An entrepreneur’s guide to building an accounting and book keeping function in Dubai: In-house accountant or a professional retainer firm?
The only reason to have a professional accounting function.
Engaging in commercial, industrial or professional ventures involves many activities divided into multiple organisational functions over time, recurring and non-recurring. How does an entrepreneur keep track of them?
A well-run Accounting and Financial Reporting function is the only solution to this problem. It cannot be controlled with cash flow- because the time at which an expense or income gets committed could differ from when the payment is made. Without accurate accounting, businesses cannot have the below information.
  • What is the financial position of the business? How much has the investment grown?
  • How much progress did we make in the last month, year or quarter? Is it as budgeted?
  • How much do I have in receivables and payables? When is it due?
  • How much taxes do I need to pay? What are the tax credits that I can offset? 
  • What are my overheads? How is it growing over time?
  • What is the proportion of salary cost in my cost of goods sold?
  • And many more…
Every organisation needs an adequate measurement mechanism that enables timely review and triggers actions. 
Accounting and financial reporting for management work on two levels. The first is the data input and documentation level, and the second is a review and supervisory level that sets review mechanisms, systems, and controls and takes part in management decision-making. 
Small and medium organisations face challenges due to insufficient resources and generally fill only the first level-namely data input level- and operate with limited information analysis capability. This, in turn, results in the finance element missing from the growth stage and exposes the entity to risks.
This article discusses the essential points every entrepreneur needs to remember while setting up an accounting and financial reporting function in UAE. 
The basics of accounting. Why is it not listing expenses and incomes in a spreadsheet?
Accounting is the process of recording financial transactions systematically. The most widely adopted accounting system is the double entry system which works on the equation “Assets = Liabilities + Equity”. The beauty of the system is the automatic dual recording of every transaction. For example, when a cash sale is made, the sale is recorded in a sales bucket (also known as a general ledger or GL), and the cash incoming is updated in a cash account simultaneously. This results in an automatic reconciliation of transactions. Hence, at every stage in accounting, totals of both sides must agree, or “Tally” as known popularly. Any mistakes in recording transactions will pop up an error in the totals agreement.  When recording is done in any other mode, including as a listing in a spreadsheet, this automatic reconciliation is not happening and identifying errors or omissions and ensuring completeness will be cumbersome. 
Top 3 assumptions in accounting, and why is it important?
There are three underlying assumptions every accountant follows to meet financial reporting objectives. This sets the base for consistent, comparable measurement and reporting across different periods and entities. 
Accrual basis 
Under this basis, the effects of transactions and other events are accounted for when they occur (and not as cash or a cash equivalent is received or paid), and they are recorded in the period to which they relate.  For example, equipment leased for a month from 20 December 2021 to 19 January 2022 cannot be treated as expenses in December when it is paid. Instead, it must be recorded proportionately as an expense between December 2021 and January 2022. This is because booking the expenses in the month of payment will result in higher expenses for the month in which it is paid. The accrual principle ensures that not only past events but also future obligations are adequately recorded, forming the basis for accurate data that support economic decision-making. 
Going concern 
The financial statements are generally prepared on the assumption that an enterprise will continue to operate for the foreseeable future as a going concern. In any event this assumption is invalid, financial statements have to be prepared on a different basis. For example, if a company has a specialised plant installed at the cost of USD 80 Million. While the plant is in operation, the value of the plat will be reported as the cost less depreciation due to wear and tear. This is because it is expected that the asset will bring value while being in continuous operation. However, if the company decides to shut down the business for any reason, the asset value must be reported at net-recoverable value.
For financial reports to be comparable, accounting must use consistent policies. When financial reports are not comparable, they cannot be used as a basis for decision-making.  For example, if a company is depreciating its vehicles across five years in one accounting period and decides to depreciate them in 8 years in the next accounting period, the expense for both periods would vary, resulting in more profits for the second year. This may affect decision-making.  In financial reporting, any such exceptional changes should be reported with a corresponding impact on comparable accounting periods. 
What are accounting standards or IFRS? Is it mandatory in UAE?
To achieve the purpose of comparability, a uniform guideline of accounting principles has to be there. Accounting standards are a set of common principles, standards, and procedures that define the basis of financial accounting and reporting policies and practices. It works as a guideline for accountants and auditors. In other words, every bookkeeper and accounting firm follows this common set of standards, so the financial information is accounted for, treated and reported uniformity across firms and over time. Accounting standards have been developed to address the full breadth of an entity’s financial picture, covering assets, liabilities, revenue, expenses, and shareholders’ equity. Different countries have different accounting supervisory bodies that develop standards to be adopted by the region. However, the most widely adopted standard is the International Financial Reporting Standards, commonly known as the IFRS, issued by the IFRS Foundation and the International Accounting Standards Board. Accountants and Auditors Association, UAE is the country’s accounting body that takes leadership concerning matters relating to accounting, financial reporting and auditing. However, the authority has not released a set of standards applicable within the country, and IFRS is being adopted widely. Further, the tax authority, many banks, regulatory authorities and mainstream investors in UAE insist that the financial reports submitted to them should be prepared following the IFRS.
Accountant needs to be educated and experienced
Accounting is a specialised skill. Therefore, selecting and applying specific policies and standards that match circumstances can be challenging without adequate technical knowledge and experience. In addition, reading and interpreting reports take in-depth understanding and years of experience. Senior-level business leaders, including CEOs, CFOs, and Finance Managers in Dubai, believe that the accounting and financial reporting function needs to be an enabler in the growth of any organisation. Working as a team towards group goals demands a conceptual understanding of other business functions and expertise. Accountants provide information on which other managers rely on for decision making.  
Financial reports: How to read them?
There are only three major financial reports an accountant prepares. The first and most important one among them is the statement of financial position. This statement is popularly known as the “Balance sheet”. A balance sheet is an economic “photo” of assets and liabilities on a particular date, which is the closing date of the reporting period. The objective of an accountant while reporting a balance sheet is to ensure that balances that need to be carried forward to the next financial period, be it assets, liabilities, or equity, are reported fairly. The second report is the statement of comprehensive income, commonly known as the profit and loss statement. It summarises the revenue transactions- meaning income and expenses- of the reporting period. The profit and loss account compiles all income and expenses to derive the profit or loss for the period. This needs to be added to (or deducted from, in case of a loss) the owners’ equity. The difference between the balance sheet and the profit and loss is the nature of balances. The profit and loss account reports expenses and income for a period showing the performance of the business. At the same time, the balance sheet reports the balances on the closing date showing the financial position.  In addition, a third report called statement of cash flow analyses the movement of cash flow into three segments- cash flow from operations, investing activities, and financing activities. All other reports generated with historical financial reporting are explanatory reports of balances presented in the above reports. Apart from the above reports from historical information, there can be additional reports which include or compare future projections. Again, discussing the objectives with an expert accountant before deciding on periodical reporting is recommended since the requirements can vary from industry to industry and company to company. 
Hire an accountant or outsource to an accounting retainer. Points to consider in Dubai

When a business is young, it is probable that the resource allocation is primarily for growing businesses rather than support activities. As a result, entrepreneurs need to spend less on the accounting function. This results in compromising on financial expertise, one of the most critical elements in survival and growth. But, since the operations are not in full swing, the volume may not justify a full-time resource as well.
Generally, the trend in Dubai is to hire a junior accountant who needs to handle other functions like sales, invoicing, and other coordination apart from accounting. But accounting is a specialised skill; the accountant needs to be educated and experienced to bring value addition.
An ideal trade-off would be to outsource the accounting function until the cost of hiring a full-time accountant is justified with sufficient volume. Until then, using the service of an accounting retainer would balance the growth. The hourly cost of an outsourced accounting and CFO services firm in Dubai may be higher than the hourly cost of an in-house accountant. But, the firm efficiency will reduce the time required to execute the work, and the expertise of the manager will pay off with value addition. In addition, an outsourced accounting and bookkeeping retainer will help build processes and internal controls that will set a systematic base for years.
One important thing worth considering is the tax and regulatory requirements of the UAE and its respective emirates(Dubai, Abu Dhabi, Sharjah etc.). In addition, all Free Zones in Dubai, including DMCC, IFZA and JAFZA, have regulatory requirements that accounting firms are experienced in complying with, protecting the business from legal, regulatory and tax risks.
Experienced accounting firms are specialised domain experts with data entry and review mechanisms. The accounting retainer firm’s services are delivered as a package, and an expert reviews the work before it gets to the reader. Further, experienced financial managers of accounting outsourcing providers will assist management with a structured thought process.
The services of outsourced accounting and CFO service companies are highly customisable and can offer a service package tailored to the business requirement.
The accounting and CFO services provider will recommend a suitable structure when the operations demand an in-house accountant. Entrepreneurs can utilise the technical skills of the accounting expert to test, train and assist the hired accountant as he onboard. Good service providers are dependable and do their best that the business demand.

What to look for while hiring a best fit accountant?

Below are the essential things to be careful about while hiring an accountant.

Basic accounting rules of double entry bookkeeping
An accountant’s most critical skill is proficiency in the double entry concept. Even experienced finance managers and CFOs ensure every accountant in the team is strong on basics. When the accounting concept is clear, it is easy to train organisation specific skills and tools. 
Experience in an accounting Software 
Accountants need to be aware of accounting software that the company is using or planning to implement. Most software has shortcuts that will save hours. The basic principle of all accounting software is the double entry concept. Hence, if the accountant is strong in double entry accounting, this would be easy to catch up in a couple of months.
Financial reporting
The end product of accounting and bookkeeping is the information provided to management. So, the accountant should know how to prepare financial reports even if the software will automatically generate them. It helps the accountant to understand if the accounting software report is sensible. In addition, the accountant should be aware of specific reporting requirements applicable in UAE. 
Knowledge of the business
One of the most crucial skills every accountant should have is business knowledge. This will help justify expenses and incomes and highlight any irregularities in transactions. Hence, test the candidate’s understanding of the previous employer’s business.
Critical thinking and attention to detail
The accountant is the gatekeeper of every organisation. The function protects the company from many risks. The capability to critically evaluate every truncation will go a long way in protecting the company’s interest. In addition, the accountant should be skilled in observing every transaction’s minute details.
Communication skills
Accountants will communicate with many stakeholders, including employees, suppliers, customers etc. Therefore, it is vital to have good communication skills, so interacting in a multi-culture environment like Dubai will be easy. Also, communication skills in the Arabic language would be an advantage in Dubai.
Regional laws and regulations, including tax and employment law

An accountant should be aware of Dubai’s regional tax and regulatory requirements. While hiring expatriate accountants, one needs to be careful about the changes in the regulatory requirements of Dubai. Tax laws covering Value Added Tax Law, Corporate Income Tax, and the labour law are the most important.

Accounting software and tools

Accountants primarily work with numbers and double entry. Hence, an accountant should be proficient with the company’s accounting software. Cloud-based accounting software for start-ups and SME businesses in Dubai includes QuickBooks Online, Zoho, Xero and Odoo, to name a few. Entrepreneurs can look for experience in any of these programs while hiring an accountant. However, if there is no program implemented while hiring, the entrepreneur can consult an accounting and bookkeeping service provider, who will assist in selection, implementation and integration to achieve efficiency. While it matters for an accountant to be experienced in accounting software, it is recommended not to implement the same software just because the accountant is experienced in it.

Apart from accounting software, the accountant should be well versed with a spreadsheet application. The most widely adopted spreadsheet application in Dubai is Microsoft Excel. Following MS Excel in Dubai is better as information sharing will be easy with a widely adopted application. The accountant should be able to use formulae such as VLOOKUP, SUMIF, and Pivot function apart from basic formulae.

Other tools that will be handy include MS Outlook or the mailing application the company is using, MS Word and regular computing applications. The accountant should also be aware of the practical aspects of internet security so that confidential information is not compromised.

Accountants take care of tax returns and other departmental filings.

Even though the primary function is accounting, accountants in start-ups and small companies take responsibility for filing tax returns and other departmental forms. In Dubai, the most common compliance requirements are Value Added Tax, Corporate Income Tax, Economic Substance Regulations (ESR), Ultimate Beneficial Ownership (UBO) Reporting and Anti Money Laundering (AML). Even if an accountant can handle it in-house, getting help from an accounting and bookkeeping outsourcing consultant is recommended in the first few months to eliminate compliance risks.  

Compliance should not take much time when the accounting is done correctly since the information is well organised and complete. However, some activities, such as tax reclaim services (Eg:- VAT Refund), take a substantial amount of time, primarily because of the reconciliations and time taken to liaise with the tax authorities.

Selecting an accounting and CFO service retainer who can bring in value

There are many accounting and bookkeeping service providers in Dubai. But it isn’t easy to assess the quality of service they provide before entering into a retainer contract. Below are some critical aspects you can use for an assessment. 

Quality of people

Ask for the education and experience background of the consultant and the person handling the accounting. Ideally, a Qualified Chartered Accountant or a member of any professional accounting body, who is experienced as a finance manager in Dubai would be a good fit. One way to assess the quality is to understand the quote. A consultant who quotes reasonably can afford quality people.

Experience handling similar assignments

Ask the accounting retainer to share his experience handling other clients in Dubai. Discuss how services are being delivered at other client’s businesses.

Confidentiality and professional ethics

Accountants possess confidential information relating to the business. Observe if the accounting and CFO service provider is disclosing any confidential information relating to any client. Also, understand the ethical behaviour of the representative. Professional accounting and CFO service companies will have a Non-Disclosure Agreement with their employees and will encourage signing an NDA with the Clients. 

Assess the understanding capabilities

While discussing, try to assess how the consultant understands your business. A good idea to observe this by allowing the consultant to discuss the areas that will be prioritised once the firm is onboard. Also, discuss how the consultant is planning deliverables. A skilled finance manager should discuss the business’s challenges and try to provide solutions with accounting functions.

Financial reporting skills

Discuss the reports that the consultant can deliver periodically and how far it is tailored and fit for the industry and the business. In addition, a growth-focused consultant will include reports on challenging areas the company should focus on in the long run.  

Interaction with other functions

The accounting and finance function should interact with other functions such as sales, production etc. and act like an enabler. The understanding of the accountant regarding other functions will be a point worth considering. An accountant should be a watchdog and a team player at the same time.


While for larger companies, it is economical to have an in-house accounting function, small and medium companies may adopt an outsourcing model, where resources are limited. An outsourced accountant can also be of value during the initial stages of business as the provider will take the initiative in making operations systematic, with improved controls, and by adopting industry standard practices.

 A hybrid model for accounting and reporting is recommended if the number of transactions is more and an accountant needs to be present at the client’s place throughout to handle transactions. 

Accounting and finance management is an important element, more so in an early stage of a business. However, companies should carefully adopt an option that adds value to the growth.

Schedule a discussion with us to understand how your accounting function is performing and any scope for improvement.