24 AUG Risk of using multiple records for your business – and how to fix them
BookKeeping Basic for Every Small Business Owner
I recently spoke with a client who has several sets of ledgers. Some do not even know that they are doing this. Here are four reasons why your company may have more than one set of ledgers, and if you recognise your company in these paragraphs, here you will see what you can do to fix this problem:
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You and your tax agent are out of sync:
Any company or audit firms in Dubai that pay taxes to the budget runs the risk of creating a second set of ledgers. All tax agents that prepare tax returns – even the most intelligent and professional ones – make some changes to the books they keep and make for you, which never reflect the text that you use to manage your company.
Take depreciation, for example, as the simplest example. The reduction should be used in calculating tax payments. Naturally, your tax prepare would like to maximise your depreciation deductions throughout the year, and they most likely do this. But they should also inform you of any adjustments so that your accountant can make appropriate adjustments to their books so that the accounts and data are identical.
And honestly, you have to control this. Part of doing business is optimising the tax burden, and if your management books are at odds with the numbers you provide to the tax office, you will have problems. Also, you may find yourself in a situation where only your tax accountant knows the real numbers and how they are calculated, which is a dangerous situation for various reasons.
To fix this, you will need to get adjustments from your tax specialist. Then ask your accountant to make the same adjustments using the “13th Period”. Each month is one period (this is 12!), And the last day of the year is the so-called period 13. The previous period should include all tax adjustment entries so that your books look like the tax return on December 31st. By making adjustments on December 31, you will save your operational data for 12 months.
And if you need to look at your books, generate your reports for the year without tax adjustment. Note, Do not let your accountant “cancel” the records over the next year without consulting the tax prepare, as this can change the accounting data and return you to where you started: to two different sets of books.
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You keep the second set of books to comply with generally accepted accounting principles:
All tax reporting compilers will insist that your books comply with the generally accepted accounting principles – accounting standards of PBU (Accounting Regulations). PBU or accounting standards are a set of rules that determine how income and expenses were recorded.
Why do you need this? Although PBUs are very useful for public companies, they are not a mandatory requirement for practical application for most small enterprises. Several tax agents are likely to write me displeased comments about this advice, but I firmly believe that you should keep your ledgers in a way that is convenient for you. And, while you adhere to the basic principles of accounting, you can generate your financial statements. And if this contradicts some insignificant, not affecting the financial result, PBU moments, this should not worry anyone.
To solve these issue, no matter how you keep your books, do not let someone else keep the second set, just observing PBU. The waste of resources and probably only hurts you. If you’ve already been the victim of an overly zealous accountant, my advice is to stop. Stop spending money on separate RAS reports and find a new accountant who will provide you with the tools and recommendations you need to organise your company accounting with one set of books.
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You have security problems:
Some business executives and business owners believe that storing individual records “outside the books” will not allow employees to see critical financial data (such as salaries, benefits, or property data). Not true. As soon as the manager starts using spreadsheets for some data full of “secret” details, the integrity of the financial statements disappears. (And, at the same time, unnecessary difficulties of a double data set are added!)
Why do you need this? The use and storage of the second set of books will always lead to errors, duplication of data entry, and the absence of both clarity and accuracy. You need your books so that the data is clear, unambiguous and complete. So you don’t need to use three spreadsheets and two Quick Books files to find out if you made a profit this month!
What to do with it: release the reins a bit. If the company does not have a single person, you can trust to keep books honestly and with a complete, clear idea of the costs, try outsourcing your financial statements to a reputable company. As an additional advantage, you will get a lot – you will cease to do extra work on accounting yourself, you will have more time to focus on much more essential tasks.
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Do not use much software:
Unfortunately, companies or vat consultant in Dubai use the same system, which, for example, makes invoices, but does not track account balances and payments. Or they have a sales system that tracks the number of stocks but does not report the value of goods sold. There are many stories like these — a few methods used by the company that does not integrate very well.
Be careful with this!
Why do you need this? Whenever you have two systems that run a business, you get two sets of books that can never be combined. Each of them may be correct and show a part of the story, but you will miss detailed moments that connect with all your data in only one place – such as customer profitability, detailed cost of goods sold or annual sales.
What to do about it: this is the most individual problem on our list. If you have several software platforms, each of which creates only part of the financial picture. Fortunately, technological solutions often exist – synchronisation tools and cloud platforms that combine multiple data streams. However, if your systems do not work together, it may be time to abandon them and start all over again.
Conclusion:
No matter why you have several sets of books, it is time to do something about it. Take the necessary steps to get one set of clear, concise, and complete accounts as soon as possible you can hire company liquidation services in Dubai. There is no other way to find out that all you need to know about your business is: truth, the only truth, and nothing but the truth!