Introduction
AlAjeez (name changed for confidentiality purpose), a prominent oil and gas giantin Kuwait, specializes in Engineering projects and maintenance contracts within the Oil & Gas, Petro-Chemical, Distillation, and Power Generation sectors. However, their potential was hindered by inaccurate opening balances and improper accounting practices, resulting in misleading financial statements and their chances of securing contracts with key industry players like KOC and KNPC.
The Problem
AlAjeez struggled with discrepancies in opening balances due to previous inadequate tracking and accounting practices. These inaccuracies had severe repercussions, impacting revenue and liability figures by around KD 12.6M and leading to misleading cash flow statements. Their inability to track cash flow accurately impeded decision-making based on flawed data.
The Effect:
Misleading financials and inaccurate data resulted in missed opportunities and low performance reflected in their financials, hindering their potential for growth and collaboration with industry giants.
TheProposed Solution
AlPrime Capital, as a reliable accounting firm, embarked on a meticulous process to rectify Al Ajeez’s financial situation:
1. Accurate Opening Balances: Al Prime conducted an extensive review of all transactions, including deposits, withdrawals, interest earnings, related party payments, and other relevant entries, to establish accurate opening balances for each account head.
2. Comprehensive Reconciliation: The firm meticulously reconciled each customer and vendor account balance, accrued and prepaid expenses/income, partners' current account balances, fixed asset breakdown, and employees' leave and indemnity.
Unveiling Hidden Issues
AlPrime Capital discovered that the customer and contractor balances of the company had been outsourced to a third party. After thorough reconciliation, it was revealed that the balances maintained by the third party were overstated, resulting in a variance of 10% in accounts receivables. Correcting these discrepancies was crucial to portray the actual accounts receivable aging.
The Results
AlPrime Capital's diligent adjustments led to a remarkable transformation in AlAjeez's financials, restating the opening balances with precision and accuracy. The overall difference of around 12M significantly improved the company's financial position, empowering them to make informed business decisions.
Conclusion
By unlocking the hidden potential of Al Ajeez through meticulous accounting practices, Al Prime Capital played a pivotal role in helping the oil and gas giant overcome their financial challenges. Accurate financial statements and data provided Al Ajeez with a strong foundation to seize new opportunities, secure valuable contracts, and propel their growth in the competitive industry. Together, Al Ajeez and Al Prime Capital showcased the power of insightful accounting, transforming challenges into remarkable success stories.
