9 Accounting Mistakes that Can Kill Your Business
Accountants play a critical role in delivering an accurate financial picture of a company by performing functions like collection, recording, analyzing and presenting the company’s financial operations. However, even with the advancement of technology, accounting mistakes could still occur and the company could face losses. Be it the laxity in making a budget plan or inefficient management of cash flow, the mistakes could hamper the growth of businesses.
Common Accounting Mistakes that Companies Commit
1. Mixing Business & Personal Transactions Including Finance
Failure to separate the personal and company transaction would give businesses a tough time as the end of financial year approaches. This is one of the most common mistakes made by small businesses, which would have a negative impact on the process of tracking profitability. One of the best ways to solve this fatal error is to keep separate business and personal bank accounts and credit cards for the company right from the time of launch of the venture.
2. Fail To Hire The Right Accounting Professionals
Recruiting or hiring the services of a right professional accounting firm could help the companies in expense tracking, regularly paying vendors, balancing bank accounts and staying on top of payroll. It should be acknowledged that mistakes can come from even the most experienced accounting professionals in the UAE or anywhere else.
However, mistakes could hamper business prospects and may even hurt the company’s relationship with vendors and clients. In case of payments dispute with vendors, business owners could easily fetch a particular invoice if the records are maintained properly. If small businesses find it tough to invest in recruiting accountants they could outsource to the best accounting service providers in the UAE.
3. Not Using the Proper Accounting Application
Having a veteran accountant as an employee is not the ultimate solution to efficiently maintain financial records and comply with regulations. The talent of the professional would go wasted if the company decides to invest in software that doesn’t fit the requirements. Plenty of software available in the market especially those based on cloud-based applications. Putting some time to research on purchasing robust accounting software would help businesses avoid issues of productivity and money loss.
4. Failure to Track Business Costs Properly
Companies need to ensure that their accounting system is accurately tracking all the expenses as failure to do so will result in money loss. An accurate tracking would help companies assess the health of their business thereby leading it to the path of profit.
5. Non-Management of Cash Flow
In the UAE, many companies face cash flow problems leading to late payments to vendors and other expenses. The late payment to vendors may lead to vendors hiding their prices instead of the interest on late payments. Managing the cash flow of a company is an art and if one understands and implements it perfectly, the company can never find problems to explore markets or areas.
6. Ignoring Backing up of Accounting Data
Technology is a big boon to businesses but it also comes with its faults and errors. Unfortunate events like the crashing of software could occur at any time, which will make data retrieval a tough task. As losing accounting data would prove to be fatal for any firm, it is advisable to build an efficient data backup system.
7. Lack of Budget Plan
Many companies in the UAE do not make the budget for expenses and those who make the budgets fail to keep a track of it. And when the year-end approaches, the company realizes that even with good gross margins, they are suffering losses. With a proper budget for expenses, the company can save money and time on unnecessary expenditures, which will also help in maintaining cash flows.
8. Inability to Maintain Good Records
One of the perks of having availing the services of an accounting firm or professional in UAE is that businesses can ensure the records are maintained efficiently. Maintaining a good record is critical in managing costs and complying with legal and regulatory requirements. Maintaining proper books of account for at least 5 years is mandatory for the companies as per the UAE Commercial Company Law 2015. Reputed accounting and bookkeeping firms in the UAE could help companies in keeping good records. If accounts are not maintained as per FTA guidelines heavy fines can be imposed by FTA. Submission of vat return with accounting errors also may cause fines. Failure by companies to maintain required records and other information specified in the tax procedures and tax law may end up paying heavy penalties to FTA under VAT.
9. Error of Omission
Many often the accountant in small industries do not record certain transactions that have a non-cash effect. But such a transaction can distort the profit figures. And accountants also do not understand the revenue and cost matching principles which leads to ultimate false profits or losses.
Why Should You Choose Jitendra Chartered Accountants?
Every company in the UAE needs to maintain a record of all the financial transactions especially after the implementation of VAT back in 2018. Jitendra Chartered Accountants (JCA) is one of the most reputed accounting firms in Dubai, UAE. The accountants of JCA are well qualified, experienced and certified professionals who can help an organization grow and to be able to comply with the local & international regulatory requirements. JCA’s team of accountants can also look into your cash flow requirements, and will ensure efficient financial management. Availing JCA services could save you from committing critical errors in accounting and make your company profitable