE. Contact us today and take the first step to more efficient bookkeeping practices.