Bookkeeping is an unpleasant and overwhelming topic for you? You are not alone! Not without reason, the number of tax advisors in Germany is growing steadily and reached a total number of almost 90,000 in 2021. Whether it is the advance VAT return or the annual financial statement, tax consultants can support you in many upcoming tasks.
Does your company benefit from the support of a tax consultant already or do you plan to do so? Then the next step is to identify how you can optimally prepare for the cooperation. In this context, thorough preparation of documents in the whole process of preparatory accounting is crucial. The more thorough and error-free this occurs, the faster and more efficiently tax consultants can do their work. This in turn, will reduce the costs for you. But how can you prepare for the collaboration and, above all, how can you ensure that the collaboration will be carried out efficiently?
In order to solve this mystery, we will put forward crucial steps that should be taken in preparation for working with tax advisors. Although some of the preparatory accounting steps can already be carried out by tax advisors, many companies carry them out themselves. As you will see, the tasks at hand are less overwhelming than many people assume.
The crucial steps to prepare for the collaboration with tax advisors:
Collecting and sorting receipts
The first step is to carefully collect all your receipts. This includes both incoming receipts and outgoing receipts. These should be stored securely and, at best, sorted. This will make it easier for the tax advisor to match the receipts to payments. How and where receipts are collected can vary greatly. While many individuals and businesses still store receipts in physical boxes or numerous digital folders, you can now store them centrally using smart financial softwares. This is beneficial to you because, as listed in our blog post “Top 10 Manual Steps and How to Avoid Them,” sorting receipts manually increases the likelihood that might lose some of them. If you do receive receipts physically, make sure to scan them clearly so they can be processed successfully later on. Because neither you nor your tax advisor can do anything with odd, illegibly scanned documents.
Caution: You must continue to keep documents that you have submitted to your tax advisor. Depending on the type of document, you are required by law to keep them for six or ten years. Please also read our article on retention periods.
Assignment of receipts and payment transactions
Besides being collected and sorted, your receipts also need to be assigned to the corresponding payment transactions. Why? Tax advisors need the appropriate documentation for each payment made. Although there is no longer a legal obligation to present receipts, there is a duty to keep them. If the tax office wants to inspect receipts, you should have them ready to hand, otherwise you may face an increased tax burden. Unnecessary and annoying, isn’t it? Therefore, do not even work without supporting documents!
Take responsibility and hand in all your receipts and proofs of payment so that all payments are directly comprehensible. This can be done by attaching the receipt directly to the corresponding bank statement. If you work with financial software, this step can be carried out directly. This is because the software automatically compares and “matches” receipts with corresponding payment transactions.
Initial account assignment
The next step is to assign the invoices to the corresponding cost centers and posting accounts. For posting accounts, you can select from a variety of predefined account charts such as SKR03 or SKR04, which already specify the account and the corresponding number. Furthermore, you can also set up individual accounts with their own numbers. Cost centers, which can be defined individually, help you to allocate income and expenses to the respective departments in your company in order to get a better overview. Since you know your operational business better than your tax advisor, we recommend that you handle the assignment of accounts and cost centers yourself. The initial account assignment is oftentimes carried out traditionally by using an account assignment stamp. Alternatively, it is now possible to carry out this task digitally with a software solution without any additional effort. If no proper initial account assignment is carried out, the risk of incorrect postings on the part of the tax consultant increases. In turn, you can expect increased costs, as these uncertainties mean additional work and increased working hours for the tax consultant. It is therefore better to carry out this step with too much care than too little.
Recording the tax rates (optional)
Although your tax advisors often carry out the identification of the appropriate tax rates, you execute this step yourself. For example, digital software solutions can automatically read and record the tax rate from invoices thanks to automatic text recognition, also known as OCR.
Transfer data to tax consultant
The last step is to transfer your accounting data to your tax consultant. Depending on your tax requirements, this must be done monthly, quarterly or annually. Depending on the degree of digitisation, the booking data can be imported directly into DATEV Unternehmen Online from a previous system. For example, if you work with intelligent software solutions such as finway, all previously recorded data is transferred to DATEV, including invoice number, amount, VAT, payment date, cost centre, and the G/L account addressed.
Of course, preparatory accounting includes several other tasks. For example, outgoing invoices must be sent and monitored, travel expenses must be accounted for and reimbursed, and invoices need to be paid. However, these steps are less relevant for your collaboration with the tax advisor and have therefore been neglected within this article.
What else should you consider?
Now you know the rough steps you should take to be well prepared for working together with the tax advisor. As you have seen, preparatory accounting can be executed relatively easy on your own, especially if you use financial software. After all, according to a study by PCW, financial technology helps significantly with process improvement. This can also explain why the use of AI, for example, in the automatic reading of documents for further processing in accounting, was already at 67% in 2020. We hope that you belong to this majority.
For the cooperation to run smoothly, we would like to conclude by giving you some more valuable tips.
Consult with your tax advisor
Before the preparatory work even begins, you should at best have already contacted your tax advisor. We recommend that you discuss your wishes and requirements in detail, as this will allow you and your tax advisor to find a way to cover them. The first step is to specify your individual tax requirements to initiate the following steps, such as providing the necessary documents. In addition, you should disclose your internal financial processes comprehensively and thoroughly (keyword: procedural documentation). Your tax advisor should be able to easily understand, for example, how you write your outgoing invoices, send them or in what quantity you store incoming invoices and where. In addition, you should describe which banks and software solutions you use. Only if the tax advisor knows your exact processes, he or she can give you personal tips on avoiding mistakes and organising the preparatory work optimally and efficiently. So if things change in your finance department, for example, through the introduction of invoice processing software, inform your tax advisors immediately.
Start early enough
When was the deadline to hand in your income tax return again? On the tenth day after the end of an income tax filing period. And when is the advance sales tax return due? That depends on the amount of sales tax from the second year after starting the business. Did you know these deadlines? We hope you did because this is the only way to avoid missing deadlines. Do not wait for your tax advisors to remind you of these deadlines. And instead, start too early rather than too late. Unexpected issues can always arise, such as false invoices or untraceable payment transactions. And don’t forget that employees sometimes forget to submit their receipts. Allow enough time for this so that you don’t end up having to work under pressure.
Check all receipts
Before sorting the receipts, make sure that they are free of errors and comply with legal requirements. For example, are the date, address, quantity and price of the listed services or the calculated VAT correct on the invoices? Enclosed you will find a small checklist of what should be included in an invoice.
- Date and place of invoicing
- Sender address
- Recipient address
- Quantity & price of the service provided
- VAT identification number of the invoicing party
- Invoice number
- Net amount
- Payment term
- Notes on possible tax exemption
- Bank details
At best, check the necessary information immediately upon receipt or issue of the invoice. This way, there is no risk that you will initiate the further steps of the preparatory accounting with erroneous documents and that, afterwards, documents will have to be corrected, and the entire work will start all over again.
Find the right tax consultant
Imagine you are working with intelligent financial software that facilitates your preparatory accounting. The software provides you with all your records for export to DATEV Unternehmen Online. Now, unlike you, your tax advisor is less advanced in digitization. He neither works with DATEV Unternehmen Online nor can he do anything with your digitally prepared data. As a result, it takes him a while to understand the data you have carefully prepared, and he often gets back to you with queries. What does this mean for you? Increased costs and additional work, although you wanted to prevent this through digital processes.
Such a situation will not arise if you have found the right tax advisor for you. Barriers, for example, due to differing digital skills, the use of different software or a lack of specialized knowledge, should be avoided in any case. In addition, a healthy basis of trust should be strived for because this way, problems can be tackled better and with more ease, and joint solutions can be created.
How to find the right tax consultant? First, of course, recommendations from acquaintances can be helpful. Otherwise, DATEV offers a tax advisor search service, where you can filter, for example, by areas of work, industry knowledge or even foreign languages.
We hope that these tips will help you to optimize your cooperation with your tax consultant.