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No business can be run successfully unless it is ensured that every single department, and every single employee is doing their work to the best extent possible while cooperating with each other in order to accomplish common goals. There are different kinds of operations that together work towards attaining targets, but there is one thing that determines how they manage to go about getting their work done, and that is adequate funding. Without this, they would not be able to implement their strategies. This is why bookkeeping and accounting are absolutely keys to a company’s proper functioning.
The United Arab Emirates has, in recent years, risen to become one of the top business hubs in the world. People not just from either of the seven emirates, but also from different parts of the world, set up their businesses here because of its economy, which is flourishing, owing to which they can expect to earn major profits and returns on their investments.
The need for and importance of Accounting and Bookkeeping
Bookkeeping is a part of accounting and refers to the process of organizing all the company’s financial transactions and data, which includes receipts, payments, invoices, discounts, bills, etc. in categories and recording it. Accounting is the process of taking this very organized and recorded data, analyzing it, and creating comprehensive reports which provide an in-depth idea of the company’s finances and its financial situation in general. However, accounting and bookkeeping should not be confused for the same, since bookkeeping is a part of accounting and not the same thing; an accountant can be a bookkeeper but not the other way around.
Bookkeeping and accounting are extremely important for any business because there is a constant flow of money, whether incoming or outgoing, and there is also a need to allocate money to the different departments, to make payments, and to invest. Unless finances are systematically tracked and managed, it will become difficult to determine how much money the company is making, how much it is spending, and where, how it is spending more than is necessary, which department needs more funds, how it can cut down on expenses, etc. Moreover, accountants or bookkeepers also advise you on matters related to business decisions, taxes (filing and calculating), auditing, financial statements, etc. This shows just how both these services are essential for any business, irrespective of its activities, area of operation, size, region, etc.
Why Should Bookkeeping and Accounting Records be Kept Updated?
As mentioned above, Dubai is a business hub, which means that it houses hundreds and thousands of businesses of different kinds. Owing to the many business and financial transactions, there is a lot of data generated, which needs to be recorded as well as analyzed so that businesses can make the right decision. This means that not only should bookkeepers and accountants do their work properly, but they should also do it regularly or on time so that the records are always up to date. Here are some reasons as to why that is important: –
- Taking Decisions on Products and Services: As a business, you are perhaps manufacturing products and offering services. By looking at your financial records and reports, you would be able to figure out which service and product are bringing in higher returns and which is not. This means that you would be able to make decisions regarding whether to continue providing said product and service or not, whether to make some changes, etc. It is important for accounting/bookkeeping records to be updated since they would provide a clear idea of how your products and services are doing.
- VAT and Taxes: As a company in Dubai, not only would you be required to pay taxes to the government, but you would also be required to charge VAT on any products you manufacture and sell. Accounting and bookkeeping records include all the details regarding the amount of money spent on the manufacture of said products and would thus help calculate VAT, whereas all the financial data would help you get an idea of how much corporate tax you would need to pay. If your records are not updated, you might not be able to come up with an accurate figure and might not be able to plan accordingly.
- Budget: It goes without saying that you need to allocate funds to the different departments so that they are able to carry out their work without any problems, need to make payments for anything you buy, along with making investments. Unless you have a clear idea of your company’s finances, you would not be able to plan out your budget such that you can meet all your financial engagements while ensuring that you do not deplete your resources. Keeping your records updated means you have a clear picture of your company’s current financial status.
- Business Analysis: A key function of an accountant or even a bookkeeper is to not only record all the financial data but also to analyze it, giving any advice if necessary. By keeping your records updated, it would make it much easier to understand how your company is doing in terms of its finances, where the money is coming from and where it is being spent, whether you are spending more or less than you should, how you can save money, etc.
- Updated Reports to Investors, Auditors, Regulators, etc.: As part of your legal obligations, you are required to provide reports to tax regulators, auditors, investors, etc. If you keep your accounting as well as bookkeeping records updated, it means that you would be able to provide them with the most recent information pertaining to your business and would also be able to submit these reports on time. If they are not updated, chances are, you might need to rush to complete them before the deadlines, which might mean more errors.
Accounting and bookkeeping records are absolutely vital to ensure that a business/company is being properly in accordance with all the rules and regulations. It is important to make sure that these records are kept up to date so that it becomes easier to plan out the budget, adhere to deadlines, and basically make decisions regarding how the business should be run.