Setting up a new business is exciting, and if you are in the process of starting one, you must ensure you record your finances properly and efficiently. Proper record-keeping and accounting can help you understand the financial health of your business and drive growth. You must also comply with all legal requirements that are applicable to your industry.
An important aspect of accounting for any new business in the UAE includes adhering to the tax regulations, such as Value-Added Tax (VAT) or Corporate Tax. Not complying with these tax regulations can lead to hefty fines and legal complications that can hurt your business.
Importance of setting up accounting the right way
Any new business must set up accounting the right way, as it lets the decision-makers compile income, expenses, receivables, and payables and close their books. Accounting, when done right, enables businesses to track cash flows. Tracking cash inflows and outflows helps all businesses make mindful decisions that directly impact the operations of their business. For instance, a business that holds inventory must keep track of it and reorder before stockouts to keep the distribution smooth and sales steady.
An accounting software like TallyPrime helps businesses keep track of all inventory and finances, making it easy to see how much money they have in the bank and how much they can reorder. If accounting is not set up correctly, your new business will always struggle to function smoothly, and your financial mismanagement might lead to severe losses, compliance issues and even lead to the eventual closure of the business.
The checklist to follow for new businesses
Business owners must ensure that their legal and accounting files match so that it makes it easier for the banks or authorities to review their documents, reducing unnecessary delay.
Here is a checklist every new business must follow in the first 90 days when they are setting up their accounting:
- Choose accounting software that is easy to understand, use, and access, even on the go.
- Define how the funding will be treated when it first hits the business’s bank account. Your record-keeping will happen accordingly.
- Define who handles what and gets access to your accounting software to record your transactions and keep books. Not everyone needs access to these numbers.
- Begin posting transactions as soon as they start happening and ensure the narration of the transaction is easily comprehensible. You or the reviewer must always understand why the money changed hands by reading the narration at a glance.
- Always keep the bills and receipts that require reimbursement because it can get tricky to get reimbursements without invoices.
- Be disciplined about recording transactions and create a routine that you follow to avoid last-minute panic. Regularly updating your books is the only way to ensure there’s not a huge chunk of work and pressure when it's time for tax filing.
- Reconcile all transactions, attach proofs, and close the books of accounts frequently to avoid forgetting why the money changed hands when it is still fresh in your mind.
Best practices in setting up accounting for a new business
As mentioned earlier, the first step in setting up accounting is to separate the personal and business bank accounts to track expenses and income easily. Have a look at the other best practices that make accounting easier:
- Choose between the different types of accounting, such as cash accounting or accrual accounting. Cash accounting records transactions when income is received and the expenses are paid. On the other hand, accrual accounting records transactions when the income or expenses are incurred.
- Create separate folders for various expenses and incomes in your accounting software, such as salaries, rent, or sales. You won’t be confused and can find all the records easily.
- Track each and every transaction in your accounting software, no matter how small it is, and add it to the right folder.
- Always prepare your basic financial statements, such as the income statement, balance sheet, and cash inflow statement.
How can TallyPrime help?
TallyPrime is a one-stop shop for all new businesses that want to start record-keeping efficiently and easily. Here are a few benefits you can get with TallyPrime if you are setting up a new business in the UAE:
- Cash and credit management
- Accounting
- Banking
- Inventory management
- Compliance
- Cloud capabilities
- Access from anywhere
- Access to comprehensive reports
Having user-friendly accounting software that’s easily accessible from anywhere can drastically reduce the record-keeping hurdles. TallyPrime is a preferred choice for many new and established businesses that want precision, functionality, and feature-loaded accounting software.
Accounting provides a framework for managing finances, making informed decisions, and complying with tax laws efficiently. Proper accounting helps businesses look at their financial health from a well-informed point of view and can save them from heavy losses. Setting up accounting the right way is the foundation any business needs to lay to set itself up for success.
It can dramatically lead to creating robust financial management systems and provide clarity that helps with strategic decision-making and business insights. New businesses must start their journey with robust accounting software, as it is a necessity, not a luxury!
