Five Issues UAE Businesses Need To Be Prepared For In 2017

Author: Stephen Armitage – Guest Writer
Published on FEBRUARY 8, 2017

As we enter 2017, there are a number of issues that owners of UAE businesses of all sizes and across all sectors will face. In this article, I will highlight the areas we, as a business ourselves, feel will be hot topic items in 2017, and the biggest issues our existing clients have been engaging us about when preparing financial forecasts for the new fiscal year.

1. Accessing working capital and managing cash flow The new oil price reality (US$50 dollars per barrel at time of writing) has had a global impact but we are focused on how that impact trickles down to local businesses. Lower oil revenues impact on government budgets and liquidity, and this in turn impacts central and commercial banks. This tightening of liquidity impacts on individual businesses ability to raise capital, and a worsening of global (and local) debt collections puts increased pressure on cash flows. Business owners need to be proactive and review existing credit terms provided to customers and debt profiles to ensure a healthy flow of cash into the business. Business that provides a profit on paper but equates to a worsening of liquidity needs to be assessed properly, and the cash flow impact, as well as profit margin, needs to be taken into account.

2. Additional legislation and associated overheads The UAE has been very proactive in the last 24 months with new legislation being written into law in relation to compulsory medical insurance, end of service gratuity, accounting, liquidation and the provision of staff accommodation for certain lower paid employees. These legislative moves will definitely improve the corporate governance aspect of doing business in the UAE, and will provide additional confidence to business leaders, but what are the costs associated with implementing them? For many small businesses, keeping accurate accounting information has not been seen as a priority due to the lack of corporate taxes and the lack of legislation. This is set to change from June 2017 when all onshore companies (DED companies) will be required to prepare full accounting records. With this come new costs such as accounting software and accounting personnel.

3. Compulsory accounting from June 2017 All onshore companies will face having to prepare accounts from June 2017 (as mentioned above). The original deadline was June 2016, but this was deferred for a further 12 months, but finally comes into force this year. Many small companies either don’t keep detailed records or keep the bare minimum and many do not even have an accounts team or third party accounting provider. Moving from a non-accounting platform to producing fully transparent accounts will be a huge change for many business owners and in addition to the costs mentioned above time will need to be invested to review business models and set up the appropriate accounting structures to ensure compliance can be achieved. Time will also be required to either interview and recruit internal accounting personnel or to source a third party accounting services provider.

4. Understanding competition and maintaining a competitive advantage When new businesses start out on their commercial journey, they hopefully develop a robust business plan which includes an analysis of their competition. At the start of each year, these business plans should be reviewed and updated to take into account changes to the economic, legislative and geo political environment. At the same time, direct competition should be reviewed, and deliverables and pricing should be analysed. Pricing points in 2017 will be particularly important as customers look to make their dirham spend go further, and lowering prices to achieve a competitive advantage could be crucial. We know from discussions with clients that they have changed auditors to achieve savings of 500 dirhams annually, so price sensitivity is definitely going to be prevalent in 2017. In addition to pricing, businesses need to look at advances in technology to improve the customer experience. Engaging with customers on social media platforms provides a customer service edge and leads to greater understanding of the customers’ needs. Wikibooks’ definition of business strategy is defined as “the process of specifying the organization’s mission, vision and objectives, developing policies and plans, often in terms of projects and programs, which are designed to achieve these objectives, and then allocating resources to implement the policies and plans, projects and programs.” Business owners need to look at their existing strategies and ask the question: “Do our existing strategies still work for us?”

5. Customer loyalty As the UAE has grown in size, competition across all business sectors has also grown, and some sectors (such as real estate) have become saturated. As a result, individual customers now have greater choice when it comes to spending their disposable income. B2B businesses also need to be aware that companies will be looking to competitive tender more of their overhead spend, as cost savings are sought to offset reduced gross margins arising from price reduction strategies needed to maintain competitive advantage. Business owners need to be aware of this fact and be sure to focus on customer relationship management and understanding their customers spending habits. Many businesses win new customers and then service their requirement(s) without engaging with the customer on a regular basis. A more proactive approach to customer relationship management is required to understand the customer’s on-going requirements and to increase the likelihood of retaining customer loyalty. Four main areas to focus on when reviewing customer loyalty strategies are: know what is important to your customers; win, and retain their trust; offer incentives, and deliver what you promise and deliver well

2017 is set to be a challenging year for the UAE business community, but understanding the issues that might affect individual business will ensure solutions can be proactively sought. 2017 also represents an opportunity for business owners to dust off old business plans, and update business strategies to better understand their individual businesses and the sector they work in.

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UAE Businesses