Any business starts small and if managed right grows consistently. Taxation is a part and parcel of business globally, which requires the business to maintain a proper book of accounts as a minimum. For a new business, outsourcing accounting activity to a local accounting services firm is the best available option. This raises the question of how to choose the right accounting services firm to meet your specific business requirements.
This blog post presents a set of practical considerations that you can easily undertake, to make a qualified decision on the accounting services firm that you would like to outsource your accounting to.
Before you start searching for an Accounting services firm, do undertake a detailed requirement analysis of the service for your business.
This requirement analysis should consider the following key aspects of your business: Number of sales per month, nature of sales (Exports, local, contractual, etc.), the volume of purchases (this should include your direct purchases for raw materials or stock in trade, other purchases for day to day business and office management), Recurring expenses (such as rent, salary, utilities, phone, etc.), nature of purchases (local, imports, custom-made articles, etc.)
This business analysis would reflect the scope of work for outsourcing to an accounting service firm. Having a good idea always helps to negotiate the pricing and maintain the pricing for a longer period of time. Once the accounting services firm commences the engagement, they will have a clear idea of your volume of transactions and will push you to price more suited to your volume of transactions.
Another outcome of the insight into your requirement analysis will also help you make a clear decision on whether to outsource or hire an in-house accountant, this is usually recommended for business owners who have an accounting background and can hence, adequately, monitor the accountant for proper delivery.
Freelancer/Accounting services firm/Auditing firm:
The UAE market has service providers for Accounting services as freelancers, dedicated accounting and bookkeeping firms and of course, full-service accounting and auditing firms. Background on each to help you consider your options.
Freelancers are basically employed in either a full time or part-time job, they take up accounting and bookkeeping assignments to augment their incomes. Usually, highly qualified individuals do not undertake freelance as they are expected to have a good-paying job with no need to freelance. Hence, basic qualified accountants form the major chunk of freelance accountants.
Accounting and Bookkeeping firms specialize in providing outsourced accounting and bookkeeping services, usually, for a specific geography. They are well versed with the accounting requirements for the region, accounting systems used to manage the accounts with ease and local tax compliance apart from a good understanding of local market business practices and multiple industries.
Auditing firms are in most cases focused on audit assignments, business evaluation, and due diligence assignments. They do offer accounting and bookkeeping services, however, it is not their primary focus area of business. Plus, usually, higher-cost resources are available to meet Auditing requirements, who are used for accounting assignment thereby increasing the cost of their services. However, in case you are in a Free-Zone which requires regular audits, it does make sense to outsource your accounting to an auditing firm and negotiate a package rate for accounting and regular auditing.
Now that you have a better understanding of what these service provider options mean, you should use your business evaluation results to make a conscious decision. If only books of accounts are to be maintained in a proper and compliant manner, the best option is the Accounting and Bookkeeping Firms, they bring with them all aspects of the big Audit firms by way of knowledge of market, accounting standards, accounting systems, taxation laws, business practices and qualified accountants at rates much lower than Auditing firms and quality much better than freelancers.
Accounting firm Due diligence:
As with any business decision, once you shortlist your options, you should undertake a bit of research and due diligence on the shortlisted firms. Simple things to consider are review of their website to understand the services offered, ideally, outsource to a firm where accounting is the primary business line, review their blogs if any, evaluate the quality and timeliness of response to queries by dropping an email inquiry, look out for tie-ups and partnerships with system providers and service providers, and also consider the vintage of the firm as to number of years in operation.
The quality of staff is rather a difficult thing to evaluate, but a critical factor that you would consider when selecting an outsourced service provider. In case, the discussions are held by the sales personnel, then you have a problem, however, if the accounting department personnel deal with you directly, then it would be a good indicator of the quality of resources available with the firm and to make a meaningful evaluation.
The days are gone when manual accounting in physical books and excel based accounting were sufficient to meet regulatory requirements. Luckily, accounting is one of the first activities which was taken up by technology, hence we have a plethora of options when it comes to accounting systems to use. Customized systems, cloud-based systems, locally hosted systems, FTA notified systems, etc are all available choices. Needless to add, costs are also the main consideration when it comes to choosing any system.
Evaluate the accounting services firm based on systems they work on, options they provide you for accounting systems to deploy and rationale for the same. We do recommend cloud-based accounting systems notified by UAE FTA as VAT compliant. The rationale for this is one it is expected to have compliance hard-wired, second being cloud-based updates to system on account of tax law changes do not cost you, thirdly, cloud-based systems can be accessed from anywhere globally 24 x 7, and finally, they are very cost-effective with monthly subscription options also being available.
VAT in UAE is one of the primary reasons for businesses to commence accounting of their business transactions. Accounting or Bookkeeping inherently requires, accounting for VAT for every transaction. This means the service provider should be well versed with the VAT laws and its applicability to the various nature of transactions that your firm would undertake, they would be able to generate reports to file periodic tax returns, they will be able to provide you inputs on how best to structure a transaction to ensure optimal VAT impact for your business.
This can be easily evaluated by having a quick discussion with the service provider on understanding the VAT impact for your business if the advice is logical consider them, if not, discard them. Usually, legitimate accounting and bookkeeping firms would not charge you for VAT related services which are advisory in nature, or support for filing returns or registration services, which are available to the business owner through the FTA e-services portal free of charge. If a service provider indicates a charge for VAT services, then it is advisable to avoid them.
Record Management and Reconciliations:
Services are rendered in two ways by most of the accounting and bookkeeping firms, one onsite at your business premises or offsite from the service provider business premises. Onsite accounting systems require onsite service provision, in this case, the record management is rather easy as the service provider accesses your records in your premises, accounts for them, and returns it to you for safe-keeping. Cloud-Based systems allow for offsite service provision, in such cases, the records need to be made available to the service provider. The ease of process to share the records with the service provider should be considered as it has a long term impact.
Reconciliations specifically of bank accounts are a key control feature to ensure that all eligible business transactions have been accounted for. This also helps to confirm completeness and to an extent accuracy of the transactions processed. The service provider considered, should by default, provide reconciliation services for your business bank accounts at least for each tax period if not monthly without any additional charges.
The above qualitative guidance should help you make a intelligent decision on zeroing in on the accounting services firm you would like to engage with. There are other things which should also be considered like the quality of communication, transparency in discussing detailed deliverable, written communication quality all have a role to play in helping you make up your mind.
A service provider with whom you would like to partner should put you at comfort, this is achieved by explaining the service delivery in layman terms to the extent the client requires, answer all queries politely, comprehensively and to the client satisfaction, any effort to obfuscate or ambiguous responses only puts off the client.
We hope this post is helpful and would very much like to hear your views. If you have considered any other factors which proved to be a clincher for you to take the right decision, do share the same for the benefit of our blog post readers.
Overture Accounting and Bookkeeping L.L.C. provides comprehensive VAT compliant accounting and bookkeeping services with complementary VAT consultancy and support services. Details of our accounting offers are available here.