Accounting and Bookkeeping

How to improve Cash Flow Management during COVID-19

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Accounting solutions to help business survive covid

A couple of months ago, we wrote a blog describing “WHY BUDGETING IS CONSIDERED KEY TO BUSINESS FINANCIAL SUCCESS?” and one of the mentioned benefits of budgeting was planning and predicting cash flows. We assume that, due to the unpredictable events caused by COVID-19, there would be a major change in the budgeted figures and improving cash flow is important to help owners make decisions that will influence the future of their company.

As a major portion of cash revolves around accounts receivable and payable, let us examine some methods to achieve budgeted cash flow through its proper management.

  • Improve Receivables Credit Policy: Review your receivable credit policy i.e. your credit terms. It should be less than the credit period given to you by your suppliers. In order to improve your receivables credit period, you can encourage customers to pay faster with an early payment discount scheme.
    On the other hand, you can check with your supplier if payment terms can be increased on the basis of your long-term relationship. If not all, some of them may agree and extend your credit period from (hypothetically) 30 days to 45 days.
  • Advance Payment: If you are providing a service or goods that involve substantial cash or effort before delivery of said service or goods, ask your customer to pay a portion of that as an advance. An advance can range between 30%-50%, depending on the agreement with your customer and the type of services or goods to be provided.
  • Transaction cycle between receivable and payable should not be too long, or else you will end up investing in additional human resources or will end up paying interest on delay in payments to your suppliers.
  • Invoice financing: This option is also known as invoice factoring, invoice discounting or, in simple terms, selling your sales invoice to finance companies or banks. For example, if you have credit terms of 30 days with a customer, you can get the amount from a finance company on the day the invoice was issued, instead of waiting for 30 days.
  • Set up a policy for long outstanding receivables: Set up a policy indicating the maximum period it should take to clear a customer’s account. If any outstanding receivables exceed the maximum period, act immediately and suspend any further business with that client until their account is settled.
  • On-time Accounting: Record all transactions immediately and keep track of aging summary on a regular basis.
  • Use Automated feature of accounting software: Tracking receivables and payables manually would be time consuming and more cumbersome if even a single document is missed. Automating the process will help you with quick compilation of information and send regular reminder mail to customers for payment without interrupting your routine work.

Other than the methods mentioned above, you can also improve cash flow by converting fixed costs into variable costs, cutting or delaying expenses, looking to sell or lease idle assets, checking for deferment of loan instalments, lowering instalment amounts etc.

It is very important that you consider your business model before selecting from the above methods to improve cash flow. Contact us for more information

COVID-19: Accounting and Financial Reporting Considerations

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Accounting and Financial Reporting Considerations - Preparing Books of accounts during Covid-19

The outbreak of the Coronavirus (COVID-19) pandemic has had an adverse impact on the global economy and is affecting businesses of all sizes and sectors. Organizations around the world are facing challenges, often related to economic downturns, such as supply chain disruption, reduction in revenue, increasing inventory level, business closures, delay in expansion, and tightening cash and credit conditions.

Considering such economic uncertainties, entities need to carefully consider their circumstances and risk exposures, revisiting their strategic business plan and assessing the impact the outbreak may have on their financial reporting.

This article highlights certain key accounting and financial reporting implications that may arise as a result of COVID-19 in the preparation of financial statements as per the International Financial Reporting Standards for the annual or interim reporting periods ending in 2020.

1. Going Concern Assumption

IAS 1 Presentation of Financial Statements requires management to assess a company’s ability to continue as a going concern. The going concern assessment needs to be performed up to the date on which the financial statements are issued. There may be significant areas of uncertainty due to COVID-19, and it could be important to assess the anticipated effects and impact of new information.

Management should assess whether disruptions caused by COVID-19 will be prolonged, resulting in reduced demand for their products and services and liquidity shortfalls, among other possible repercussions, thereby assessing the appropriateness of the use of the going concern basis. When management is aware of material uncertainties that cast significant doubt on the entity’s ability to continue as a going concern, the entity should disclose those material uncertainties in the financial statements.

If it has decided to either liquidate or to cease trading, or the company has no realistic alternative but to do so, it is no longer a going concern, and the financial statements may have to be prepared on another basis, such as a liquidation basis.

2. Events after the Reporting Period

IAS 10 Events After the Reporting Period contains requirements for when adjusting events (those that provide evidence of conditions that existed at the end of the reporting period) and non-adjusting events (those that are indicative of conditions that arose after the reporting period) need to be reflected in the financial statements.

With respect to reporting periods ending on or before 31 December 2019, there is a consensus that the effects of the COVID-19 outbreak are the result of events that arose after the reporting date. If management concludes the impact of non-adjusting events is material, the company is required to disclose the nature of the event and an estimate of its financial effect.

If it cannot be quantitatively estimated in a reliable manner, there still needs to be a qualitative disclosure, including a statement that it is not possible to estimate the effect. Management should also consider whether it is able to properly assess as a going concern if it cannot reliably quantify the effect of non-adjusting events.

3. Fair Value Measurements

Fair value measurement (FVM) is the exit price of an asset or liability on the measurement date from the perspective of a market participant as specified in IFRS 13 Fair Value Measurement.

Considering the market volatility, a key question is what conditions and the corresponding assumptions were known or knowable to market participants at the measurement date and not at a future date. The events or transactions occurring after the measurement date are only adjusted for in FVM to the extent they provide additional evidence of conditions that existed at the measurement date.

IFRS 13 Disclosures requires companies to disclose the valuation techniques and the inputs used in the FVM as well as the sensitivity of the valuation to changes in assumptions. Disclosures are needed to enable users to understand whether COVID-19 has been considered for the purpose of FVM or not.

4. Impairment of Non-Financial Assets

IAS 36, Impairment of Assets ensures that a company’s assets are carried at a value that is not more than their recoverable amount (the higher fair value, fewer costs of disposal, and the value in use) and requires companies to conduct impairment tests when there is an indication of impairment of an asset at the reporting date.

Companies will need to assess whether the impact of COVID-19 has potentially led to asset impairment. For most companies, the economic effects are likely to trigger an impairment test for long-lived assets, as well as other asset groups. Estimates of future cash flows and earnings are likely to be significantly affected by direct or indirect factors. Ongoing identification, evaluation, and re-evaluation are essential to understand the extent of the need for recognition and for what periods. Considering the uncertainty in the current environment, disclosure of key assumptions and judgments made in estimating recoverable amounts are important.

5. Lease Accounting

IFRS 16 Leases requires a lessee to recognise a right-of-use (ROU) asset representing its right to use the underlying leased asset and a lease liability representing its obligation to make lease payments.

Impairment to ROU could occur due to the consequences of the pandemic, and the lessee must test its ROU assets for impairment and shall recognise impairment loss (if any) as per IAS 36.

In the current environment, lessees may be seeking rent concessions from lessors. This may take the form of reduced or free rent for a period, a deferral of rent, or some other type of relief (e.g., fixed rent payments becoming variable). The accounting implications of an agreed change to rent will depend on whether or not the change was envisaged in the original lease agreement.

The IASB has issued an amendment to IFRS 16 to make it easier for lessees to account for COVID-19-related rent concessions. The changes to IFRS 16 are listed below:

      • Provide lessees with an exemption from assessing whether a COVID-19-related rent concession is a lease modification if the conditions stated in the amendment are met. Requires lessees to disclose if the exemption is applied to all rent concessions, the nature of contracts to which it is applied, and the amount recognised as profit or loss to reflect the changes in the lease payment.
      • Requires lessees to apply for the exemption retrospectively in accordance with IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors but does not require them to restate prior period figures.

The amendment is effective June 1, 2020, but lessees can apply the amendment immediately in any financial statements (interim or annual) not yet authorized for issue.

6. Revenue Recognition

IFRS 15, Revenue from Contracts with Customers, establishes the principles that an entity applies when reporting information about the nature, amount, timing, and uncertainty of revenue and cash flows from a contract with a customer.

COVID-19 could affect the assumptions made by management in measuring the revenue from goods or services already delivered, particularly for variable consideration and for the anticipated outcome of contacts extending over multiple reporting periods.

For example, reduced demand could lead to an increase in expected returns, additional price concessions, reduced volume discounts, penalties for late delivery, or a reduction in the prices that can be obtained by a customer. A company may also modify its enforceable rights or obligations under a contract with a customer, such as granting a price concession in which it is necessary to consider whether the concession is due to the resolution of variability that existed at the contract’s inception or a modification that changes the parties’ rights and obligations.

7. Onerous Contracts

An onerous contract arises when the unavoidable costs of meeting the obligations under the contract exceed the benefits expected to be received. If an entity has a contract that is onerous, IAS 37 requires the entity to recognise and measure the present obligation under the contract as a provision.

The provision for onerous contracts could be triggered in situations such as a revenue contract containing penalties for non-performance or an increase in costs associated with fulfilling a customer contract. Hence, entities should review their contracts to determine if there are any terms that may relieve them from their obligations without paying compensation. Contracts that can be terminated without paying compensation to the other party do not become onerous as there is no obligation.

8. Valuation of inventories

Inventories are measured either at cost or net realisable value (NRV), whichever is lower. Given the uncertainties in the current economic environment, it would be challenging for entities to determine NRV at the balance sheet date and conclude that NRV will recover before the inventory is sold. Hence, entities should assess the significance of any write-downs and make appropriate disclosures in accordance with IAS 2.

Also, the entities may experience changes in production levels due to COVID-19 and will need to use judgment in determining what constitutes abnormal production levels. In case of abnormally low production, an entity may need to review its cost of inventories to ensure unallocated fixed overheads are recognized in profit or loss in the period during which they are incurred.

9. Financial Instruments – Classification, measurement, and expected credit loss assessment

The classification of financial assets under IFRS 9 Financial Instruments is based on-

a) The entity’s business model for managing the financial assets; and

b) Whether the contractual cash flows of the financial asset are solely payments of principal and interest.

COVID-19 can impact the classification of assets where the entity’s business model for managing financial assets might have changed and it must reclassify all affected financial assets.

The potential deterioration in the credit quality of individuals and entities due to the COVID-19 pandemic will have a significant impact on the expected credit loss (ECL) measurement. IFRS 9 requires an entity to incorporate reasonable and supportable information about past events, current conditions, and the forecast of future economic conditions into the assessment of expected credit losses (ECL) for financial assets. ECL applies to trade and other receivables, loans, debt securities, contract assets, lease receivables, loan commitments, and financial guarantee contracts.

The measurement of expected credit losses should be based on the following:

a) The information that existed at the reporting date and that is available without undue cost or effort;

b) An unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes; and

c) The time value of money. Entities should provide transparent disclosure of the assumptions used to measure the ECL and provide sensitivity disclosures.

 

Whilst the COVID-19 outbreak represents one of the biggest challenges ever to the world economy, companies should evaluate the related accounting issues and disclosure considerations discussed above and must continuously adapt to new and uncertain market conditions.

Key Steps Accountants Should Take to Guide SMEs Out of the COVID-19 Crisis

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Business survival tips and strategies for SMEs during covid-19 crisis by expert accountants in Dubai

In the present situation where the whole world has come to a stop, it is now more important than ever to have savings in hand. There will be a massive impact felt due to the coronavirus, and businesses need to be ready for any situation which comes their way. It is because of this reason that outsourcing the accounting functions of a company will be more beneficial for the management.

Accountants – for many – are SMEs’ trusted advisors.

The Covid-19 crisis is a critical time where SMEs need all the guidance they can get to navigate through the storm. We call on accountants and small accountancy practices to help struggling SMEs through these difficult times.

The following actions are required to be taken by accountants to support their struggling SME clients:

1. Informing clients about all aid options

Accountants should be aware of all financial (and other) forms of aid provided by national governments. It would be helpful for the national accountancy body to be aware of aid that other countries provide, so they can flag the best practices to their own national policymakers.

2. Applying the available aid to the client’s situations

Identify clients in high-risk sectors and those that would benefit most from public support measures. Help them by:

  • Advising them on, and guiding them through, all the claims available to them
  • Identifying options to help them diversify their business
  • Providing a path to accessing emergency financing being provided by governments
  • If possible, consider renegotiating your fees and payment schedules with them

3. Helping with immediate business survival

One of the ways in which accountants can help is by informing their SME clients of immediate measures that might make the difference between survival and collapse. They should also help them implement these measures where required. Examples of this include:

  • Accessing the reliefs on offer as soon as possible to increase the impact.
  • Reviewing and adjusting their cash flow forecast to determine what impact cuts in sales will have on their ability to pay their suppliers and debt. Businesses should continue to pay their suppliers when they can to help avoid a widespread collapse of the financial system.
  • Considering the business model to ascertain whether the SME can deliver goods or services in an alternative manner – such as by home delivery or online and whether it can downsize or stop certain activities, such as travel, sales, and marketing.
  • Understanding their supply chains and planning for disruptions in the supply of products and services. This may involve scaling back production for some parts and stock and re-considering suppliers and clients from countries heavily impacted by the virus.
  • Checking their insurance to understand whether they are eligible for a claim for any financial losses.
  • Communicating with their staff to discuss the possibility of short-term pay cuts.
  • Ensuring that their financials are up to date so they can monitor profitability, stock, and debtor-creditor balances. Many governments are offering deferment of tax returns and financial information filing. However, such deferments’ long-term impacts are not clear. They could result in a later bottleneck in filing such returns and the possible loss of financial and tax data.
  • Negotiating with their debtors- for example, to offer discounts in exchange for early payment.
  • Negotiating with their debtors– for example, to offer discounts in exchange for early payment.
  • Continually monitoring the situation and informing clients of new initiatives so that when lifting the restrictions becomes imminent, they are ready to recommence trading.
  • If all else fails, consider the options within insolvency, as it may be possible to rescue viable businesses by debt reorganization rather than being forced into full liquidation.

4. Guiding SMEs’ plans for the medium term

Many SMEs are likely to be in crisis mode. Our chartered accountants help them avoid emergency measures that could endanger the business’ medium-term viability. They can, for example, help them to:

  • Reconsider whether laying off employees is unavoidable. On top of having negative social and societal impacts, cutting down on the workforce also constitutes a loss of key skills for the business. This should be a last resort option only, so make your clients aware of that and help them access all alternative options, aid, and financing available first. It is possible that staff would prefer taking a temporary pay cut over redundancy. This could increase staff loyalty and allow the business to resume operations once the restrictions are lifted.
  • Start building financial reserves as soon as possible to prepare for a new peak in coronavirus cases even after the current restrictions are lifted.

Accounting For COVID-19-Related Rent Concessions

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Accounting and Bookkeeping services in Dubai, accounting for covid-19 rent concessions, IFRS-16 amendment

COVID-19-Related Rent Concessions for Lessees, published by IASB on May 28, 2020:

Purpose:

As a result of the COVID-19 pandemic, many lessors are providing rent holidays / concessions to lessees.

Rent Concessions can be in the form of rent waivers, lease payment deferrals or one-off rent reductions. Prior to the amendment, such concessions may fall within the ambit of lease modifications.

What is a lease modification?

IFRS 16 defines a lease modification as:

“a change in the scope of a lease, or the consideration for a lease, that was not part of the original terms and conditions of the lease.” A lease modification results from renegotiations between the lessee and lessor.

Examples of lease modifications include (but are not limited to):

  • reducing or extending the contractual lease term;
  • hiking or lowering the lease payments; or
  • adding or removing the right to use one or more underlying assets.

Separate lease:

If a lease modification creates a separate lease, the lessee makes no adjustments to the original lease and accounts for the separate lease the same as any new lease.

Not a separate lease:

For a modification that is not a separate lease, the lessee’s accounting depends on the nature of the modification.

Lease Modifications – Amendment:

The following amendment makes it easier for lessee to account for COVID-19 related rent concessions as “not a lease modification” by exempting him to consider/evaluate the individual lease contracts to determine whether rent concessions are a lease modification or not as a direct rule with a criteria prescribed”.

Practical Expedient:

The accounting for lease modification is seemingly complex. It envisages the recalculation of lease assets and lease liabilities / (payments) using revised discount rates.

In order to simplify the Lessee Accounting for rent concessions, the International Accounting Standards Board (IASB), has proposed some amendments as a practical expedient:

All the following three conditions are required to be met for permitting a lessee to apply the practical expedient:

  • As a result of revised consideration, the change in lease payments is substantially the same or less than the original consideration; AND
  • the reduction in lease payments affects only payments, originally due on or before June 30, 2021; AND
  • there is no substantive change to other terms and conditions of the lease.

Lessee:

  • Thus, the proposed practical expedient obviates the need for lessees to carry out an assessment to decide whether a COVID-19 related rent concession received is a lease modification or not.
  • The lessee accounts for the rent concession as if the change was not a lease modification. Such rent concessions would generally be accounted for as a variable lease payment.
  • In this case, a lessee applies paragraph 38 of IFRS 16 and generally recognises the effect of the rent concession in profit or loss.

Lessor:

  • No practical expedient is provided for lessors
  • Lessors are required to continue to assess as if the rent concessions are lease modifications and account for them accordingly.
  • In case of operating lease, the lessor recognises the effect of the rent concession by recording lower income from leases.

Disclosure Requirements:

Lessees applying the practical expedient are required to disclose:

  • that fact, if they have applied the practical expedient to all eligible rent concessions and, if not, information about the nature of the contracts to which they have applied the practical expedient; and
  • the amount recognised in profit or loss for the reporting period arising from application of the practical expedient.

The information disclosed will need to be sufficient to enable users of financial statements to understand the impact of COVID-19-related changes in lease payments on the entity’s financial position and financial performance (paragraph 31 of IAS 1).

Effective date:

The amendments are effective for periods beginning on or after June 01, 2020, with earlier application also permitted in Financial Statements not authorized for issue at May 28, 2020.

Transition:

A lessee applies the amendments retrospectively and recognises the cumulative effect of initially applying them in the opening retained earnings of the reporting period in which they are first applied.

The disclosure requirements of Paragraph 28(f)1 of IAS 8 – Accounting Policies, Changes in Accounting Estimates and Errors do not apply in the reporting period in which a lessee first applies COVID-19-Related Rent Concessions.

Accounting of Unexpected COVID-19 related Costs

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Accounting and Bookkeeping Services, Accounting and Bookkeeping Companie, accounting for unforeseen expenses, accounting treatment of covid-related expenses

HOW TO ACCOUNT FOR UNEXPECTED COSTS RELATED TO COVID-19

COVID -19 has taught us a new lifestyle as well as new business structures. Staying at home and social distancing is becoming a part of our day-to-day life. Every business and every person has been affected by this epidemic and it will go down in history as an event that paused the economy and the beginning of a new culture.

In addition to various financial impacts being felt due to COVID-19, we must consider the unexpected/unusual expenses and their classification. Nowadays, every organisation requires a restructured business model. Most businesses would be remodelled and relaunched as a part of a turnaround strategy to recover all the financial impacts. Let us discuss the major unusual expenses that would affect cash flow due to COVID-19.

  • Cost related to digital ecosystem: As we know, most of the countries have imposed lockdown in order to reduce the spread of COVID19. Due to this, majority of the companies have implemented a remote working model in order to continue operations. Cost incurred for implementing remote working such as IT Consultation, related hardware installations, etc. can be considered as restructuring costs and treated accordingly.
  • Costs related to Inventory: Verification and valuation of inventory would be required before re-opening the regular activities of trading and manufacturing companies. Companies may require additional manpower for the verification of inventories, an inevitable cost. Due to the lapse in time, there is a high chance of goods being found to be unfit for sale, which may lead to high abolishment costs. Valuation is required because it reduces risk and return of goods. High maintenance cost of inventory may also be incurred due to lockdown.
  • Supply chain interruption: Production delays due to supply chain interruption would be a major cost which adversely affects the overall operation and the cash flow of the business.
  • Marketing expenses: Remodelling and recovery of business stability would be a great challenge, especially during the initial phases. Door to door communication may not be allowed and hence marketing divisions should be more focused on online marketing. Customer relationship expenses will also be part of this.
  • Sanitisation costs: As it may take more time to fully recover from COVID-19, cost of sanitisation will continue, at least in the short-term.

Accounting Treatment

When items of income or expenses are material, an entity shall disclose their nature and amount separately (IAS 1:97). An entity shall present additional line items, headings and subtotals in the statement(s) presenting profit and loss and other comprehensive income when such presentation is relevant to an understanding of the entity’s financial performance (IAS 1:85). However, an entity shall not present any items of income or expenses as extraordinary items, in the statement(s) presenting profit or loss and other comprehensive income or in the notes (IAS 1:87).

According to IAS 1:86, because the effect of an entity’s various activities, transactions and other events differ in frequency, potential for gain or loss and predictability, disclosing the components of financial performance assists users in understanding the financial performance achieved and in making projections of future financial performance. An entity includes additional line items in the statement(s) presenting profit or loss and other comprehensive income and it amends the descriptions used and the ordering of items when this is necessary to explain the elements of financial performance. An entity considers factors including materiality and the nature and function of the items of income and expense.

Based on these explanations in IAS 1, we can conclude that the overall effect of COVID-19 can be accounted separately if the total expenses are material, as decided by the management. If the expenses incurred are not material, it should be accounted within the appropriate heads of accounts itself. For e.g If there are any additional expenses (which are immaterial) related to marketing, it should be part of marketing expenses. Similarly, if there is any restructuring cost which is material, an entity shall disclose it separately under appropriate head.

Accounting Technologies

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Accountants in Dubai, Accounting Services Dubai, Chartered Accountant in Dubai, Accounting and Bookkeeping Services, Accounting Consultancy Dubai

Accountants need to stay up to date with technological advances in order to respond to market conditions and their clients’ needs. Technological innovations have led the way, establishing how accounting is done nowadays. Digital resources and online tools help improve productivity and organization.

Now, we can find advanced technology to help streamline accounting processes and management of books of accounts.

How does technology impact accounting?

The biggest impact IT has made on accounting is enabling companies to develop and use computerized systems to track and record financial transactions. This system allows companies to create individual reports quickly and easily, enabling management to make decisions faster, using up-to-date information.

There are many applications of modern technology in accounting. Out of the many available options, in this blog we summarize the five types of accounting technologies that are currently transforming the accounting industry:

  1. Artificial Intelligence & Robotics

    In simple terms, Artificial intelligence (AI) is the ability of a computer or a robot controlled by a computer to do tasks that are usually done by humans because they require human intelligence and discernment.

  2. Cloud Computing

    Cloud computing accounting software is accounting software that is hosted on remote servers. It provides accounting capabilities to businesses in a fashion similar to the SaaS (Software as a Service) business model. Data is sent into “the cloud“, where it is processed and returned to the user.

    A Simple Advantage
    This opens up a new way for accountants to work with their clients. Using cloud accounting, there is more time to engage with the client and focus on business strategy instead of getting burdened with detailed processes.

    Difference between Traditional Accounting and Cloud Computing?
    Traditional Accounting Software comes with initial infrastructure costs as well as maintenance costs of on-site software and hardware.

    Cloud computing, on the other hand, provides a software function without large upfront costs or licensing fees.

  3. Innovations in Tax Software

    An innovation is defined as the process of translating an idea or invention into a good or service that creates value or for which customers will pay. To be called an innovation, an idea must be replicable at an economical cost and must satisfy a specific need.

    Tax preparation software is an online, automated system for preparing individual and business income taxes. It’s used by both tax preparation businesses, like CPA’s(Certified Public Accountant), and individual taxpayers who prefer to do their own returns. It eliminates the need for the taxpayer to complete his or her return using actual forms.

    The tax software of today has helped improve accuracy while reducing margins of error – something businesses want to embrace in order to avoid tax penalties and prevent issues with stakeholders. Better tax software also helps streamline audits by making them more efficient and effective.

  4. Mobile Accounting

    Mobile accounting is the ability to access and process accounting information, which could be data, applications, etc. over devices that are not restricted by physical locations.

    “Mobile accounting could mean different things to different people and businesses, so the first step in a successful rollout is defining what it means to you and your company. For example, consider who the users will be and what they will be using it for. Think about the different functions you’d want your mobile accounting and financial solution to cover.”

  5. Social Media

    Social media has become an essential tool for firms wanting to engage with current and potential clients while expanding their brand reach. Social media is a tool that will continue to evolve and provide accountants with a valuable sales and marketing platform that can instantly connect firms to current and future clients.

    Most accounting firms understand the importance of implementing traditional marketing into their overall business development plans, but many firms may not realize the power of integrating social media marketing into their long-term marketing strategies.

    Social media should be a part of a firm’s overall business development strategy, and if done consistently, will help amplify the effectiveness of all other marketing and business development efforts.

Why Outsource Bookkeeping and Accounting Function?

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Why Outsource Accounting and Bookkeeping Function in Dubai?

Every business is different, and one business’ proven formula may not fit another’s. It is very important for a company to maintain its financial discipline, irrespective of the nature or size of the business. Some of the key benefits of outsourcing accounting and bookkeeping and other finance operations are:

  1. Saves time: One of the most common and obvious advantages of outsourcing is the amount of time you save. It’s a simple concept: accounting and bookkeeping take time. If you’re doing it yourself, then that’s time lost. There are a lot of different aspects to consider, and it becomes a balancing act. By outsourcing your accounting and bookkeeping services, you simply save time that’s better spent on core tasks.
  2. Reduced Overheads: By outsourcing accounting, a company saves overheads like visa costs, perks, visa deposits, sick leaves, annual leaves, etc.
  3. Faster decision-making: Our reports are customizable and help the management to make informed decisions at the right time, which is crucial for any business to grow exponentially. After all, if you’re paying money to work with the experts, they’ll have the information you need to see in a way that makes sense. This allows you to continue to make decisions to grow your business with peace of mind.
  4. Updated Big Picture: If you’re on the fence about outsourcing one service or another, an important thing to keep in mind is the amount of information and insight you might receive. Good quality accounting and payroll companies will have a “big picture” in mind after dealing with your company for a while. This information can be had at a moment’s notice, and advanced technologies can help you obtain personalized reports giving you the insight you need to further your company.

The types of outsourced accounting and bookkeeping services we offer are listed below:

Bookkeeping / Outsourced Accountant

A service that helps the company maintain its set of books in complete order, compliant with local laws, and reconciled with various statements. This is a basic feature and the minimal requirement for any company, whether it is a startup or a Multi-National entity. Our bookkeeper shall handle day-to-day data entry, either on a full-time deputation basis or through regular visits. Typical kinds of bookkeeping outsourcing could be on a Full time, Part Time or Project Basis.

Management accounting / Outsourced FM

Management accounting entails the management of business assets, internal business operations of clients, reports on profit and loss based on the company budget, reports on the fulfillment of key performance indicators or performance metrics that are uniquely adapted by the company, cash forecasts, and revenue projections, among others. In managing this data, your provider must assume an eagle-eye approach with regard to how your company’s leadership realistically fulfills all its financial goals.

Financial controller services / Outsourced CFO

These services cover coordination with bookkeepers and business owners in the completion of monthly management reports. In the fulfillment of these services, your provider will handle financial data that is crucial to hiring, dealing with clients, and the like—an assessment of how healthy your business is at any given time. Financial analysis is a part of this service, which includes data that pertains to product cost calculation; profitability; reviewing of credits and rebills; and reviewing company sales contracts to determine the impact on accounting policies, among others.

Payroll services

Another service that is available is the management of your company’s payroll. Our payroll services include the tallying of your company’s pay cycle and the accounting of on-demand services, end-of-month services, and end-of-year services. Your provider is obligated to learn the payroll management norms of your company, as well as what the just and timely standards are for your employees’ compensation, in order to ensure that they adhere to the same.

To know more details, please contact Nihar Kothari, Partner at Affiniax, at nihar@affiniax.com

SUBMISSION OF CBCR NOTIFICATION TO MOFA

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All multinational groups with Group Revenue equal to or exceeding 3.15 Billion AED must read this carefully. Otherwise, there is a risk of AED 1,000,000 penalty if the form is not submitted by 31 December 2019. Ministry of Finance (MoF) has required all eligible entities to submit CbCR notifications before the 31 December 2019 deadline. The purpose of reporting is to eliminate gaps in information between taxpayers and tax administrators. Cabinet Resolution No. 32 on Country-by-Country Reporting regulation was issued in UAE on 30th April 2019 and requires those entities which are tax residents in the UAE and part of a multinational group; to file a notification to the Ministry of Finance in a specified format. Applicability of Resolution: Multinational groups with consolidated revenues of at least AED 3.15 billion (approximately USD 855 million) per annum and wherein,
  1. An Ultimate Parent Entity established in the UAE being tax resident (being parent company of a Multinational Group)
  2. A Constituent Entity, through ownership or control of a Multinational Group in UAE.
Compliance Requirements: CbCR Notification Notification must be submitted, on or before the last day* of the group’s financial year by the Constituent Entity of an MNE Group being Tax Resident of UAE. *Where financial reporting year of the Multinational group starts on 1st January 2019, the due date of first notifications must be on or before 31 December 2019 CbC Report Filing The filing must be done within 12 months from the end of group financial year* by:
    1. Parent Company being Tax Resident in UAE
    2. Constituent Entity (being tax resident) on fulfilling certain conditions.
Penalties for Non- compliance:
Failure to keep the documents and information for a period of 5 years from the date of submitting CbCR AED 100,000
Failure to provide any information required in accordance with the CbCR and notification AED 100,000
Failure to report or notify on or before the due date AED 1,000,000 plus AED 10,000 per day subject to maximum AED 250,000
Failure to provide complete and accurate information AED 50,000 – 500,000
  How Affiniax Partners can Help
  • Assessment of applicability of Regulation CBCR requirements
  • Assist in Notification Compliances
  • Assist in aggregating the data required under the CbC Reporting
  • Advisory services

ROLE OF AN ACCOUNTANT IN BUSINESS OPERATIONS

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Role of An Accountant in Business Operations

An accountant can be anything from a simple bookkeeper to a strategic advisor, interpreting financial information for senior decision-makers in business operations.

Financial Data Management

The accounting structure of a company is an essential component of business operations. One of the primary roles of an accountant usually involves the collection and maintenance of financial data as it relates to a company or firm. The accountant ensures that financial records are maintained in compliance with lawfully accepted procedures and policies on the corporate level. The financial information for any organization should be kept in a pristine manner because it is a key component used to operate and manage any business.

Managing the financial data of an organization can also include more sophisticated duties, such as developing, implementing, and maintaining financial databases, as well as establishing and monitoring control procedures.

Analysis And Advice

As analysts, accountants may perform certain types of analysis using financial data that is used to assist in making business decisions. From deciding which kinds of supplies to ordering payment of bills to payroll, the accountant handles many intricate financial details on a daily basis. Advising on business operations can include issues such as revenue and expenditure trends, financial commitments, and future revenue expectations.

The accountant also analyzes financial data to resolve certain discrepancies and irregularities that may arise. Recommendations may also involve developing efficient resources and procedures while providing strategic recommendations for specific financial problems or situations.

Financial Report Preparation

Accountants typically prepare financial statements that may include monthly and annual accounts based on the financial information that is compiled and analyzed. The preparation of financial management reports can include accurate quarterly and year-end closing documents. Reports compiled may be used in connection with the continual support and management of budgetary forecast activities.

The financial reports may be used by a financial director or officer for the development, implementation, and operation of a company’s financial software and systems, such as Hyperion, Excel, and CODA Financial Management.

Regulatory and Reporting Compliance

An accountant may also be responsible for ensuring that all financial reporting deadlines are met, internally and externally. For example, quarterly, semi-annual, and annual reports all have specific deadlines, as well as some tax implications. Monitoring and supporting taxation issues and filings can also be included in the role of an accountant. The accountant also usually coordinates the audit process by assisting with financial data preparation.

External Business Affiliations

Often, accountants must work with financial professionals from the four major fields of the industry: public, management, internal auditing, and government accounting. Accountants may provide data to a public accountant, who acts as a consultant, auditor, and tax service professional.

Corporations, nonprofits, organizations, and governments use management accountants to record and analyze the financial information of the businesses in which they are employed. They usually advise company executives, creditors, stockholders, regulatory agencies, and tax personnel. Accountants may also work with government officials who are examining and maintaining the financial records of the private business for whom an accountant is employed in connection with taxation and government regulations.

WHY BUDGETING IS CONSIDERED KEY TO BUSINESS FINANCIAL SUCCESS?

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One of the most important tools an entrepreneur can develop for the financial success of a business  is a budget. Budgets allow a business owner to not only plan for expenses, but also analyze expenditures and make changes according to the needs of the enterprise. A business that doesn’t budget sets itself up for a host of financial problems down the road. This is true for businesses of all ages and sizes. Conversely, a business that develops short- and long-term business objectives by creating a detailed business plan can create a road map for financial success and opportunities to expand. Just like a household, a business has certain debt obligations and expenditures it is responsible for. Imagine the potential implications if a business is unable to meet even one financial obligation, because of poor budgeting. Being unable to meet payroll means employees will leave the company; not carrying insurance leaves the company open to liability; failure to pay rent means eviction; and not paying statutory taxes on time leads to fines. Developing an accurate budget is a critical component of financial success; that being said, a budget is a living tool that should change according to the needs of your business. When developing an initial budget, try best to accurately estimate income and expenses, but know that the figures will change as expenditures rise and fall. For example, if you overspend on office supplies but overestimate the cost of your utilities, feel free to adjust the numbers in the budget accordingly for that month – you didn’t do anything wrong! Budgeting is a trial-and-error process, and the accuracy of your estimations will improve as you continue to follow the budgeting model. After the budget has been developed, it’s important to analyze actual results at the end of each month. Compare expenditures and income to the budget planned, and try to develop a sense of how you performed in relation to your budget goals. Benefits of Budgeting: A carefully constructed budget allows a business to continually track where they are financially. This allows for strategic, long-term planning for everything from current operating costs to potential expansion. Other benefits include:
  • The ability to set sales goals
  • The chance to open lines of credit
  • The ability to make decisions about salaries, bonuses, benefits and overhead operating expenses
  • Easier tax preparation (VAT)
  • Plan and predict cash flows
To ensure budgeting is done accurately, it may be worthwhile to hire an outside accountant, or a business manager who has expertise in business finance. We can help you establish an accounting system, track expenditures and produce reports that will help you make calculated and informed decisions about business operations. Please click here to get details as to what we have to offer. To sum up, it is very well said by Joe Biden that “Don’t tell me what you value, show me your budget, and I’ll tell you what you value.”

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