The role of bookkeeping is equally important as running a business on a day-to-day basis. Perhaps, even more of a crucial role especially for startups that are still under a controlled and limited budget to work on.
Not all entrepreneurs realise that organised financial records are an indispensable aspect of business that helps in devising concrete strategies and forecasting profitability.
If you are a budding entrepreneur or a business owner transitioning to a large-scale business, here are the top reasons why bookkeeping should become a top priority for your business as early as possible:
1. It gives you a clear analysis of your financial data
Having intact bookkeeping gives you a coherent analysis of your expenditures, profits, and returns. You may be surprised at how much valid data emerges, which hugely impacts decision-making for your business. Not only does bookkeeping break down data in a logical manner, but it also gives you a clear picture of your financial positioning.
2. Financial reporting is accurate and transparent
One of the primary benefits of bookkeeping is financial accuracy and transparency. You can achieve this by having an internal system suited for your business, which allows you to input, extract, and analyse data. A process for record-keeping should also be in place for daily tracking of expenses, incomes, and your overall budget. This way, you can be confident that transparency across all your accounts is achieved.
3. Strategising for your business is easier
When you have adequate bookkeeping, coming up with business strategies or financial plans become easier. Why? Reliable bookkeeping gives you the ability to fix glitches and a number of inconsistencies, which hinder a strategic approach to financial planning. On a broader perspective, bookkeeping allows you to forecast future expenses and returns and gives you the power to devise a plan where the business can develop and grow more.
4. Your tax obligations are fulfilled
Since bookkeeping requires recording all your daily transactions, it’s almost impossible to miss due taxes for your products and services. Day-to-day bookkeeping now then becomes your constant reminder for paying your taxes on time and in accordance with the law. At the same time, you can be assured that your business is always up-to-date when authorities require for an audit.
5. Your business is safe from violations and penalties
With the recent taxation reforms in the UAE, the government has become stricter in regulating businesses. Authorities do not tolerate negligence in keeping the financial records required by the law and there are penalties involved for various bookkeeping violations. Having solid bookkeeping in place ensures that your business is safe from penalties.
Maintaining financial records in the UAE
Under UAE law, real estate firms are required to maintain records for 15 years while other sectors are mandated to maintain records for at least five years. It is also important to note that records related to Capital Assets must be maintained for ten years.
Among others, your records of accounts should include the following as specified in the law:
- Records of all supplies and Imports of Goods and Services
- All Tax Invoices and Tax Credit Notes issued and received
- Records of Goods and Services disposed
- Records of adjustments or corrections made to accounts or Tax Invoices
It also pays to keep yourself abreast of the various violations and penalties with regards to financial records. Here are some that you should be aware of:
- Violation: Failure to keep the required records specified by the tax procedures law and the tax law.
- Penalty: AED 10,000 for the first time. AED 50,000 for each repeat violation.
- Violation: Failure to submit the required records in Arabic when requested by the Authority.
- Penalty: AED 20,000
- Violation: Failure to inform the Authority of an amendment to tax records that need to be submitted.
- Penalty: AED 5,000 for the first time. AED 15,000 in case of repetition.
Good practices that last in business start from being proactive, ready, and consistent until they become valuable habits. That is why reliable bookkeeping should start as soon as your business kicks off. You have to be knowledgeable of how to create the most effective bookkeeping process that works for you.
You can seek the expert advice of our CREATIVE ZONE Tax & Accounting professionals so you can be well-assured that your business is, without a doubt, in compliance with the UAE law. Our experts are keenly adept with bookkeeping. They can also provide you with customised services that your business requires for a seamless financial management system. CREATIVE ZONE Tax & Accounting also hosts monthly workshops for startups and SMEs, keeping them well-informed of government updates coupled with expert advice on how to accurately manage financials.
To know more about CREATIVE ZONE Tax & Accounting services call us: +971 4 407 0570 or email: firstname.lastname@example.org.