Effective tips to manage SME bookkeeping seamlessly

Only 12 days left to implement the new corporate tax law in UAE. Federal Decree-Law No. 47 of 2022 on Taxation of Corporations and Businesses (the “Corporate Tax Law”). Businesses will become subject to UAE Corporate Tax (“Corporate Tax”) from the beginning of their first financial year which will be implemented from June 1st. 

The UAE government has also announced relaxation for Small and Micro Businesses (Ministerial Decision No. 73 of 2023) as a part of its initiatives to support Small businesses which operates within the UAE.  According to the relief terms, if the annual revenue of businesses and individuals is below AED, 375, 000, they are subjected to 0% tax and taxed a 9% on the taxable income if the revenue is higher. 

Does this mean SMEs whose revenue is below AED 375,000 has to do nothing? Nope. They will still have to submit their books to verify your eligibility for exemption. In short, all business entities in UAE has to keep proper bookkeeping and accounting hereafter. 

Apart from the taxation purpose, proper bookkeeping and accounting will give you information regarding the health of your finance, cash flow, profit and loss, and help you in forecasting and budgeting. 

How will you do that? 

Research shows that more than 60% of SME owners manage the books on their own. You don’t need a master's in accounting but has basic knowledge. 

Here are a few tips for maintaining your books.

• Keep personal and business accounts separate
• Reimburse yourself 
• Maintain regular  and accurate financial records
• Establish a clear chart of Accounts
• Monitor and Manage Account receivables and payables
• Make regular adjustments
• Streamline the payroll process
• Review P&L statement quarterly
• Analyse Accounting report

Separate Personal and Business Accounts

This is the first and golden rule for bookkeeping. It's crucial to keep your personal and business accounts separate. Mixing them up can lead to confusion, inaccurate financial reporting, and potential legal and tax issues. So, make sure you have separate accounts to keep your business finances organized and easy to manage.

Reimburse Yourself for Personal Expenses

If you use your business funds for personal expenses, be sure to reimburse yourself. This keeps your financial records accurate and ensures that personal expenses don't impact your business's financial reports. By properly documenting and reimbursing yourself, you maintain transparency and protect your business's financial integrity.

Keep Regular and Accurate Financial Records

Maintaining regular and accurate financial records is the backbone of good bookkeeping. It helps you track your income, expenses, and cash flow, giving you the information you need to make informed business decisions. Plus, it makes tax time much easier and provides a clear audit trail if needed.

Establish a Clear Chart of Accounts

Having a well-structured chart of accounts is essential for organizing and categorizing your financial transactions. It ensures consistency in your financial reporting, simplifies analysis of your income and expenses, and helps you make smart business decisions. So, take the time to set up a clear chart of accounts that works for your business.

Monitor and Manage Accounts Receivable and Payables

Keeping a close eye on your accounts receivable (money owed to you) and accounts payable (money you owe) is crucial for maintaining healthy cash flow. Promptly collecting what's owed to you and managing your own payments to suppliers helps ensure your business stays on track financially.

Make Regular Adjustments to Your Books

Don't let errors accumulate in your books. Regularly making adjustments helps keep your financial records accurate and up to date. It's important to account for things like accruals, deferrals, and corrections. By adjusting your entries more often, you'll have a clearer and more reliable picture of your business's financial health.

Streamline Your Payroll Process

If you have employees, it's crucial to set up and manage your payroll properly. This means accurately calculating wages, deducting taxes, and ensuring timely payments. Effective payroll management keeps you compliant with employment regulations and ensures your employees are taken care of.

Review Your P&L Statement Quarterly

Take the time to review your Profit and Loss (P&L) statement every quarter. This gives you insights into your business's revenue, expenses, and profitability. It helps you spot trends, identify areas for improvement, and make informed financial decisions. By regularly reviewing your P&L, you'll have a better understanding of how your business is performing. 

Dive into Your Accounting Reports

Don't just skim through your accounting reports - dive into them! Take a close look at your balance sheets, cash flow statements, and financial ratios. They provide valuable information about your business's financial position, liquidity, and overall performance. Analyzing these reports helps you identify strengths, weaknesses, and opportunities for growth.

Use a Tax compliant software

Using tax-compliant software for your small business is super important. It helps you calculate taxes accurately and reminds you of important deadlines, so you don't miss any filings or payments. A tax-compliant software makes it easy to handle VAT calculations and generate invoices. It takes away the stress of tax compliance, saves time, and keeps your business on the right track with its taxes.

Learn how Nymbl Suite ERP integrated with Nymbl POS (for restaurants and retail) makes it 10x easier to do the bookkeeping

In wrapping up, it's crucial for SMEs to gear up for the new UAE corporate law. Compliance with this law isn't just about ticking off boxes; it's about establishing a solid financial foundation for your business's prosperity. By adopting effective bookkeeping and accounting practices, you gain valuable insights into your financial position, make informed decisions, and ensure adherence to tax regulations.

By embracing these practices and tools, you can confidently navigate the evolving UAE corporate law, streamline your financial operations, and position your SME for long-term prosperity. So, take charge of your bookkeeping, stay compliant, and empower your business to thrive in the ever-changing landscape of the UAE.