In a nation that has a booming economy, favorable legal conditions, tax exemptions, and easily available manpower, it is easy to see why UAE is becoming a global investment hub. Business owners in the UAE will understand what we are talking about.
Any business structure incorporates different departments and accounting is one of the departments where you cannot cut any corners. High transparency and accuracy of financial records are required every time you renew your business license in the UAE. This can be achieved if you ensure compliance with UAE laws and keep updated accounting records.
In contrast to large enterprises, small and medium-sized enterprises (SMEs) cannot afford to retain in-house accountants. What can SMEs do to stay compliant and still save money? One of the simplest and most cost-effective ways to do this is to outsource accounting & bookkeeping services.
Top-5 Reasons Why Do SMEs in the UAE Need to Outsource Accounting Services
Lack of experience or knowledge of UAE laws may lead to severe penalties. It may even ban you from doing business in the UAE and may expel the owner completely from the UAE. But the main reasons for SMEs to outsource accounting services in the UAE are:
Ensure tax compliance: non-compliance with the tax laws results in harsh penalties in the UAE. For example, late payment penalties for VAT stand at 4% per month if the business makes voluntary disclosure. If you are non-compliant and fail to disclose it voluntarily, the business will have to pay tougher penalties. As a business-friendly country, UAE has hardly any competition. Despite this, tax laws are constantly changing, so you should keep track of them to factor them into your accounts.
Growth plan: keep up with the accounting to create a roadmap for business growth and obtain a complete financial picture of small businesses. Accounting is critical to understand things like changes in the cost of goods, margins, growth goals, etc. To plan for future business growth, it is easier if you can refer to the historical trends in your income statement and balance sheet.
Stay on top of your credits and debts: staying on top of your cash inflows and outflows is imperative for any SME. Ensure you keep track of all expenses, payments, receipts, and incomes. The balance sheets help you to keep track of everything you owe (credit) and everything you are owed (debt):
Credit. The payments to be received from your customers form the profits of the company. Keep track of everything you are owed with well-maintained accounts.
Debt. Debts include loans, credit cards, and accounts payable. Monitoring your debts helps you understand where you stand with your business.
Attract investors and buyers: prospective investors and buyers will check the accounting records to make sure the business is profitable. Build a proper accounting system to attract potential investors and buyers. You would also need it for obtaining any bank loans. Whether you plan to sell or not, it is always wise to have a proper idea of the net worth of your business.
Maintain regulatory compliance: regulatory compliance refers to compliance with the legal laws and standards. A company's accounting must adhere to UAE regulations to avoid legal hassles or penalties. Due to the rapidly changing standards in the UAE, accounting support is often required to ensure compliance.
Benefits of Outsourced Accounting
Usually, businesses spend about 1.5 to 3% of their revenue on hiring, training, and staffing their accounting departments. For SMEs, this is a significant amount. Instead of having someone on your payroll and spending all the overhead expenses, you can save a lot with outsourcing. With outsourced accounting services in the UAE, you get a team of experts at a fixed price.
There is also a reduced probability of miscalculations and errors. One of the major cons of in-house accounting for small and medium-sized businesses is the wastage of manpower on non-revenue generating tasks. Outsourcing helps you overcome this hurdle without compromising on the outputs.
You won't need to purchase accounting software for your company because it will be handled by the accounting firm. It is also an advantage to outsource accounting services in the UAE.
In-House Accounting vs. Outsourced Accounting
You may choose to have in-house accounting specialists in your organization to take care of all your accounting and compliance needs. However, it is not the smartest option for SMEs due to multiple reasons:
It is a very time-consuming and error-prone task that requires both expertise and care.
Failing to comply with any of the tax laws would render the business liable and result in heavy penalties.
Moreover, the expenses and resources can be better deployed for other aspects of a growing business.
Outsourcing is often the best option for SMEs since they get experts to do their work for them at a pocket-friendly cost.
Accounting is a time-consuming process, and this time could be better utilized in building customer relationships or maximizing profits. Moreover, staying on top of paperwork and filing is tiring. SMEs often function with small teams. It is very normal to be burnt out after doing the accounting tasks. Outsourcing Accounting services enables better performance for the business allowing entrepreneurs and owners to focus on core business needs.
With the assistance of qualified chartered accountants, My Business Consulting DMCC can provide complete accounting services. With our customized solutions, you will receive a solution suited to your needs and budget. As a result, you will be able to take on the daily tasks and use your time and energy to drive the business forward. Reach our specialists for a kind expert advice: +971 4 4327436.