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| 09 September, 2018

Bahrain SMEs need to improve accounting standards: Study

95% of SMEs lack clear financial audits due to lack of knowledge or to avoid costs

Visitors are seen at the TSM Arabia stand at the Middle East Process Engineering Conference & Exhibition in Manama, Bahrain, October 9, 2016.

Image used for illustrative purpose only

Visitors are seen at the TSM Arabia stand at the Middle East Process Engineering Conference & Exhibition in Manama, Bahrain, October 9, 2016. Image used for illustrative purpose only

REUTERS/Hamad I Mohammed

A total of 86 per cent of Bahraini start-up small and medium enterprises (SMEs) do not work according to financial and accounting principles, said a recent study.

The study, “The Reality of Entrepreneurship in Bahrain”, took place in the kingdom and looked at 300 Bahraini entrepreneurs.

During a seminar at “Entrepreneurship camp”, Khalil Al Qahiri, chief executive officer of Stradico Company, stressed that the possession of these institutions for accurate accounting lists is particularly important as Bahrain introduces VAT.

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Al Qahiri said: “The smooth and effective application of this tax requires that all Bahraini companies and institutions are prepared to deal with them through a strict financial accounting system.”

“Otherwise, we will be facing many issues, just as in the application of the Commercial Activities Fees Law,” he added.

“According to the study, 95 per cent of the SMEs lack clear financial audits due to lack of knowledge or to avoid costs, especially during the process of incorporation, such as small restaurants, Abaya shops and car garages,” he said.

Al Qahiri pointed that the audited financial statements and the auditor's report have a positive impact on the SMEs, at the internal level in terms of monitoring and evaluating the work and performance of the previous year, planning for future, and at the external level with the various parties related to the institution itself, stressing its important for stakeholders in dealing with the institution, such as banks, suppliers, customers and employees, it added.

Financial auditing is considered legally binding. It contributes to assessing the performance of institutions, developing future plans, helping to determine the optimal investment of resources, and to provide incentives to employees in addition to the acquisition of more confidence by the dealers.

Moreover, the audited financial statements helps to further competition, growth, access to finance and encourages the entry of partners when needed, in addition to knowing what quantity is sold or services provided? What are the costs incurred? What profit-making activities are, and whether sales prices and sales capacity leave an appropriate costs, etc.

During the seminar, Al-Qahiri reviewed a number of accounting terminology such as fixed, current and intangible assets, financial statements, revenues and expenses, balance of accounts, accounting guide, final budget and others. He pointed out that SMEs require effective, low-cost accounting and administrative guidance, and therefore must have the ability to prepare financial statements correctly and efficiently.

“Entrepreneurship camp” is a training programme aimed at identifying the challenges and opportunities of establishing and developing projects in Bahrain, and to provide theoretical and practical solutions to their owners.

The programme managers are keen to develop their vocabulary in each session, in order to enhance their objectives to entrepreneurs and the national economy as a whole, it stated. – TradeArabia News Service

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