Financial Accounting in Dubai: Top Bookkeeping Mistakes Businesses Make & How to Fix Them

Bookkeeping may not be the most glamorous part of financial accounting in Dubai. But, in Dubai’s fast-evolving regulatory landscape, you may need to ensure proper bookkeeping. If you opt for poor bookkeeping, you can trigger penalties, induce tax errors and miss business opportunities. This is important for all types of zones, including free zones and mainland.

Here are some of the top bookkeeping mistakes businesses in Dubai are likely to make and ways to avoid them. By avoiding them, you can stay compliant, audit-ready and financially healthy.

1.       If you are a startup or solopreneur in Dubai, you may begin using the same account for personal and business transactions. This is a fact especially when you are in the early stages of business. It may be convenient. However, it can create a messy paper trail that becomes hard to track and reconcile. It can also lead to issues during audit. It is risky because it can lead to erroneous VAT reporting. Moreover, you will notice reduced visibility into the actual business performance. Lastly, it can complicate your expense categorization in financial accounting in UAE. You should ideally fix this issue by opening a dedicated business bank account, whether you are a freelancer or sole proprietor. You should use the accounting software like Zoho Books and QuickBooks to record expenses with proper tagging. You should avoid using the business debit card for personal purchases.

2.       The second mistake you are likely to make is poor documentation of invoices and receipts. If you don’t collect the store receipts and tax invoices, you may face issues during VAT audits. It can also mean that the FTA, Federal Tax Authority, will disallow your input tax claim. This can prove to be risky as the VAT returns can be incorrect. Moreover, you may attract penalties of AED 10k+ for not having appropriate documentation. Lastly, your lost proof will make it harder for you to verify the expenses during an audit. You can use cloud-based tools like Dext and Hubdoc to store the receipts digitally. It can also help you keep track of all the supplier invoices, including their VAT details like TRN date. Lastly, you should have a recurring reminder to review and file these receipts weekly as part of financial accounting in Dubai.

3.       You will make a mistake of delaying the bookkeeping or managing irregular updates. Most business owners update their books at the end of the quarter. In some cases, they would update it right before filing their VAT return. This would make it difficult for them to catch the errors and add to the stress. If you opt for delayed bookkeeping, you might forget the context of these transactions. You may also miss certain entries or misclassify them, leading to inaccurate reports. Lastly, you might incur high fines. You should always schedule bookkeeping updates once a week. Block the time or assign a member for the purpose. You should automate the bank feeds to reduce manual data entry. Lastly, you can hire a part-time bookkeeper to help.

4.       You may be making a big mistake with financial accounting in UAE by ignoring the bank reconciliation. For instance bounced payments, delayed transfers or transaction issues. It can lead to cash flow mismanagement and difficult audits. You can fix this by reconciling your bank accounts monthly.