Your business’s accounting
As an entrepreneur, you are responsible for orderly accounts. Accounting also includes financial statement and audit.
Even if you outsource your accounting and other financial management to a professional, you must have a good understanding of the basics of accounting, even if only approximately. When your accounts are up to date, you can make plans and forecasts based on them, as well as budget cash flow and business development.
Your company’s taxable income and VAT filings are also based on the accounts. For example, VAT is often filed monthly, which in itself already creates a framework for monthly accounts. These timetables are important, as late filing attracts penalties. If you pay salaries, you must report them, no later than five calendar days after pay day and file a separate notification monthly. You report your business’s income annually.
Your accountant does his or her own work based on the information you provide. That is why you must ensure that the accountant gets all the necessary information, such as every invoice you send a client or receipts for business supplies.
As business owner, you are responsible for storing accounting material and vouchers for the statutory period: at least ten years from the end of the financial year for accounting material, and at least six years from the end of the year in which the financial year ended for vouchers, such as receipts and invoices. In some cases, the storage period maybe even longer. In practice, an accounting firm can also store the material if you so agree. Documents can be stored either on paper or electronically.
The Accounting Act and key accounting concepts
Accounting is regulated by such laws as the Accounting Act and the Value-Added Tax Act. (Value Added Tax Act in English). Note that the law is always interpreted based on the original text.) The regulations vary depending on business entity and business size.
The Accounting Act lays down in detail how companies of various sizes must manage their accounts. For example, the requirement to store vouchers and the deadlines for financial statements are defined in this Act. The guidelines below are based on the Accounting Act and established practices in the sector.
The accounts may take the form of either single-entry or double-entry bookkeeping. Single-entry bookkeeping may be enough for a sole trader. Refer to the Accounting Act to see your business’s obligation.
A financial year is usually 12 months. In a business with double-entry bookkeeping, the financial year can be different to the calendar year, but in a business with single-entry bookkeeping it is always the calendar year.
The first financial year may be longer or shorter than that, because the financial year begins on the day you register the business. The maximum length of the first financial year is 18 months.
In accounting, a voucher means any document which shows a purchase or sale transaction. For example, an invoice for a service provided is a sales voucher. Receipts, product catalogues and cash withdrawal receipts are also accounting vouchers.
The law specifies in detail which information vouchers must contain. Pay attention to detail, for example when sending invoices.
Based on the vouchers, your accountant will make an entry or enter the purchase or sales transactions into the accounts. The entries are the basis for a monthly accounting report on transactions, as well as for VAT and employer contribution calculations used to calculate your tax.
Can I do my own accounting?
You can, but you should think carefully before doing so. Think about what you want to spend your time on as a business owner. Accounting is regulated by many acts and decrees. Are you familiar with them or do you have the time and interest to study them? If you do not know the law well enough and you do your own accounts, you might make mistakes, such as incorrect accounting or missed filings. You might also fail to notice tax deductions you are entitled to if you do not know the legislation well enough.
How do I choose an accounting firm or accountant?
Incorrect accounting can cause a lot of frustration and expense. That’s why you should choose a competent accountant or accounting firm for your business.
A reliable professional is very useful: apart from your regular accounts, he or she can provide other financial management services, such as payroll.
You can look for a suitable accounting firm on the site of the Finnish Federation of Financial Service Companies, whose members are authorized accounting firms, meaning their operations are regulated. You can also get reliable contacts from the Finnish Enterprise Agencies. Other entrepreneurs may also be able to recommend their accountants or accounting firms. They might be able to offer tips on finding an accountant who knows your sector.
You can approach several firms and professionals for a quote and compare prices and service offerings. Digital programs make many work stages easier. Always sign a written contract for the services you buy.