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 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 for buying goods, renting a location, installing equipment, etc. and you want to keep the costs as low as possible. You know how to make calculations on Excel and maybe even have a business degree. So… you decide to make the books yourself.

Source: Shutterstock

Actually, 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 found in Windows. You do not pay extra expenses for doing 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 business with very few transactions, especially if the owner has excellent memory and organisation skills. How few is enough for Excel DIY bookkeeping? In my opinion, it is as long as everything fits in your computer screen.

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

DIY bookkeeping on accounting software

Accounting software is strongly recommended as a standard protocol of running a business. Besides bookkeeping, accounting software provides professional templates for your invoices/credit notes to your customers, creditors, and other business associations. Usually, an accounting program offers more than bookkeeping and accounting; you can make analyses of any function in your business, making reports, managing stocks, making bank reconciliations, and even building and managing your webpage. There is a wide price range of accounting programs 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 blocks incorrect inputs with explanations. Bookkeeping on accounting software is suitable for people that are comfortable with the logical, straightforward way of thinking.

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

Source: Shutterstock

DIY accounting at year end

At the end of the year, all business owners will have to 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 loss of income for you.

You may calculate your income and expenses precisely, but there are 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 a number of tax deductions. That’s not all. Some businesses have deductions that others do nott 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 claim VAT at the wrong rate, not paying tariff for products, claim deduction for expenses that you are not allowed, borrowing cash from the company illegally, or pay in cash illegally, etc. Even if these mistakes are made by an employee or an external bookkeeper; it is ultimately you the business owner alone that pays the price.

What to do

The first thing to do is to get a professional accountant to check through your bookkeeping. You will get your books done right and receive advices. It takes a few hours for this service, but worth the risks and potential problems. At the end of the year, you should get professional accounting services because there are 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…?

JACOBSEN ACCOUNTING ApS

We are not only doing accounting

We are hunting for tax deductions

DIY accounting