Accounting Challenges for Modern-Day Businesses
Modern-day businesses face a lot of challenges and have to make sure they adhere to these challenges in order to survive in the ever-changing environment. The below article highlights how modern-day businesses and their accounting challenges are made easier by recording, summarizing, and analyzing all financial transactions.
Wages
Wages include employees’s salaries, deductions, and their net pay. A proper wage management system implemented by a business gives satisfaction to employees. The wage management system implemented by the business has to be WPS compliant as per Ministry of Human Resource and Emiratization rules and guidelines in order to ensure a safeguarded, fortified, systematic, and firm way to reinforce the timely payment of wages to employees by their employers. WPS is one of the accounting challenges faced by modern-day businesses in the United Arab Emirates, as not complying with the UAE WPS rules may lead to huge fines and penalties.
Value Added Tax
Modern-day businesses need to comply with various obligations, which may include registration with the Federal Tax Authority (FTA), accounting with VAT, timely returns filing for VAT, VAT deregistration, etc. An invoice can be defined as a document that records the products and services delivered to a customer along with the amount due for these services and goods and the payment method opted for by the customer. Invoices have to be prepared as per the Value Added Tax (VAT) laws in the United Arab Emirates issued by the Federal Tax Authority (FTA). This includes mentioning the tax registration number of both parties along with the breakdown of the sales value and the taxes. Not adhering to these obligations and regulations may lead to fines and penalties. VAT is also one of the major accounting challenges faced by modern-day businesses in the United Arab Emirates.
Dynamic Tax Laws
Dynamic tax laws seem to be a major concern for accounting teams in modern-day businesses. The accounting team should be knowledgeable about all the recent changes. The dynamic changing tax laws may involve understanding total tax liability and shifting trade and tariff policies across products. Adequately interpreting and navigating the changes may help businesses utilize their funds in a more efficient way, ensuring they have enough for any challenges ahead.
Regulatory Changes & New Accounting Standards
Learning and being aware of the rapid regulatory changes is essential for adherence and working well. Being acquainted and adjusting swiftly to these changes is pivotal for businesses in Dubai.
Accounting teams are required to be aware of regulations such as Anti-money Laundering and Combatting Financing of Terrorism (AML-CFT), Economic Substance Regulations (ESR), and Ultimate Beneficial Ownership (UBO) laws.
Accounting teams at modern-day businesses must assess how they can comply with these regulations and avoid hefty penalties. All these regulations mandate the accountants under obligation to maintain proper documents and file reports/notifications to ensure compliance and maintain best practices throughout.
Apart from this, it is critical for the accounting teams to stay updated on the day-to-day changes in the accounting and auditing standards (which can be IFRS and ISA).
This would benefit modern-day businesses during internal and external audits. The more the records are in an orderly manner, the more it would lead to hassle-free audits.
Technology Upgrades
Technology is an instrument that revolutionizes prospects, as it can empower and become a powerful catalyst by automating procedures and cost-effectively obtaining productivity. Modern-day businesses usually struggle with integrating technology and software into the business. This requires investment in software and the latest technology, along with proper training for the accounting team to operate on the integrated systems. The accounting team is made aware of the latest accounting tools for error-free accounting and is made familiar with the advanced features of integrated accounting software—like data analytics and forecasting. This helps the accounting team to interpret and translate the complex data into meaningful, actionable advice. Failing to understand and adapt to advancements in technology can result in accountants staying behind.
Cash Flows and finances
Due to the rapidly changing market conditions and customer payment behaviours, modern-day businesses can face cash flow issues, necessitating accurate forecasting and management practices. Modern-day businesses fumble when it comes to managing the cash flow efficiently. Poor cash flow management may even lead to their failure, as they might find it tough to allocate funds to cover recurring costs and keep their business alive.
The accounting team for modern-day businesses should carefully analyze the bills and strictly chase payments from customers to navigate the cash flow challenge. The team should focus on monthly expenses and try to cut costs where possible.
Reconciling books may be considered a difficult task for modern-day businesses, especially those businesses without robust accounting software. These businesses may find it easy to make errors leading to incorrect data. The accounting team should verify all the business transactions at least every month or can also make it a habit to verify the books of accounts at the end of each day.
Apart from the above, the accounting team should develop clear invoicing and collection processes to improve cash flow. Cash flow forecasting tools can be utilized by the accounting team to anticipate and manage the liquidity needs of the business.
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Disclaimer: The information provided in this blog is based on our understanding of current tax laws and regulations. It is intended for general informational purposes only and does not constitute professional tax advice, consultation, or representation. The author and publisher are not responsible for any errors or omissions, or for any actions taken based on the information contained in this blog.