When it comes to outsourcing areas of your business, it is always worrying that you are not in control. With VAT poking its head around the corner, how can you tell your accountant understands all that they need to, so you don’t incur heavy penalties?
With the implementation of VAT coming in January, it is vital to ensure that your business has an accountant that is able to understand the law properly and safeguard you from having to pay too much – or too little – than is expected. With the prospect of heavy fines for businesses that don’t comply with the legislation, business leaders need to be able to rely on their accountants and guarantee that they are paying exactly what is required.
Cash flow is now more important than ever. Money will be leaving your account quarterly to pay for the VAT that the business will incur. These payments will need to include monies for any work that has been invoiced and for which money has been received and/or is outstanding. If a company that you have invoiced doesn’t pay their dues, you will not be able to claim back the VAT that was paid on their invoice for 6 months. As a business you need to account for this. You have to ensure that you have the funds to be able to pay all staff, suppliers, rent etc. VAT should be considered to be an advance of cash that the companies will have to put to one side. Tax returns will be provided for any eligible claims, but to safeguard your business, cash flow needs to at the top of the agenda, “It is important for you to have ‘peace of mind’ with your accounting, cash flow, VAT return. You want to be satisfied that you are accounts are being properly handled so that you can focus on your core business,” explains Caroline Thevenot of CT Consultancy.
If at present, you don’t have this confidence, you need to do the relevant checks to ensure that it isn’t the inexperience of your book keeper in certain areas of finance – like VAT – that is letting them down. Obtaining a second opinion of your books will help, but Caroline also suggests training them so that they gain an understanding of what is required in the new era, “Businesses should also look to outsource a finance manager. They can manage your employee, monitor their work and provide you with the financial reports and information that you need.”
When you are looking for either a finance manager or accountant, not only should you question if they have experience of VAT previously, but you also need to ensure that the person you outsource to will match with your company values, understands your business model and all of the services that you would like support with – For example, if you want someone for strategy, you need to know so that when you interview someone, you can ask the right questions. Alternatively, would you like a payroll function?
To get the best out of the person you hire, you need to view their position within the company as a strategic one. You will want them to know confidential information on the business, and should want them to report directly to you, while actively participating in many of the company projects. This is the best way you can obtain the highest return on your investment.
In order for you to ensure you have the right accountant for your business, Caroline suggests:
They Have Previous Experience (in UAE)
The UAE is not only on the verge of implementing VAT into their economy, but it has processes and reporting structures that vary from free zone to free zone, or for businesses that are an on-shore business. An accountant who has no experience in the UAE may not understand the importance of company structure and set up, or any of the idiosyncrasies that are unique to the UAE. “This inexperience may mean that financial penalties are placed on the business, or worst-case scenario, that you are illegal in your actions, with deportation or jail time as part of the judgement if you are found to be at fault,” says Caroline.
“You want your accountant or finance manager to be proactive. They need to be empowered and illustrate that they can make decisions by themselves. This is a big step for business leaders. If you don’t yet have the trust in them to allow them to make basic decisions, or sign off spending on certain amounts, I would suggest you start by asking them to propose solutions to problems or improvements to the systems already in place. If they come back with ideas, implement one or two of the suggestions to see how they work. If they work, maybe you should look at implementing more?
“On the other hand, if your accountant is not proactive and the trust just isn’t there, then are they the right person for your business? In order for you to gain that confidence and peace of mind, you may want to consider if it is better for your business to find the right person to be either your accountant or your finance manager, at least then you will have one less worry,” suggests Caroline.
“The only way you will stop worrying about your accounts, is if you trust your accountant. They need to be reliable,” explains Caroline. She suggests asking yourself the following questions; Does your accountant meet their deadlines? Is your cash flowing smoothly? If not, does your accountant offer advice and suggestions? Do they have experience advising on VAT outside of the UAE? Have they kept up to date with their knowledge on VAT so far? If the answer is no to more than one of these questions, you should review the position and decide if it is in your companies best interests to outsource this role to someone else.
Accountants often have to deal with high-pressure situations – especially those who work with SMEs and start-ups, “They need to be fast, and able to cope with colleagues at a managerial level,” says Caroline. “Ultimately they need to know how to deal with stressful situations. Cash flow is a concern for many businesses and their manner of dealing with this, often evidenced by how they deliver the advice, will determine whether or not a business leader will accept the advice given.”
Know Procedures and Processes
Behind all the laws on accounting (current and future laws), there are procedures and processes in place that will enable them to be enacted. Caroline suggests asking yourself, “Does your accountant understand these processes and the different techniques that will enable them to be enacted? Your accountant needs to have enough experience to be able to see what processes need to be implemented.”
Competent in Excel
“This may sound obvious, but staff being generally computer illiterate and not good in excel is one of the many complaints that I hear from the owners of small businesses,” Caroline explains. This hides underlying problems, “Someone who is good in excel demonstrates a logical approach to dealing with problems. It shows that they can engage in practical ways to overcome the area of concern. Most importantly, they will also be able to report back on the spread sheets in an effective and clear manner so you can always understand your position.”
Have Knowledge of One or Several ERP and Accounting Software Systems
As we said above, many businesses still rely on excel to run their accounts, but, “With the implementation of VAT, now is the best time to consider using an accounting software tool that will streamline processes and payments. Your accountant should be the person who you trust to have the ultimate say in this as they will be the person working in the system daily,” advises Caroline. “The best way for them to have authority to speak on this, is if they have knowledge or experience of several of the Enterprise Resource Planning (ERP) and accounting software packages that are available – especially if they already have experience in setting up an ERP.”
Ultimately, the benchmark for ascertaining if you have the right accountant for you, should rest with their ability to assist your business with the transition into VAT, and the amount of assistance that they are able to provide with regards to all your business readiness activities. If your accountant or finance manager is able to do this, then you are in luck. If not, maybe it is time to find someone who can…
For more information, visit http://www.ctconsultancyuae.com