Organisation of accounts
Your company's accounting must state all expenses and income related to your business operations. All enterprises are obliged to keep accounts. As an entrepreneur, you are responsible for making arrangements for accounting. It is often a good idea to outsource accounting to a proficient accountant or accounting firm, particularly if your company’s operations are not very insignificant.
The accounts are your company's record of operating revenue and expenditure. It provides information on your company’s profits and losses, and assets and liabilities. It is also the basis for taxing your company.
Accounting allows keeping your own and your company's money separate, and keeping the money of different units separate. You can utilise accounting data diversely in your company’s operations, including the calculation of costs and investments, pricing and budgeting.
According to the Accounting Act, all companies regardless of their size, company type and industry are obligated to keep accounting records. As an entrepreneur, you must make arrangements for accounting.
Accounting is usually divided into 12-month financial years. In exceptional cases, the length of a financial year may also be longer or shorter. This may be the case at the starting or ending stage of business operations. For private traders, the calendar year is always the financial year. However, private traders that have opted for double entry bookkeeping may use other periods as their financial year. The maximum length of the financial year is 18 months.
Fully managing your accounting on your own is usually not recommended. Accounting includes a lot of details, and it is very easy to make mistakes if you do not know exactly what you are doing. Your company may face significant costs if you have entered information incorrectly or neglected your notification obligation, for instance.
Accounting and finding out about related practices takes a lot of time, which you will then not be able to spend on your company. In fact, it is often a good idea to outsource accounting to an accountant or accounting firm, particularly if your company’s operations are not very insignificant.
However, if you would like to manage your company’s accounting on your own, familiarise yourself well with the issue, for instance, on an accounting course. Remember that the bigger your company and more operations it has, the more complicated its accounting.
You can also agree with your accountant that you manage part of your company’s accounting and the accountant the rest of it. For example, you can draw up a summary of total sales and purchases but leave the actual accounting up to your accountant. This allows you to better keep up with your company’s financial situation.
Familiarise yourself carefully with the statutes on accounting. The most important of these are the Accounting Act, Accounting Decree, and instructions issued by the Accounting Board on preparing accounting records and applying the legislation in practice.
Double entry bookkeeping is usually required. However, if you are a private trader and your operations are minor, you may choose whether to use single or double entry bookkeeping.
According to the Accounting Act, you must enter all expenditure, revenue, financial transactions and related adjustments and transfers in the accounting records. You must always attach the original voucher, such as an invoice, to the entries.
Make sure that you take care of all statutory notifications and charges to the authorities related to your company’s accounting. These include charges and notifications related to value-added tax, employer’s contributions, and prepaid taxes.
Use your company’s accounting records to prepare financial statements at the end of the financial year.
All receipts, invoices, payslips, account statements and other accounting records are vouchers used at the basis of your company’s accounting. The vouchers may either be hard copy or electronic. You must include the dates and use consecutive numbering on the vouchers. Keep the vouchers easily available through the financial year.
At the end of the financial year, store the material related to the period. Keep vouchers and any other correspondence considering transactions as well as other accounting records for at least six years from the end of the year during which the financial period ended. Keep the financial statements, annual report, accounting records and list of accounts, and the list of accounting records and materials for at least 10 years from the end date of the financial period.
You can store the materials on hard copy or electronically. If you store the materials in hard copy, note the earliest date when the records may be destroyed at the earliest. If you chose to store the materials electronically, also make back-up copies of the materials.
Note that you must store the material until the end of the time limit even if your company ceased operating earlier.
According to the law, the majority of companies must use double entry bookkeeping. Double entry bookkeeping means that each transaction is entered into two accounts: debits and credits. The use of funds is entered into the debit account and the source of the funds into the credit account. Use your company’s double entry bookkeeping to prepare financial statements at the end of the financial year.
If you are a private trader, you can use single entry bookkeeping if your company meets one of the following conditions during the concluded financial year and the financial year before that:
- your company’s turnover is over EUR 200,000
- your company’s balance sheet total is over EUR 100,000
- your company employs over three people on average
If all of the aforementioned conditions are met, you must use double accounting. Double accounting is usually the better alternative even for a small entrepreneur because accounting programs use double accounting.
Enter all your company’s expenditure, revenue, interests, taxes and the use of goods and services you have procured for your company’s needs. This allows you to keep your company’s assets separately from your personal assets. Use the accounting records as basis for filing your tax return.
The Finnish Accounting Act includes definitions of micro-undertakings, small undertakings and large undertakings. Your company size influences what kinds of financial information it must produce. For example, the requirements for financial statements are less strict for micro-undertakings and small undertakings than for large undertakings.
Your company is a micro-undertaking if it meets at most one of the following criteria during the previous financial year and the one
immediately preceding it:
- net turnover of over EUR 700,000
- a balance sheet total of EUR 350,000
- your company employs over 10 people on average.
Your company is a small undertaking if it meets at most one of the following criteria during the previous financial year and the one
immediately preceding it:
- net turnover of over EUR 12,000,000
- a balance sheet total of EUR 6,000,000
- your company employs over 50 people on average.
Your company is a large undertaking if it meets at least two of the following criteria during the previous financial year and the one
immediately preceding it:
- net turnover of over EUR 40,000,000
- a balance sheet total of EUR 20,000,000
- your company employs over 250 people on average.