We are not only doing accounting

We are hunting for tax deductions

The purpose of this blog is to provide a reliable source of business, tax, and accounting information. English is the chosen language to ensure coverage for Danish and non-Danish readers.

DIY accounting

February 2019.

You might know this: You just started your company; you need the money to buy goods, rent a location, install equipment, etc., and you want to keep the costs as low as possible. You know how to make calculations in Excel and maybe even have a business degree. So… you decide to make the books yourself.

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When we talk about accounting, there are two parts: bookkeeping for everyday activities and accounting at the year end when you are required to make the annual financial report and you must submit it to the Danish Business Authority (Erhvervsstyrelsen) if your company is a liability limited company.

DIY bookkeeping on Excel

Excel is an accessible program that can be found in Windows. You do not pay extra to do your bookkeeping using Excel. You might hear yourself or others saying: I know the

basic calculation, and I have so few invoices. How difficult can it be to do it myself?

Yes, bookkeeping on Excel is suitable for businesses with very few transactions, especially if the owner has excellent memory and organisation skills. How few is enough for Excel DIY bookkeeping? I think it is as long as everything fits on your computer screen.

As soon as the data gets larger than the computer screen, it becomes more complicated to control your data, and it is often here that people make the most mistakes, e.g., missing invoices, using incorrect formulas, wrong entries, etc. Excel has no function to track your changes and detect your errors.

DIY bookkeeping on accounting software

Accounting software is strongly recommended as a standard protocol for running a business. Besides bookkeeping, accounting software provides professional templates for invoices/credit notes to customers, creditors, and other business associations. Usually, an accounting program offers more than bookkeeping and accounting; you can analyse any function in your business, make reports, manage stocks, make bank reconciliations, and even build and manage your webpage. A wide price range of accounting programs is available on the market: from free-of-charge to the corporate price range. Small business owners should check out Dinero and E-conomic. Larger companies can go for Navision C5 (rebranded as Microsoft Dynamic 365).

Using an accounting program is relatively easy for an average computer user. You can use the built-in help functions, which automatically block incorrect inputs with explanations. Bookkeeping on accounting software is suitable for people who are comfortable with logical, straightforward thinking.

On the other hand, acquiring an accounting program costs money. It also can be difficult for some people, and let’s face it, computers can also make mistakes. It doesn’t matter how much you pay; you still need basic accounting knowledge to use it.

Source: Shutterstock

DIY accounting at year end

At the end of the year, all business owners must submit the annual financial report to the Danish Business Authority. DIY financial reporting is strongly not recommended for non-professionals for many reasons, but the foremost is the loss of income for you.

You may calculate your income and expenses precisely, but there is much more than that. They are tax deductions.

Refer to our previous article: A Happy New Year present to you, you will get ideas about several tax deductions. That’s not all. Some businesses have deductions that others do not have, or the government may offer extra tax deductions during economic recessions. Other problems can be that you don’t know what to do with some accounts, so these stay in the accounting system and grow bigger over time. Once you submit your annual report, you cannot change and claim your tax deductions.

It is easy to make mistakes with DIY accounting. You might end up claiming VAT at the wrong rate, not paying tariffs for products, claiming deductions for expenses you are not allowed, borrowing cash from the company illegally, or paying in cash illegally, etc. Even if an employee or an external bookkeeper makes these mistakes, you, the business owner, ultimately pay the price.

What to do

The first thing to do is to get a professional accountant to check your bookkeeping. You will get your books done right and receive advice. This service takes a few hours, but it is worth the risks and potential problems. At the end of the year, you should get professional accounting services because there is much more at stake: get all tax deductions, report the income/loss and tax liability correctly, and you will get a review of the bookkeeping in the process.

Maybe you will fall in love with accounting and take an accounting degree like me. Who knows?

Update: As of the 1^st of January 2024, new bookkeeping laws mean companies are not allowed to do bookkeeping in Excel. All work must be carried out using accounting software.

JACOBSEN ACCOUNTING ApS

We are not only doing accounting

We are hunting for tax deductions

DIY accounting