How can accounting help a retail business in the UAE ?
In the modern day and age, the way businesses are mostly conducted differs greatly from the conventional times. As a matter of fact, there is an inherent need to ensure on part of the business managers, that they have a proper system to record their incomings and outgoings, and use certain key metrics in order to evaluate the overall business performance over a given period of time.
The importance of accounting for retail businesses in the UAE can simply be gauged by the fact that due to increasing competition, and uncertainty, the overall market dynamics are changing on an extremely rapid business. Therefore, ideally a business should not only ensure that the present is sorted out, but should also plan for the future, so that the overall risk is mitigated. Accounting for such businesses provides such a cushion, which can help companies to experiment, and ensure that they are able to sustain and grow in the business dynamic they are a part of. There are other numerous ways in which accounting can be helpful for retail businesses in the UAE.
Firstly, it can be seen that for retail businesses, the overall profitability is very volatile, if certain aspects of a business are ignored. Accounting in this regard would help business owners as well as managers to track their performance over a stated period of time, to be able to ensure that they are performing up to their standards, and benchmarks. These benchmarks and standards can only be created if a business is able to have proper accounting and book-keeping in the first place. For example, using accounting, a business can easily compare the profitability, and how it has changed from the past year.
Within the aspect of profitability, businesses can analyze which particular component needs their attention the most. For example, they can gauge if their gross profit decreased, or their net profit decreased. Using accounting financial statements, they can easily evaluate their overall standing compared to certain different aspects.
Secondly, using accounting tools and methods, they can also calculate certain ratios which are important to gauge the overall business success. For example, they can make informed decisions about charging the relevant margins, or they can check if they are using excessive overheads which need to be controlled. All in all, these ratios can provide a very quick check regarding the financial health of the business and this can be reflected in the form of policy making in the subsequent year. For example, they can check if they are offering enough discounts for customers, or if they are able to get enough discount from their clients.
Moreover, it can also be seen that with accounting rules and regulations in place, a company can protect itself from frauds, and leakages from the financial system. It will act as a blanket to protect the company, and ensure that they are able to prevent any inventory losses, or cash losses within their realm of operations.
Therefore, it can be seen that accounting is best described as an accounting tool which can be regarded as a very crucial metric to remedy any issues that the company might have. Rate of Stock Turnover, Cash Flow Management, and Liquidity are certain elements which can increasingly be helpful in this regard. The overall need to have well-defined procedures at the workplace has become a necessity for almost every organization in the modern day and age, and the only think that differentiates between a business that does well, and the business that doesn’t stands to be the way in which they utilize their resources. Accounting provides a snapshot of that, which in return, acts as a very important aspect for managerial decision making.