On a 12% gross margin, working capital is the entire business.
Landed cost accuracy, inventory turns, receivables control and free zone Corporate Tax analysis for Dubai and UAE trading, distribution and wholesale businesses.
Trading businesses run on percentage margins that leave no room for measurement error. When gross margin is twelve percent, a two percent error in landed cost is a sixth of your profit — and landed cost errors are extremely common, because duty, freight, insurance, clearance, demurrage and currency movement are frequently expensed to overhead rather than allocated to the goods that incurred them.
The second constraint is the cash cycle. You pay suppliers on their terms, hold inventory for however long it takes to sell, and then wait for customers who pay on yours. That gap has to be funded, and growth widens it. A trading business growing thirty percent a year with an eighty-day cash cycle is consuming cash faster than it earns it, regardless of profitability.
The reporting this sector actually needs.
Standard accounting produces a compliant P&L. These are the views that change decisions, and they require the underlying data to be structured for them from the start.
True landed cost per SKU
Product cost plus freight, duty, insurance, clearance, handling, demurrage and currency effect, allocated to the goods rather than absorbed into overhead. Without this, your gross margin by product is wrong and every pricing decision built on it is wrong too.
The cash conversion cycle
Inventory days plus debtor days minus creditor days, measured monthly and tracked as a target. This single figure determines how much working capital growth will require, and it is the number to manage rather than revenue when cash is tight.
Inventory turns and dead stock
Turns by category and SKU, with slow-moving and obsolete stock identified and quantified. In distribution, dead stock is the most common place for a large amount of cash to sit unnoticed, and it usually gets written down eventually rather than sold.
Receivables and credit control
Customer credit limits, ageing by customer, and a defined escalation process with named ownership. In trading, customer concentration also means concentration of credit risk, and a single significant default can exceed a year of profit.
Supplier terms and currency
Terms tracked and renegotiated as volume changes, with foreign currency exposure identified where purchases and sales are in different currencies. Most trading businesses carry unhedged currency exposure without having quantified it.
Free zone Corporate Tax position
Many UAE trading businesses operate from free zones, which makes the Qualifying Free Zone Person analysis directly relevant: the proportion of revenue from mainland customers, the de minimis test, substance, and whether the position is documented. This needs monitoring through the year, not assessing at filing.
The diagnostic, then the layer you need.
Most clients in this sector begin with the AED 4,500 Finance Health Diagnostic — a two-week fixed-fee review ending in a written findings note you own. It tells you what is broken, what it is costing, and what to fix first.
Commonly engaged services
- Accounting & bookkeeping — the foundation
- Management accounting — the reporting layer
- Corporate Tax & VAT — compliance
- Cash & working capital — 13-week control
- Cost & margin optimisation — where the leaks are
- Virtual CFO — senior judgement on top
What should be included in landed cost?
Product cost, inbound freight, insurance, customs duty, clearance and handling charges, demurrage where incurred, and any currency effect between order and payment — allocated to the specific goods. Expensing these to overhead makes gross margin by product meaningless and leads directly to underpriced SKUs.
What is a good cash conversion cycle for a trading business?
It depends heavily on the category and on your position in the supply chain, but the measurement matters more than the benchmark. Track inventory days, debtor days and creditor days separately, set a target for each, and monitor the combined cycle monthly. Improving it by ten days on a business with AED 40 million of cost of sales releases substantial cash permanently.
How do we handle free zone Corporate Tax if we sell to the mainland?
Mainland sales are not automatically all treated the same under the Free Zone Corporate Tax regime. The result depends on the customer, activity, source and other Qualifying Free Zone Person conditions; non-qualifying revenue is subject to the de minimis rules. If mainland sales are material, the position should be classified and tracked rather than assumed from the customer location alone.
Can you help reduce our stock holding?
Yes — identifying slow-moving and obsolete inventory, quantifying the cash tied up in it, setting reorder points and cover targets against actual demand, and recommending clearance where the carrying cost exceeds the likely recovery. It is usually the single largest source of releasable cash in a distribution business.
How do you account for foreign currency purchases?
Transactions recorded at the rate on the transaction date, with monetary balances retranslated at period end and differences taken to the P&L. The more important management question is whether the exposure between purchase and payment is quantified, because unhedged exposure on thin margins can eliminate the profit on a shipment.
Tell us where the numbers stop being useful.
Describe the current setup, the systems you run and what you cannot currently see. We aim to reply within one business day with a scoped next step and an indicative fee range.