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Understanding Business Expenses

Leen Shami

November 10, 2022

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All companies and businesses will incur business expenses, but how can you know what exactly is considered business expenses? And how will the introduction of UAE corporate taxes affect business expenses and income reports?

What are business expenses?

Business expenses are costs a business incurs to run the business properly. In simpler terms, they're expenses made by the business for the business.

With the UAE introducing corporate tax laws in 2023, it's crucial for businesses to be able to track and categorize their business expenses, as some of them may be tax deductible.

While the IRS may divide business expenses into ordinary and necessary business expenses, the UAE takes a different approach.

Ordinary business expenses are anything that is "common and accepted" to a business, whereas necessary expenses are anything that is "helpful and appropriate" to a business but not essential.

The federal tax authority in the UAE does not take a similar approach and only considers business expenses as tax deductible or not. We will discuss this in a later section.

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Examples of business expenses

Business expenses include a wide range of expenses, from insurance to office space, to online subscriptions, such as Zoom, Figma, or Adobe.

Let's break it down; if a design agency bills a client AED 120K per year, that doesn't mean they made a profit of 120K. When a business brings in revenue, it must account for the business expenses made to provide its clients with its services. These services include digital software subscriptions, office rent, employee wage, and/or wifi fees.

Here are some examples of the most common business expenses:

  • Advertising and marketing
  • Business travel (fuel, airfare, taxis, etc.)
  • Employee costs (payroll, salaries, insurance, perks, etc.)
  • Employee equipment (such as laptops, monitors, phones, etc.)
  • Legal fees
  • Office space rent & utilities
  • Software subscriptions

While many more expenses are considered business expenses, these are the ones most businesses will incur.

Types of business expenses

When setting up a budgeting plan, business expenses play a vital role in keeping the businesses' financials in check. When preparing a budgeting plan, finance teams typically begin by looking at the three types of business expenses incurred.

These business expenses include:

3 types of business expense; fixed, variable, and periodic

1. Fixed expenses

Fixed costs are costs that do not change; they happen at known intervals, such as month to month.

With predictable costs, budgeting is more straightforward, as these costs are always expected and never come as a surprise.

Examples of fixed expenses include:

  • Rent
  • Employee payroll/salaries
  • Utility bills
  • Insurance

2. Variable expenses

Variable expenses are business expenses that change from month to month. These costs vary depending on a company's production or sales volume; if production or sales increase, variable expenses increase, and if production or sales decrease, variable expenses decrease as well.

Variable expenses are typically a business's largest expense, as some may be unexpected or unaccounted for.

To calculate the variable cost, multiply the quantity of the output by the variable cost per unit of output.

Total variable cost = Total quantity of output X Variable cost per unit of output

Examples of variable expenses include:

  • Shipping expenses
  • Sales commissions
  • Raw materials (used in production)

3. Periodic expenses

Periodic expenses are business expenses that happen infrequently or, sometimes, semi-regularly.

Typically, periodic expenses happen on a quarterly or yearly basis, such as annual car insurance, but can also come as a surprise, such as a company car repair.

Budgeting can be tricky with periodic expenses, especially when expenses are infrequent.

Examples of periodic expenses include:

  • Maintenance & repairs
  • Merger and acquisitions costs
  • Major equipment purchases

Profit and loss statement report

A profit and loss (P&L) statement, also known as an income statement, is commonly used when businesses record business expenses. Through the P&L, businesses can determine their taxable income. This is especially important for UAE businesses with an annual net income above AED 375,000.

The 3 categories of an income statement include the following:

1. Costs of goods sold (COGS)

Costs of goods sold are the costs associated with the production of goods sold by a company. This typically includes direct costs only, such as materials used and labor costs to create the goods sold. Indirect expenses are not calculated regarding COGS; these include sales and marketing.

For a business to determine gross profit, the costs of goods sold must be deducted from its revenue. They also affect how much profit a company makes on its products.

2. Operating costs

For a business to run, operating costs are unavoidable.

Generally speaking, operating costs relate to a business's daily maintenance and administration. These include costs such as COGS, payroll, rent, and overhead costs. However, non-operating costs, such as interest and investments, are excluded from an income statement.

An income statement reflects operating income after operating costs are deducted from revenue.

3. Depreciation

When accounting for depreciation, there are two types to look at:

a. Depreciation expense

A depreciation expense is a loss in value of fixed assets that companies record through depreciation. During the period you use an asset, its value decreases, and the price you originally paid for it is allocated over time.

An example would be a physical asset that loses value over time, such as a car or vehicle.

b. Accumulated depreciation

Accumulated depreciation refers to the accumulated depreciation charge a specific asset has taken as it wears down or becomes obsolete. Accumulated depreciation is shown on the balance sheet, unlike depreciation expenses reported on the income statement.

Personal and business expenses

Knowing the difference between personal and business expenses incurred is vital, especially with the UAE corporate tax law coming up. Business expenses can be used to lower a business's taxable income; however, personal expenses incurred are not considered deductible expenses.

So, what's the difference between personal and business expenses?

Personal expenses

Personal expenses are purchases made for personal reasons and cannot be used as deductible expenses.

If you make a purchase for the business but add in an item for personal use, it is crucial to have two transactions to avoid mishaps coming your way. Having two receipts will help you record and store the receipt so the business expenses can be used as deductible expenses.

Business expenses

If you're making purchases that benefit the business, such as driving more revenue, they can be considered business expenses. When making business expenses, it's essential to keep a record of the purchase by storing the receipts. By doing so, you can use these business expenses to lower your tax liability by deducting the amount from your income.

Tax deductible expenses

We've reviewed personal expenses, the 3 types of business expenses, and what goes into P&L statements. But which of these are considered tax-deductible expenses? In a nutshell, all the above, other than personal expenses. Let's delve deeper into tax-deductible expenses.

Tax deductible expenses are business expenses that help businesses generate revenue. These expenses are deducted from the company's income before applying any taxes.

Examples of tax-deductible expenses:

  • Administration fees
  • Advertising and marketing
  • Bank charges
  • Insurance
  • Legal fees
  • Maintenance and repair
  • Office expenses
  • Office rent
  • Payroll/salaries
  • Supplies
  • Travel and transportation
  • Utilities

Non-deductible tax expenses

Non-deductible tax expenses cannot be deducted from a company's income.

In the UAE, there are 3 main categories for non-deductible tax expenses:

1. Related party payments from the mainland to a Free Zone Person

The related party payments made to a Free Zone Person that is taxed at 0% on receipt of the income will not be deductible for CT purposes. However, if the payment is attributed to a mainland branch of the Free Zone Person, the related party can claim a deduction.

2. Entertainment expenses

Because these types of expenses often also have a non-business or personal element, businesses can deduct up to 50% of the expense incurred to entertain customers, shareholders, suppliers, and other business partners.

3. Other expenses

No deduction will be allowed for certain specific other expenses, such as 

  • Administrative penalties
  • Recoverable VAT
  • Donations paid to an organization that is not an approved charity or public benefit organization.

How to keep track of business expenses

To maintain your business, it's important to track your business expenses. There are several ways to track business expenses; however, you will need to establish a system to account for costs and accurately manage your business.

Here are 6 steps to keep track of your business expenses:

1. Open a business bank account

A business bank account should be completely separate from your personal checking account and must only be used for business expenses/purposes. This will help you manage your business expenses easily and give you eligibility for business credit cards or, even better, Pluto corporate cards.

2. Select an accounting system

If you haven't chosen an accounting system yet, choosing one that's appropriate for your business is vital. Some businesses opt for spreadsheet software, such as Microsoft Excel; however, to simplify the accounting process, we recommend going for accounting software that will automate the process for you.

3. Choose cash or accrual accounting

Choosing cash or accrual accounting typically depends on the size of your business.

Small businesses can use cash accounting and record transactions when they happen, as volumes are small.

For bigger businesses, accrual accounting is essential, as they have high volumes of transactions. With accrual accounting, only the product sold is recorded, rather than payment received for the product. Similarly, an expense is recorded when a bill is received rather than when an invoice is paid.

4. Store receipts

Storing receipts is essential, as they are proof of business expenses made. You can store receipts by scanning them, taking photos, and keeping digital copies.

5. Regularly manage and record expenses

It's important to track spending and categorize them accordingly. Examine every transaction to compare these business expenses to your revenue.

6. Consider subscribing to an expense software

For some businesses, it is worth looking into expense management software to automate the process of tracking, managing, and recording expenses.

Tracking business expenses with Pluto

If you choose to go for an expense management software, it will help you automate the tracking, managing, and recording of expenses. But Pluto's expense management software offers more than just tracking, managing, and recording your business expenses.

Pluto will keep detailed records of all your expenses, reduce your taxable income, and help you if you are audited or need to reconcile accounts.

With Pluto, you'll be able to do the following:

Store receipts

  • Upload your receipt through Whatsapp or the Pluto app as soon as a business expense is made
  • Store all digital receipts on Pluto's software
Upload receipts using Whatsapp

Record business expenses

  • All transactions are recorded on the software automatically when using Pluto corporate cards
  • Petty cash is automated, meaning expenses are recorded on the spot
  • If an expense is made using an employee's personal card, the expense is recorded automatically as soon as they file for a reimbursement

Track business expenses

  • All business expenses made by employees can be tracked through Pluto's dashboard
  • Daily, weekly, or monthly expense reports are available in real-time
Real-time reporting through Pluto

Accounting integrations

  • Pluto integrates with all major accounting platforms

Auto-categorization

  • All expenses recorded are auto-categorized through Pluto's AI technology
  • Pluto categories are synced to your GL codes

Create tax codes

  • Create and activate tax codes that sync with your accounting platform to mark expenses as tax deductible or not
Create and activate tax codes on Pluto's dashboard

Business expense FAQs

More often than not, business expenses have many different rules. Here are the commonly asked questions about business expenses:

How do I categorize expenses?

Most accounting software already has business categories incorporated in the software, so you can use them and amend them as needed.

Pluto's expense management software allows integrations with significant accounting platforms and automatically syncs to your GL codes and chart of accounts.

Do fuel costs count as business expenses?

If the fuel cost was made for business purposes, such as travel for a client meeting, then yes, it is counted as a business expense and can be considered tax deductible.

However, driving to and from work is rarely considered a business expense.

Can business expenses be carried forward?

The UAE corporate tax law details report still hasn't come out yet. We will update this question once the Federal Tax Authority shares more details in the UAE.

Is personal expenses tax deductible?

No. Personal expenses are not tax deductible.

Is my rent deductible if I am self-employed and my home is my office?

In some cases, yes, it is possible if you are self-employed, but only a certain percentage of your rent will be considered a business expense, for example, 25% of your rent.

Find out how much your business can save with Pluto

Discover your savings with Pluto's Cost Saving Calculator and take control of your expenses. Unlock cost-efficiency now!

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Learn how Pluto is helping Keyper        to eliminate petty cash spending and optimize spend management

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At Pluto Card, our mission is to assist businesses of all scales make well-informed choices. To uphold our standards, we follow editorial guidelines to guarantee that our content consistently aligns with our high-quality benchmarks.

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Petty Cash Reconciliation: What It is, How to Do It, & Best Practices

The panic sets in when the custodian makes the entries for petty cash expenses and the balance mismatches by, let's say, AED 1500. 

When discrepancies happen, you have two options: mark it as a write off, or spend hours carrying out an investigation. Write offs are generally not accepted in companies and can lead to problems during audit season. The best option is to investigate. 

While the amount is meager, this cashier must scrutinize each voucher and receipt for the next few days to find the loophole. The employee in question will have to review over 100+ documents to spot the discrepancy, disrupting the petty cash operation and causing delays in closing the books.

This post will cover how to reconcile petty cash and optimize the process, so you never have to face this situation. We will look at some best practices to ensure the custodian does not spend weeks accounting for the missing AED 1500.

What is Petty Cash Reconciliation?

Petty cash reconciliation is the process of matching opening and closing balances of petty cash, where the difference must be equal to the total of documented petty cash expenses. 

Either the custodian or someone from the finance department performs this function to ensure the accuracy and completeness of records. It helps identify and rectify discrepancies that may arise due to errors of omission, commission, or principle. 

How Often Should Petty Cash Be Reconciled?

Petty cash reconciliation is generally done once a month if you rely on manual processes for petty cash management. It allows for timely identification of discrepancies, ensures efficient tracking of small expenses, and facilitates prompt resolution. 

However, if you have an expense management platform to record all the petty cash expenses digitally, you reconcile petty cash in real time. Since you directly add all the transactions on the platform, reconciliation becomes easy with the ability to track each cash money movement in an auditable platform. As a result, you identify discrepancies at the earliest and avoid a balance mismatch.

What Are the Steps of Cash Reconciliation?

If you use a digital platform for petty cash management, reconciliation becomes easy as the system highlights any discrepancy in the real time. So, it is as simple as flagging transactions with missing receipts.

petty cash reconciliation

However, if you have a manual petty cash process, here are the petty cash reconciliation steps:

1. Ascertain Fund Balance

Begin by determining the existing balance in the petty cash fund. This involves counting the physical cash on hand and comparing it to the initial amount allocated to the fund.

2. Gather Documentation Proofs

Collect all receipts and documentation related to petty cash expenditures. Ensure each expense is supported by a valid receipt, providing a clear record of how the funds were used.

3. Categorize Total Withdrawals and Spends

Categorize the various expenditures based on their nature (e.g., office supplies, refreshments, etc.). Tally the withdrawals within each category to gain insights into the distribution of expenses.

4. Reconcile Differences

Compare the total of documented expenses with the physical cash on hand. Identify any discrepancies or amounts that are unaccounted for. This step is crucial for ensuring that all expenditures are correctly represented.

5. Record in General Ledger

Record the reconciled petty cash transactions in the general ledger. It formalizes the financial entries and ensures that the petty cash activity is accurately reflected in the organization's overall accounting system.

6. Replenish

If the petty cash fund is running low or depleted, replenish the funds. Submit the reconciled documentation to the finance or accounting department for approval and allocate the necessary funds to restore the petty cash balance.

Challenges of the Manual Petty Cash Reconciliation Process

Here are the top four challenges of the manual petty cash reconciliation process:

1. Risk of Fraud, Waste, and Misuse

With manual reconciliation, it becomes easier for individuals to manipulate or misappropriate funds without proper oversight. The absence of real-time tracking leads to instances of waste or misuse of petty cash, posing a significant challenge to financial integrity.

For instance, an employee might submit duplicate receipts for the same expense, pocketing the reimbursement and leading to financial discrepancies. Duplicate receipts are difficult for custodians to keep track of when there are 1000’s of receipts. 

2. Custodian Chasing for Receipts

In a manual system, the petty cash custodian has to press the employees for the collection of receipts for expenses. It is time-consuming and delays the reconciliation process. It also leads to incomplete and missing documentation.

3. Lack of Internal Control

Manual processes lack the robust internal controls that automated systems offer. This absence of controls makes enforcing consistent adherence to organizational policies challenging and increases the risk of errors or unauthorized use of petty cash.

For example, an employee may submit incomplete or inaccurate receipts for petty cash expenses, leading to inconsistencies. As a result, it becomes difficult to ensure adherence to documentation standards.

4. Missing Cash or Documentation

The manual handling of petty cash poses a threat to losing physical money or documentation. Misplacement of receipts or cash, whether intentional or accidental, leads to hindrances in the reconciliation process and compromises the accuracy of financial records.

For instance, an employee may unintentionally misplace a set of petty cash receipts during an office activity. The missing documentation will create difficulty reconciling expenditures, introducing uncertainty into the financial records.

From these challenges, we understand that while we focus on optimizing the reconciliation process, we must first refine our petty cash management process. 

Instead of focusing on improving the assessment process, we shall first work on the internal procedures of approvals and documentation. It will ensure the completeness and accuracy of records and save custodians from spending weeks matching the balances.

Best Practices for Petty Cash Reconciliation

To avoid mismatches and ensure the accuracy of records, adopt the following best practices:

Maintain Receipts Digitally

Digitally store receipts using an electronic system or expense management platform to ensure a secure and easily accessible record of all transactions. It eliminates the risk of physical receipt loss or damage and facilitates efficient reconciliation.

Stringent Documentation and Regular Review

Ensure clear and detailed receipts for all expenses to enhance accountability. Regularly review these documents for prompt identification of discrepancies. It fosters transparency and helps maintain a true and fair view of the financial statements.

Set Controls

Establish precise petty cash policies and procedures for petty cash management, including predefined spending limits and approval processes. Such controls prevent misuse and ensure that expenditures align with organizational guidelines. You can additionally specify the expense category and vendors for enhanced control.

Securely Store Cash and Documents

Designate a locked and controlled space, like a safe or lockable drawer, for physical cash and accompanying documents in the petty cash system. Limit access to authorized personnel to minimize theft or mishandling risks. Regularly reconcile cash on hand with documented transactions to promptly identify and address any discrepancies, ensuring the overall integrity of the petty cash process.

Maintain a Log

Keep a detailed log or ledger of all petty cash transactions, including dates, amounts, and purposes. It serves as a comprehensive record for reconciliation and provides a historical overview of petty cash usage. A better way would be to maintain a digital log, which will be more accessible and accelerate the reconciliation process as well.

Use of Virtual Cards

Shift to virtual or prepaid cards for the petty cash process. Virtual cards allow for controlled and traceable spending with transactions automatically recorded. This digital approach enhances security and simplifies the reconciliation process. 

However, these virtual cards should not be mistaken for shared corporate cards or employees' personal debit cards, which could be reimbursed later. Such confusion makes the petty cash process more chaotic and takes away the ease of reconciling with digitization. You lose visibility, and the employees wait weeks to get reimbursed.

Digitization Simplifies Petty Cash Reconciliation

Petty cash reconciliation strengthens when the foundation is set right. It means having defined policies and methods. 

An expense management platform further assists the teams to manage effectively by providing real-time visibility. It helps you enforce the policies with advanced control and simplifies the approval and documentation process by providing all the details on a single dashboard, leaving no loopholes for any mistakes. 

Book a demo today! See how you can digitize your petty cash process to save time and ensure that a mismatch, even of an insignificant amount, never haunts your team. 

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How Corporate Fleet Cards Help Modern Transport & Logistic Businesses

Companies use petty cash for managing driver and transport expenses, including maintenance, repairs, and small purchases, by allocating a small amount of physical cash to drivers. Drivers submit receipts for reconciliation, and they manually track these small transactions. 

However, tracking numerous trivial transactions becomes time-consuming, and discrepancies emerge during reconciliation. There's always a risk of misuse or theft, demanding strict security measures. Moreover, negotiating favorable terms with vendors for minor, recurring transactions becomes challenging. They must carefully budget and maintain a sufficient petty cash fund, which strains their overall cash flow.

Overall, the manual process raises efficiency concerns, necessitating a balance between control and practicality in managing day-to-day vehicle-related expenses.

A better alternative to petty cash is a fleet card. 

This post will explore corporate fleet cards, their benefits for transport and logistics, and strategies to overcome potential fuel card challenges for improved spend management.

See a Demo


What Is Meant by Fleet Card?

A fleet card, also known as a fuel or gas card, is a specialized payment card used by businesses to cover expenses related to their vehicle fleets. It is issued by fuel companies or financial institutions specifically for fuel purchases, maintenance, and other vehicle-related expenses.

What Can Fleet Cards Be Used For?

The fleet cards are primarily used for fuel purchases, maintenance, and repairs. They facilitate seamless payments for routine servicing, tolls and parking fees, and purchasing vehicle-related products.

You get cards with custom spending limits and advanced controls, such as real-time transaction monitoring mechanisms, category-specific restrictions, and automated alerts for enhanced security and streamlined expense management.

Drivers purchase fuel, maintenance, and other vehicle-related expenses at authorized locations with the cards, and you enjoy complete visibility on a centralized dashboard for each transaction.

What Are the Benefits of a Corporate Fleet Card?

Switching from manual petty cash management to a fleet card yields the following benefits:

  • Simplifies payment processes by reducing the complexity of cash handling

  • Improves tracking and monitoring of all vehicle-related expenses

  • Minimizes the risk of theft or misuse, providing enhanced security measures

  • Automates the expense management and reconciliation process, eliminating manual record-keeping and ensuring accuracy with reduced likelihood of errors

  • Promotes compliance by enabling you to set controls and restrictions on card usage according to company policies

  • Enhances budgeting by providing detailed reports and insights into the spending patterns for a structured and controlled approach to managing vehicle-related costs

  • Streamlines transactions with vendors, offering an efficient payment method for small, frequent transactions

Should I Use a Fuel Card or a Credit Card?

Fuel cards and credit cards share similarities in providing a convenient payment method for expenses. Both can be used at gas stations and offer detailed transaction records for monitoring expenditures. Moreover, both cards come with features such as spending controls, reporting tools, and rewards programs.

However, here are some differences between the two:

  • Fuel cards restrict card usage to fuel and maintenance-related purchases, providing greater control and limiting potential misuse.
  • Fuel cards come with fuel discounts or rewards programs at specific gas stations, providing potential cost savings that credit cards do not generally offer.
  • While credit cards provide transaction records, fuel cards offer more detailed reporting on vehicle-related expenses like fuel consumption, maintenance costs, and odometer tracking.
  • Fleet cards partner with fuel providers, service centers, and other vendors, allowing businesses to negotiate favorable terms and discounts for bulk purchases or regular transactions. For instance, a fleet card's partnership with a fuel station yields discounted fuel prices, facilitating substantial cost savings.

So, for transport and logistics businesses, corporate fleet cards offer specialized controls for fuel and maintenance, streamlined reporting, and potential fuel-related discounts.

What Are the Risks of Fuel Cards?

Fuel cards, tailored for fleet management, are designed to address the unique needs of companies in the transport and logistics sector. However, organizations face the following challenges when switching to corporate fleet fuel cards:

1. Gas Station Availability Issues

Fuel cards encounter challenges related to gas station availability that limit refueling options. As a result, drivers can not find suitable gas stations, leading to increased travel time and delays in delivery schedules.

3. Location-Dependent Acceptance

The acceptance of corporate fleet cards varies by location, leading to constraints and inconveniences for companies operating in areas where certain cards are not widely accepted.

Drivers will encounter difficulties during interstate routes if you offer a nationwide delivery service and the fleet card is only accepted at specific gas stations or regions. It complicates expense management and hinders the company's ability to streamline fuel-related transactions.

3. Management Complexity

The specialized design of fuel cards introduces an administrative burden when managed separately. For instance, a company using distinct fuel cards for different vehicles finds consolidating expenses difficult, leading to increased administrative efforts and potential operational inefficiencies.

As a result, administrators have a hard time reconciling statements, accurately tracking expenses, and ensuring compliance. This burden increases processing times and errors in financial reporting.

4. Reward Limitations

While crafted to suit industry needs, fuel cards encounter limitations in cashback offers. Consider a scenario where a company's preferred fuel card provides cashback benefits only at select stations, restricting potential cost savings for the entire fleet. 

Source

Why Should You Switch to Pluto Corporate Fleet Cards?

Pluto fleet cards don't restrict the use of cards at their discretion. Instead, they facilitate advanced controls and real-time visibility. From issuing budgeted fuel cards to creating vendor-specific cards, you can set rules that align with your company's needs and policies. Then, with each transaction, you track all fleet expenses from a single dashboard and get real-time data without manual effort.

Pluto's corporate fleet cards

So, you set cards and add controls, and you are good to go! Drivers can spend them at convenient gas stations while you enjoy complete visibility and control. Each transaction appears on the dashboard and notifies drivers to upload the receipt directly from WhatsApp. Once uploaded, you can approve the expense, and the data syncs with your accounting software to help you close your books ten times faster.

Here are the top six benefits of switching to Pluto corporate fleet cards:

1. Unrestricted Access Anywhere

Unlike traditional restrictions, Pluto corporate fleet cards liberate your drivers. There are no limitations on locations or specific fuel stations. Enjoy the convenience of using cards at the most budget-friendly and strategically located gas stations, repair shops, or truck stops that welcome Mastercard.

2. Easy Cashback

Pluto corporate fleet cards make cashback benefits straightforward. With up to 2% unlimited cashback on over 100+ currency spends, enjoy seamless cost savings without intricate conditions or restrictions.

3. Smart Budgeting

Smart budgeting with corporate fleet cards

Pluto fleet cards, functioning as debit cards, provide smart budgeting without blocking cash flow. Drivers can request limit increases in seconds, ensuring operational flexibility with swift approvals. This distinctive feature sets Pluto apart, seamlessly blending budget management and uninterrupted cash flow for efficient fleet operations.

4. Driver-Friendly Controls

Provide drivers with budgeted fuel cards and set spending rules. Real-time data and advanced controls give you complete transparency of fleet expenses, enabling strategic decision-making.

5. Grow With Ease

Whether you have hundreds or thousands of drivers, the streamlined process of issuing corporate fleet cards and setting controls remains hassle-free, supporting your scalability with ease.

6. Eliminate Fraud

Eliminate fraud using Pluto corporate fleet cards

Lock or freeze cards instantly from the Pluto app, ensuring proactive measures against fraud. Enable company policies to ensure in-policy transactions, eliminating the risk of unauthorized spending.

Enhance End-to-End Spend Management

Pluto eliminates the need for separate investments in corporate fleet cards, offering an all-in-one spend management solution. 

Pluto's comprehensive platform facilitates both corporate purchase cards and fleet cards, streamlining your financial operations. Enjoy the same benefits as traditional corporate fleet cards but with enhanced functionality, all within a unified platform. With Pluto, you get unparalleled efficiency in managing corporate expenses, ensuring a seamless and integrated approach to financial control. 

Transform your spend management today. Book a demo and discover how Pluto can optimize your financial processes and elevate your business operations.

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November 6, 2023

Leen Shami

7 Ultimate Digital Transformation Tips for CFOs in UAE

The finance landscape is undergoing a seismic shift in an era of unstinted technological advancement. Back in 2018, a PWC report found that amongst the top 12 challenges that financial organisations faced, 4 of them were technology-related. It wasn't about deciding whether to implement digital transformation technologies but more about understanding the enterprise value these investments would add.

According to Deloitte, adopting the right digital transformation strategies can increase market value by up to $1.25 trillion across Fortune 500 companies. But how can organisations implement these strategies successfully?

The CFO's Perspective on Digital Transformation

Digital transformation is no longer just a buzzword; it is a mandate for modern businesses, and the CFO plays a central role in this paradigm shift. Gone are the days when the Chief Financial Officer (CFO) position revolved solely around balance sheets, budgeting, and compliance. The modern CFO is now tasked with leading the charge in the digital transformation of the finance department.

With its vision of becoming a global technology and innovation hub in the UAE, the need for digital transformation is even more compelling.

Why is digital transformation so vital for a CFO?

  • Real-Time Financial Insights: Real-time access to financial data can be an invaluable asset in combating expense fraud. Digital transformation allows CFOs to detect irregularities promptly, leading to timely intervention and reducing the financial losses associated with fraud.
  • Enhanced Reporting: CFOs can generate comprehensive financial reports more quickly and accurately, aiding in transparency and stakeholder communication.
  • Cost Reduction: Automating financial processes can lead to cost savings, such as reduced labour and operational costs.
  • Strategic Planning: Digital tools help CFOs analyse financial data and create insights to make strategic decisions and adapt to changing market conditions.
  • Compliance and Risk Management: Digital solutions assist in maintaining compliance with changing regulations and mitigating financial risks.

What is the best digital transformation tool for you?

As a CFO, your journey towards a comprehensive digital transformation should be guided by specific features that enhance financial efficiency and help combat one of the most prevalent issues—expense fraud. Here's what you should look for in a digital transformation tool to achieve these goals:

1. Full Control Over Budget Allocation and Spend Visibility:

Access to complete control over budget allocation and clear visibility into how those budgets are spent is the foundation of sound financial management. Your chosen digital transformation tool should empower you to allocate resources efficiently and make data-driven decisions.

2. Real-Time Closure with ERP Integration:

Moving from traditional month-end closures to real-time closures is a game-changer. This transition ensures you have real-time insights into your company's expenditure, allowing you to address financial challenges swiftly. An essential component of this is seamless integration with your ERP system, which provides instant access to financial data.

3. Elimination of Petty Cash Usage:

Digitization of financial processes is a fundamental aspect of modern financial management. To achieve this, focus on strategies to eliminate petty cash usage as much as possible. Consider solutions that offer alternatives, such as merchant-specific cards, fuel cards, and PRO cards, which reduce inefficiency and enhance security.‎

4. Advanced Expense Fraud Detection:

Expense fraud is an all-too-common challenge faced by many companies. Leveraging digitization to combat this issue is essential. Look for a solution equipped with world-class Optical Character Recognition (OCR) technology to identify duplicate receipts and suspicious transactions. The goal is to ensure transactions are monitored in real-time and in an automated manner, such that financial compliance is continuously maintained.

5. Improved Audit Process for Accounting Teams:

Ensuring an enhanced audit process is a vital component of your CFO responsibilities. You must seek a digital transformation tool with two critical features for this. First, accounting automation powered by ERP integration streamlines financial processes and reduces the potential for human error. Second, the tool should provide 100% visibility into all receipts across the company, creating a comprehensive audit trail and reducing the likelihood of discrepancies.

6. Insights and Forecasting:

To thrive in a rapidly changing business environment, a CFO must have a finger on the pulse of their company's finances. A 360-degree digital transformation solution offers complete real-time visibility into all company expenditures. This feature allows you to provide timely, data-driven insights and forecasts, enabling proactive decision-making.

7. Multi-Subsidiary Expense Tracking:

In the UAE, as businesses achieve a reasonable size, they often evolve into multi-subsidiary or multi-branch entities. Given this common trajectory, it's imperative that the chosen digital transformation tool supports multi-subsidiary expense tracking. This ensures that financial data from all parts of the organization is aggregated and analyzed effectively. Not only does it provide a holistic view of the company's financial health, but it also enables consistent monitoring and control of expenses across the entire organization.

To illustrate the power of these digital transformation features, let's look at real-life business examples from the UAE:

1. Dubai Blockchain Mandate: Dubai is on a mission to become the world's inaugural blockchain-powered city. The Dubai Blockchain Mandate, led by the Smart Dubai Office, lays out a clear path for integrating blockchain technology across the city. By embracing blockchain technology, Dubai has the potential to realize annual savings of 5.5 billion dirhams in document processing alone, equivalent to the value of one Burj Khalifa every year.

2. Dubai Government Services: The government is committed to digitizing its services, the rate of which in 2023 stands at 99.5%. Currently, 87% of all government service transactions are digital. Furthermore, the government has also developed over 100 smartphone apps with cybersecurity and data law compliance.

The digital transformation process is an ongoing journey that entails mobilising the entire workforce and instilling a change-oriented mindset with no pre-defined endpoint that might extend well beyond your current leadership. It serves as the fundamental framework for an organisation's survival in an era marked by disruptions. Achieving success in this context involves formulating a strategy around making purposeful investments in the digital realm. It requires the prudent allocation of resources toward innovative technologies that can drive the organisation's strategic initiatives.

Ultimately, the successful execution of digital transformation mandates the ability to communicate to stakeholders that every digital initiative undertaken is a deliberate move to enhance the organisation's prospects for sustained success.