Figure 1: Start-ups have a lot of work at the beginning and have to think about many things. Things like writing invoices or bookkeeping, monitoring incoming payments or submitting tax returns on time are quickly forgotten. With the right tools, it gets easier.
Every year, people set out to become self-employed and face the challenges that come with it. One important topic is bookkeeping. It is mandatory and for many a necessary evil. Depending on the legal form, young companies are subject to certain regulations that can be found in the German Commercial Code (Handelsgesetzbuch, HGB), the German Stock Corporation Act (Aktiengesetz, AktG) and the German Civil Code (Bürgerliches Gesetzbuch, BGB). For companies subject to the HGB, for example, the obligation to keep accounts applies. For sole traders, less strict regulations often apply. However, bookkeeping should not only be an annoying duty and a necessary evil. With the help of the figures from bookkeeping, it is possible to manage a business better, for example if customers do not pay their invoices or to avoid liquidity bottlenecks. Even in a small business, keeping the books in order is important. But how does proper bookkeeping work? Are there electronic aids for this? How can self-employed people and entrepreneurs keep track of their finances?
Create invoices correctly - it's easy
Figure 2: Bookkeeping is not only important for the tax return or because it is required by law. Entrepreneurs and self-employed persons gain important data from it, which is helpful for further planning.
Accounting begins as soon as the customer is invoiced. Invoices must have certain components. Automated and efficient invoicing saves the founder a lot of time and money. A legally compliant dunning process is also important for companies. Even a well-designed payment reminder can persuade customers to pay outstanding invoices. It doesn't always have to be a reminder or a letter from a lawyer. Especially in the beginning, however, founders usually have completely different concerns. Creating invoices correctly or planning the dunning process are at the bottom of the list of priorities. But correct invoices are important, which is why there is software that takes this part of the work off entrepreneurs' hands in a legally compliant manner. On comparison portals, self-employed people and entrepreneurs can compare various invoicing programs, with lots of tips and advice on what is relevant when choosing the right program. It is important that customers receive their invoices on time and that they pay them. Late payers can cause massive payment difficulties for small and medium-sized companies in particular. Cash flow and creditworthiness suffer as a result.
Tools for accounting
Besides invoices, founders have another issue that is very unpopular. Even easy-to-use tools and accounting software do not change this. However, the programmes have a few significant advantages: Time spent and unnecessary errors can be significantly reduced. Here, too, test reports can be very helpful in finding the right programme for a start-up's needs.
Since 2017, cash-intensive businesses, for example in the catering industry, have been required to work with an electronic cash register that must meet certain requirements, according to aachen.ihk.de.
This does not make the work any easier. However, an electronic cash book also has advantages for the founders. Processes can be accelerated and the data from the bookkeeping are even more meaningful because they are backed up with additional data.
Tip:
Additional data can be read from the data in the cash book:
- Customer frequency
- Shop utilisation
- Peak times
- when and where does which turnover occur?
Order is half the battle
Figure 3: It is very important to always file tax returns on time. If all the documents are already pre-sorted, it is easy to find the necessary receipts and complete the tax return.
This is true not only at home, but especially in companies. Many self-employed people still work with traditional methods, even though digitalisation could make it much easier. Business mail and invoices go into a pile of papers after being opened. As soon as important deadlines come up, such as the annual employee report or the tax return, the hectic search begins. In which pile are the receipts for the salary payments? Where are all the important invoices for the annual VAT return? This method costs a lot of time and can be expensive if the tax office imposes administrative fines because tax returns are not submitted on time (cf. vlh.de).
Tip:
Organise documents as they come in - incoming and outgoing documents can be collected on a monthly or quarterly basis to be filed neatly in the following period. The following filing compartments are helpful, for example:
- Outgoing payments (for example, incoming invoices or fee notices)
- Incoming payments (invoices to customers)
- Employees
- Other (for example, official letters, permits or similar)
Classification system reduces search times
All merchants are required by law to keep proper accounts. The aim is to present all business transactions clearly and make them verifiable. However, even entrepreneurs who are not subject to this obligation should observe certain basic rules. The recording of all transactions is always the goal. A suitable system is necessary for this. Keeping the incoming documents in order is only the first step. A good filing system is very individual and must fit the needs of the company. There are a few basic differentiations:
- Revenue
- Expenditure
- Supplier invoices
- Factory equipment
- Rent/Lease
- Insurances
- Communication/IT
- Advertising and marketing
- Tax office
- Tax advance returns
- Tax assessment notices
- Tax consultant
- Correspondence tax office
- Employees
- Other
Important:
Filing for everything that concerns the current business year or that is still being processed for tax purposes is important. But it is just as important to have a filing system for all the documents that entrepreneurs have to keep for years. Founders should also think about this early on.
Conclusion
Bookkeeping, accounting and entrepreneurial thinking are closely linked. Only entrepreneurs who have clear, short, medium and long-term business goals will ultimately be successful. Accounting data is the basis for planning and business decisions. With a good Cash flow planning and a profitability forecast, the future of the company can be better planned. With a well-founded financial plan, it is easier to obtain a loan from a bank, for example. It doesn't have to be that extensive at the beginning. Companies that are not required to keep accounts can start with a simple income statement, in which income is compared with expenditure in order to calculate the company's success.
Credits:
Figure 1: Pixabay © alexas_fotos (CC0 Public Domain)
Figure 2: Pixabay © stevepb (CC0 Public Domain)
Figure 3: Pixabay © webandi (CC0 Public Domain)