Umbrella Accounting Services, UAE

The Importance of Accounting for SMEs

Umbrella Accounting Services

Accounting is the spinal cord of any business. Unfortunately, this role is largely ignored. Many entrepreneurs think that accounting is secondary because they KNOW (!!) all aspects of work. They limit the role of accounting to paying taxes without being concerned with what the financial statements monitor. Or employ a person without the necessary qualifications or experience. I met many entrepreneurs that keep pumping money into the company without knowing the reasons.

FINANCIAL STATEMENTS

Accounting should provide the decision-maker with three financial statements. These are:

Profit and Loss Sheet: It shows in detail raw materials, utilities, rent, labor costs, marketing and benefits. Periodic analysis shows the business ratios in comparison with similar sectors and assists to optimize them.

Balance Sheet: what the company is and what it owes. In other words, it shows the bank accounts, receivables, assets, etc. Also, the short or long-term obligations of the company, such as loans, taxes, or payables.

Cash Flow Sheet: It calculates the company’s financial resources from several activities; main activity, investment or other. Thus, it gives a clear picture of the company’s cash flows and whether we have an abundance of cash or not.

OTHER REPORTS

There are also other reports such as the receivables aging report, sales analysis, cost ratios or individual sales performance.

WHY DOES IT MATTERS?

These should be reviewed periodically. It will lead the decision-makers to better extrapolate and decide on better business decisions. It will help decide on expansion, employment or marketing.

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