Bookkeeping for efficient business financial management
It should be a priority of every business owner to keep track of the financial transactions carried out in the business in order to effectively manage the company's finances. This process is called bookkeeping and involves recording earnings and expenses.
With bookkeeping, you will have a clear picture of your invoices, tax settlements and debts. This will make it easier for you to file your VAT returns and prepare your annual accounting, which is essential for your tax return.
Efficient business financial management
Bookkeeping helps you manage your company's finances in several ways:
- Income and expenses: You can track your company's income and expenses, so you know exactly how much money is coming in and going out.
- Debt: You can monitor your liabilities, such as loans or unpaid bills, to make sure they are paid regularly.
- Assets: You can track the value of your business assets, including inventory, equipment and accounts receivable, which can help you make informed decisions about your finances.
Streamline your business finances with bookkeeping software
Using accounting software can be a great way to manage a company's finances. This type of software can handle a variety of tasks, such as bookkeeping, managing VAT and tax bills, creating invoices and managing inventory.
You can find bookkeeping software online that suits your specific business needs. What's more, there are often free options available, making it an affordable solution for small businesses or those on a budget.
Organizing your financial transactions
When you do your bookkeeping, it's important to make sure you number your vouchers. This helps you keep track of all your financial transactions. For example, you can use consecutive numbers such as 103, 104, 105, etc.
To make it easier to find your vouchers, you could organize them in a ring binder, filed in sequential order. Remember to keep your vouchers for at least five years after the end of the accounting year.
Lastly, you may choose to keep your vouchers electronically, which is a convenient and space-saving option.
Keeping accurate business records
When running a business, it is important to record all transactions, such as sales, purchases and loans, as soon as possible. This helps keep track of financial activity and ensures accuracy in documentation.
It's also best to record transactions in the order they were made, as this can make it easier to identify any errors or discrepancies.
You have the option of handling all bookkeeping tasks yourself or delegating them to an accountant, bookkeeper, employee, or spouse. However, as the business owner, it's ultimately your responsibility to ensure that the bookkeeping is done properly and accurately.
Understanding income statements and balance sheets for small business accounting
To keep track of your business finances, you need to record your income and expenses in your accounts. By adding up your income and subtracting your expenses, you can find out your net profit or loss for the year. This is known as your income statement. You will use this information to fill out your tax return.
In addition to your income statement, you also need to maintain a balance sheet. This shows the value of your business (assets) and how it is financed (liabilities). Every time you earn or spend money, you need to record it on your balance sheet as an asset or liability. This is called double entry bookkeeping.
It's important to keep your bookkeeping up to date so you don't lose track of your finances. Your income statement and balance sheet together make up your annual accounts. These show all the financial activities of your business for the year, and the Danish Tax Agency uses them to calculate your business's profit or loss.
For example, if you sell goods or services to a customer, you record it as income on your income statement and as an asset on your balance sheet, since the customer owes you money. If you buy a machine for your business, you record the amount as a withdrawal from your business bank account and as an asset on your balance sheet, because the machine now adds value to your business.
How accounts and chart of accounts help you stay on top of your financial situation
When you keep track of your business finances, you should organize your income and expenses into specific groups like advertising, rent, buying goods, and administration. Each group is called an account. For example, you can put all your rent expenses in one account named "rent". This helps you get an overall understanding of how your business is doing financially. A chart of accounts is a list of all the accounts you have in your bookkeeping. You use it to prepare your yearly financial statements and figure out how much tax and VAT you owe.
If you use bookkeeping software, you can choose a standard chart of accounts. The software will give each account a number in order (like advertising, buying goods, and so on). It will also calculate how much tax you can deduct when you enter your expenses in each account.
How to simplify balancing your cash book and accurately record sales for bookkeeping
If you have a business where you make multiple sales in a day, it's important to balance your cash book every day.
Balancing your cash book means checking if the amount of money you have in your cash register matches the total sales you've recorded on your cash register.
To balance your cash book, follow these four steps:
1. Write down the amount of money in your cash register before you start your business day.
2. Count the money in your cash register after you've closed for the day (this is called a cash count). Count all types of receipts, such as cash, digital receipts (like credit card and MobilePay sales), and gift vouchers.
3. Calculate the expected amount of money in your cash register (calculated cash balance). To do this, add the amount you counted in step 1 to the amount of your actual sales. You can find your actual sales by adding up all of your invoices or by checking the daily till roll (z-strimmel).
4. Compare the amount of money you have in your cash register (cash count) with the expected amount of money in your cash register (calculated cash balance). If the two amounts are different, your cash book doesn't balance.
Simplify balancing your cash book
Balancing your cash book will be much easier if you use a special form for this purpose. The form will have places where you can write down all the important amounts. You don't have to worry about coping - the form is designed to be easy to read and understand.
If you use a digital form, you can save it on your computer and it will add up the important amounts for you automatically. If you prefer, you can also print the form and add up the amounts manually. Either way, using a form will make it easier to keep track of your money and ensure that your cash book is balanced correctly.
Keeping vouchers and accurately recording sales in bookkeeping
After you have successfully balanced your cash book, it's important to keep all the vouchers, such as credit/debit card receipts, the till roll, other vouchers, and the cash book form for at least five years. Other vouchers could include credit notes, simplified invoices, or receipts for items purchased using cash from the till.
Make sure to record these vouchers in your bookkeeping to document the sales for the day accurately. In case your cash book does not balance, don't forget to record the cash difference in your accounts.
Balancing your cash book for accurate business finances and records
To make sure your business's finances are in order and your records are accurate, it's important to regularly balance your cash book. This helps you keep track of your financial situation and serves as a record of your sales. If we ask for documentation to approve your accounts and you haven't balanced your cash book, we may have to estimate your taxes and VAT, which could result in higher charges for your business and potential fines.
Simplified invoice requirements for small business transactions subject to VAT in Denmark
If you are selling goods or services that are subject to VAT, then you need to create an invoice. An invoice is a document that includes important information such as the date of the invoice, a unique invoice number, your business details including your VAT number, the customer's details, and the details of the goods or services that were sold.
The company's invoice should include the most important information about the transaction carried out, such as the date the goods or services were delivered, the price of the goods or services and any VAT due. You may also want to include any discounts, bonuses or rebates that are not included in the unit price. Make sure you use the correct VAT rate for the goods or services you are selling.
You can use an invoice template that is available online to make sure you include all the required information. Once you have created your invoice, save it as a PDF file to prevent any changes from being made to it. Additionally, remember to save a copy of the invoice for your business accounts.
If you sell goods or services to another business that are worth less than DKK 3,000 and are subject to VAT, you can use a simplified invoice. This invoice only needs to include basic information, such as the name and address of your business, your business registration number (CVR), the invoice number, the date of the invoice, and the type and quantity of goods or services provided.
You also need to include the total amount of the invoice and the VAT amount. To calculate the VAT amount, you can simply state that the VAT is 20% of the total price including VAT, which is equivalent to 25% of the total price excluding VAT.
This simplified invoice is only allowed for transactions with a value below DKK 3,000 and can only be used when selling goods or services to other businesses that are also subject to VAT.
VAT requirements and filing obligations for businesses registered in Denmark
If your business is registered for VAT in Denmark, you are required to prepare VAT accounts that show the amount of VAT that needs to be paid by your business. These accounts are a part of your normal business accounts, so it's helpful if your bookkeeping software can manage them as well.
It's important to remember to file a VAT return, even if you didn't have any activities during the filing period. This is called a zero declaration. If you fail to file your VAT return, the Danish Tax Authority will estimate the amount of VAT you owe and charge you a fee of DKK 800. If you still don't file your VAT return or contact them, you will be charged DKK 800 plus an additional fee of DKK 65 for each subsequent assessment that they make.