The UAE, and particularly Dubai, is full of opportunities for entrepreneurs and Small and Medium Enterprises (SMEs). Known for being a tax free haven, there are many advantages to setting up your business here. That said, it is equally important to keep your wealth management strategy in check or else face harsh consequences.
It is imperative to segregate your personal savings from your business finances. Even though one of the main benefits of doing so are tax advantages in one’s home country, it is equally important for SMEs and start-ups to establish best industry practices for the success and seamless running of their business.
The first step for an entrepreneur is to open a separate business account exclusively for commercial purposes. Execute all business transactions via this account. This will not only force you to be more organized, but your personal spending and business capital will not be lumped together, thereby avoiding an accounting nightmare. Another great way to keep a tab on your spending is to get a business credit card. A number of banks offer services specially designed for SMEs. Moreover, maintaining business accounts as well as credit cards also lends credibility to your company through credit history, and makes the process of getting an audit more efficient. Experts believe that, “Although small business credit cards aren’t considered capital, they can be a tremendous help in the running of your business. In tough times just starting out, it can also add a sense of security.”
There is a wide array of relevant banking products and services that enable efficient financial management. According to Forbes: “By keeping separate bank and credit card accounts for business and personal, you’ll save yourself hours of work… Some applications can automatically handle the behind-the-scenes accounting for crossover expenses, but even so, we recommend handling business and personal finances as independently as possible.”
Protecting personal assets is yet another advantage of opening a company account. By establishing a limited liability company, your personal assets will remain protected, in most cases, if your company is sued.
Gauging accurate business performance can easily become an impossibility if your personal money matters are tightly intertwined with those of your company. You can only consistently monitor your true profit margins and ROIs once your company is totally separated from your personal finances.
Lastly, it is human nature to be tempted to consider your business profits as personal income. After all, you have worked hard for it! But refrain from misusing your company income and profits. It is essential to reinvest it or save it for later use. Part of being a businessman is managing the company’s finances, and this task can become much easier by clearly separating your own personal finances from those of your company.