How are procedural documents normally organized
GoBD process documentation: This is how craftsmen convince the tax office!
Why is the procedural documentation so important for operations?
The procedural documentation is the first thing every tax auditor looks at: "It is like a manual for the tax auditor so that he can find his way around quickly," says tax advisor Michael de Beer. Because the processes and IT use are organized differently in every company. In order to be able to assess them, the organization and processes must be comprehensible and verifiable for the tax auditor - based on the process documentation. "If the auditor sees that everything has been thought through and documented and is regularly checked internally, then he will tend to forgive small mistakes instead of discarding the entire bookkeeping."
Process documentation: It can also be done without - but that is risky!
It is true that there is an obligation to create written procedural documentation. In the GoBD it says: If the traceability and verifiability of the digital bookkeeping are guaranteed even without procedural documentation, "then the lack of procedural documentation alone does not constitute a formal defect ... which can lead to the discarding of the bookkeeping," says de Beer.
Conversely, this also means that someone in the company without documentation must have all the information in their head and can explain it in such a way that it is easily comprehensible and verifiable for the auditor. And that must be possible even when the boss is not there, for example during an unannounced checkout. That is why de Beer advises creating documentation instead of relying on memory in such a stressful situation.
What belongs in a procedural documentation?
According to the GoBD, process documentation "usually" consists of four parts:
- A.general description: “It should give the auditor an overview of the company,” says de Beer. What is the company's purpose - what does it do or what does it produce? Organizational structure: who has which tasks in the company? Process organization: How are the processes in the company structured? "Tax-relevant key data" were also included, adds the expert, for example how the company determines profit, processes and records incoming invoices and whether there are cash transactions.
- User documentation: According to de Beer, it should represent all accounting-relevant processes, point out critical processing steps and describe controls. The core processes provide orientation. For example, who records how the supplier master data? How are you checked for correctness and what path do you take within and between IT systems.
- Technical system documentation: This is about the documentation of the IT used including hardware, software, configurations and authorization concepts as well as the IT manager and the users.
- Operational documentation: It should document what the company is doing to ensure that its EDP functions reliably and securely. Instructions on operational safety and access rights must be documented. Emergency plans are also included in the event the system fails: Is proper bookkeeping then ensured, for example through instructions for handwritten records and subsequent digital recording?
How much time does a craft business have to invest?
The effort involved in process documentation depends on many factors, says Michael de Beer, on the size of the company, the data processing systems used and the organizational structure. On average, the tax consultant estimates the effort in small craft businesses to be one man-day net per employee. "A solo self-employed person can do it in about one day, in a three-man company around three working days are needed if all the information is available."
"Documenting the procedure sounds like a lot of effort," says de Beer. "But in the end, these are just the descriptions of processes that have already been thought about in every company and for which the relevant documents are often already available." Now it is only a matter of bundling these considerations.
Tip # 1: Be risk-based
When creating procedural documentation, business owners shouldn't meticulously process and present every point, but rather proceed in a "risk-oriented" manner, advises de Beer. "You should first create the documentation for the areas that an auditor is guaranteed to look at." As a rule, these are primarily these six points, which should be described step by step like work instructions:
- Outgoing invoices: Who calculates and writes the invoices with which software? Where does the information come from (time and material slips, other data)? How is the calculation done? How does the invoice get into the accounting department and how does it get to the customer?
- Incoming invoices: How do invoices arrive, electronically and / or by post? Who will open it? Who examines them and how? How does the invoice get into the accounting department? How is the payment made? How is the inventory management process?
- Payment transactions via banks: Which banking method do you work with? Who is authorized to do so and what is the authorization concept?
- Supporting documents: What happens to the receipts? Are they recorded in the company or by the tax advisor? How are they archived ...?
- Contract management: Who concludes new contracts and what do you have to pay attention to, such as the correct sales tax rates?
- I.inventories: Who does the inventory when and how? A brief description is sufficient here
In the cash-intensive trades and companies, the description of all cash processes should also be at the top of the priority list: How are income and expenses recorded? How is their completeness ensured? How are cash payments made to the business account?
Tip # 2: Make it as easy as possible for yourself
There are various ways in which business owners can facilitate the creation of procedural documentation:
- Existing documentation: There are already work instructions and descriptions in companies for many tasks, processes and structures, with the help of which employees are trained and informed. “Employees often create such documents themselves as a reminder or to inform colleagues,” reports de Beer.
- Keywords and graphics instead of long texts: You don't have to put everything into words and describe it in detail. Keywords or graphics are usually sufficient. "With diagrams you can show structures and processes in a company much faster and they are also easier to understand for the tax auditor," says de Beer.
- Screenshots: For the user documentation, screenshots with brief explanations of what data are entered where and what happens then are often suitable. More detailed descriptions are only required for "risk-relevant" tasks, says the tax advisor
- Provider documents: If possible, refer to the vendor software and hardware documentation in the procedural documentation. These can be manuals and descriptions of the hardware used, from which the technical data can be found, or the user manuals from software manufacturers. However, you must have these documents to hand.
De Beer also advises employees to be involved. "They can often describe the tasks they are doing the quickest themselves."
Tip # 3: test your systems!
The GoBD stipulates that data must pass through all IT systems and interfaces unchanged. The proof belongs in the user documentation, but it is difficult to provide and with the appropriate specialist knowledge.
This is where the process documentation can help the company: “Instead of checking the functions within the software, you can check the results and record them in the process documentation,” says de Beer If the booking comes out correctly and with unchanged data, then the software will also work properly. But it shows the tax office that the company is doing everything in its power to comply with the GoBD.
Tip # 4: Self-checks increase your credibility!
The GoBD expressly stipulates the establishment of an internal control system (ICS). You must also present the structure of the ICS and the results of the controls in the procedural documentation. The purpose of an ICS: Companies should regularly check, document and, if necessary, update compliance with the processes described in the process documentation.
Specifically, this means: Record in the procedural documentation which processes you control how often and in what way. Example of incoming invoices: Once a month, check three or five incoming invoices to see whether they are being processed in accordance with the procedures described in the procedural documentation, whether the data posted is ultimately correct and which points you are checking exactly. "And if you discover that processes have changed for a good reason, record this in the documentation and also adapt the process documentation to the new processes," says de Beer.
The tax advisor sees these regular checks and updates as a great opportunity to convince the auditors of the reliability of the procedural documentation: "If this succeeds, the probability of experiencing unpleasant surprises during the audit is significantly lower."
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