For some companies, the next deadline is coming up soon: the annual financial statements must be completed and published. Are you completely new in business and have just founded your GmbH? We will be happy to help you and provide you with a guide that you can use to prepare your annual financial statements.
Table of contents
- Introduction to financial statements: What are financial statements and why are they important for companies?
- Timing: How to time your year-end close while keeping deadlines and dates in mind
- What information and documents are needed for the annual financial statements? What is the best way to prepare them?
- How can companies benefit from tax advantages?
- The last steps to finalize the financial statements
Introduction to financial statements: What are financial statements and why are they important for companies?
Corporations are required to prepare annual financial statements at the end of their fiscal year. But what are corporations? The most common form of corporation in Germany is the GmbH. Together with the AG, there were over 700,000 listed GmbHs and AGs in 2021. UGs are not quite as strongly represented on the market.
Although a corporation is composed of the merger of several persons in the same way as a Personengesellschaft, the corporation is limited by liability. Another difference is that the corporation itself acts as a legal entity and is therefore also the bearer of rights and obligations. Likewise, a capital contribution (between €1 and €50,000 depending on the type of company) is mandatory.
But why is the annual financial statement so important for companies? Well, there are several aspects to consider here: in many countries, the annual financial statement is an obligation that must be fulfilled. Since the figures have to be published, it gives other people a financial overview of the company’s situation. In the case of an AG, for example, this could be of great interest to shareholders.
Publication creates both transparency and trust. Annual financial statements that are easy to understand give investors or customers confidence in the company’s objectives.
From a tax perspective, the financial statements are important because they are the basis for preparing a tax return for the entire company.
Timing: How to time your year-end close while keeping deadlines and dates in mind
Scheduling is an important step in the planning and execution of the annual financial statements. It involves identifying the deadlines and dates that must be met in order to prepare the financial statements. You should also think about all the activities that are required to prepare the financial statements.
In the context of timing, it is first important to be aware of the legal requirements and deadlines. In Germany, for example, capital market-oriented companies and large corporations must prepare and publish their annual financial statements within four months of the end of the fiscal year. Smaller companies and freelancers often have more time, but still need to keep an eye on the deadlines and dates.
Once the deadlines and dates are known, it is possible to prepare a detailed schedule. This schedule should take into account all the necessary steps and activities required to prepare the financial statements.
This includes, for example, preparing the bookkeeping, creating inventory lists and checking account statements.
When preparing the schedule, it is advisable to plan for buffer times to allow for delays or unforeseen events. Interdependencies between steps should also be considered to ensure that the schedule is realistic and can be met.
During the implementation of the schedule, one should regularly monitor progress and make adjustments as needed. This will help ensure that the financial statements are prepared on time and that all requirements are met.
Overall, careful scheduling is an important success factor for a smooth annual financial statement and should therefore be tackled early on.
What information and documents are needed for the annual financial statements? What is the best way to prepare them?
A large amount of information and documents are usually required for the annual financial statements. We have summarized the most important contents for you:
#1: Balance sheet
Your balance sheet provides information about the company’s assets, liabilities and equity at a given point in time. The management is responsible for the correctness of the contents. Either the company prepares this balance sheet independently or, for example, an auditor or external accountant is commissioned to prepare such a balance sheet. As part of the balance sheet, or as an annex to the balance sheet, you should in any case include your inventory list. This provides information about your assets and is therefore always an important part of your company balance sheet.
#2: Profit and Loss Account (P&L)
The income statement shows the company’s result over a certain period of time. In this case, result means a direct comparison of revenues and costs and thus profit or loss of the company.
#3: Cash Flow Statement
The cash flow statement shows the company’s cash receipts and disbursements during a specific time period and gives an indication of your company’s liquidity.
#4: Bank statements
The company’s bank statements are important to track the company’s financial transactions. They simply need to be kept on file at the company as evidence in case there are any queries about your financial statement numbers. However, depending on the country or type of company, there could be different tax regulations. The best thing to do here is to consult your tax advisor.
#5: Invoices – this is where easybill comes into play
All invoices issued or received by the company are subject to a statutory retention period anyway. They document the company’s financial transactions. Active easybill customers benefit from permanent storage in the easybill account. This means you can access your documents at any time and from anywhere in the world. You can export them collectively and make them available to your tax advisor for the purpose of preparing annual financial statements.
Tip: Please read our instructions in the easybill help center: Create outgoing invoice book (in german)
Payrolls are necessary to record the company’s wage and salary expenses. Here, the HR department should be able to help you or, if your tax office takes care of these matters, the most important data is already in the right place.
How can companies benefit from tax advantages?
Again, we recommend talking to a qualified tax advisor as the very first step. Depending on the country, there may be different ways to take advantage of tax benefits for your company.
For example, depreciation costs for fixed assets can be used to reduce tax burdens. Or you can claim expenses for research and development as well as environmental protection and social commitment for tax purposes.
Don’t miss out on tax benefits because you haven’t paid enough attention to them.
The last steps to finalize the financial statements
After you have prepared your balance sheet, there are still some typical tasks that are necessary to finalize the financial statements:
- Preparation of the notes: the notes are a part of the financial statements and contain additional information about the balance sheet items and the company’s results. The notes must be prepared in accordance with legal requirements.
- Preparation of the management report: The management report is another part of the annual financial statements and contains a description of the company’s business development and risks. The management report must also be prepared in accordance with the statutory provisions.
- Audit of the annual financial statements: The annual financial statements must be audited by a certified public accountant to ensure that they comply with legal requirements and present a true and fair view of the company’s financial position.
- Approval of the annual financial statements: The annual financial statements must be approved by the relevant bodies, such as the management board and the supervisory board.
- Disclosure of the annual financial statements: The annual financial statements must be disclosed to the relevant authorities, such as the Commercial Register, so that they are available to the public.
- Preparation of the tax return: Based on the annual financial statements, the tax return for the company must be prepared.
These steps are general, but additional steps may be necessary, depending on the specific requirements of the company and the legal provisions of the respective country.