Malicious tongues say that a Procedural documentation It would be a requirement imposed by the tax office on businesses to make the tax auditors’ work easier. Yet procedural documentation presents an opportunity for business owners themselves – not just for large companies, but also – or perhaps above all – for sole traders. Tax advisers also benefit when their clients make proper use of the documentation. It is not so much a question of using a specific tool to create it, but rather of handling the procedural documentation correctly.
Since 2015, process documentation in accordance with GoBD (Principles for the Proper Maintenance and Retention of Books, Records and Documents in Electronic Form, and for Data Access) has been mandatory. Accordingly, procedural documentation is intended to record the processes and business transactions within the company so that they are traceable and verifiable – in digital form. Tax-relevant data must therefore be made available to the tax office electronically in the event of a tax audit. „But at the moment, it’s still very rare that we’re able to take the data with us straight away,“ explains Andrea Köchling, who, in addition to her role as a tax auditor, is a consultant specialising in procedural documentation.
High priority in the cash audit
Right from the first stage of the tax audit, which is the Cash register inspection, procedural documentation is of paramount importance. „In the area of cash registers, procedural documentation is an essential part of measures to prevent tampering,“ says the expert. Business owners must, amongst other things, provide programming tables and operating manuals and explain how the till has been customised to suit the specific practices of the business. According to court rulings, the immutability of business transaction entries is an absolute must.
In this context, digital documentation of procedures not only makes the work of tax inspectors easier during till audits. Andrea Köchling refers to what every business owner should have to hand for the till as an „emergency kit“: programming logs, manuals, telephone numbers for the tax adviser, the till manufacturer and installer, and instructions for staff. For example, in the event of technical problems with the hardware, the relevant documents and telephone numbers are then immediately to hand, enabling the business owner and their staff to act quickly.
Four areas of the major tax audit
The comprehensive audit – that is, the audit of the entire organisation – is in turn divided into four areas: general information about the organisation, user documentation, system documentation and operational documentation. The first and last of these are to be prepared by the business owner, whilst the user and system documentation are provided by the manufacturer of the data-processing system. The focus of the procedural documentation therefore lies on the company’s processes and on the software or data interface.
How is the data stored, where does it come from, how is it backed up – „that is at the heart of what the entrepreneur needs to answer“, says Andrea Köchling. Process documentation is therefore far more than simply scanning documents to replace paper records. It is also essential to record and illustrate the interrelationships between data and the data flows. Diagrams and organisation charts are useful for this, as well as for providing general information about the company. This is because visualised processes are clearer and easier to follow for those involved. And the very act of visualisation sometimes makes it immediately apparent to business owners where processes are not running optimally. Process documentation is therefore a more accurate term here than ‘procedural documentation’.
Knowledge is preserved
The great benefit of procedural or process documentation for business owners is that no knowledge is lost. Job descriptions, for example, help to clarify responsibilities and make it easier to train new staff. And once data has been stored, it is protected against loss and can be retrieved and shared as and when required.
„Sole traders, in particular, need a contingency plan for themselves,“ advises Andrea Köchling. „The senior partner often has everything stored in his head. If anything were to happen to him, his heirs would be in a difficult position.“ However, they would then be the point of contact for the tax authorities, would have to account for the business’s affairs and would have to keep the business running. If they are unable to do so, the business may, in the worst-case scenario, have to close down.
However, if procedures, processes and responsibilities are described and documented, this can be prevented. Furthermore, with procedural documentation – which can also be referred to as a business handbook – companies are better able to respond to new situations that arise unexpectedly, such as the recent coronavirus pandemic. The example of the till system shows that companies with an „emergency kit“ knew exactly what to do when the VAT changes came into effect on 1 July. Nor do they need to shy away from the challenge posed by the approaching turn of the year.
Documenting procedures isn’t difficult
But what is the best way to get started with procedural documentation? „It’s a matter of personal preference,“ says expert Andrea Köchling. The Association of Tax Advisers or the German Professional Association for Cash Register and Accounting Systems Technology, for example, provide free Word documents that can be filled in and adapted as required. „There are now also some very good online providers who aren’t actually that expensive,“ says Köchling. The advantage here is that some tools allow tasks and access rights to be allocated. Employees can therefore be specifically tasked with entering certain data, whilst the tax inspector can be granted read-only access.
With such templates or online tools, the business owner can work their way through specific guidelines or questions. In any case, they do not have to start from scratch when it comes to process documentation: many elements already exist, such as job descriptions, areas of responsibility and the server’s location. The procedural documentation brings all this information together and thus constitutes the complete record of all information within the company.
Once this complete body of work is in place, it must „live“, that is, it must be constantly updated. Changes must be incorporated, but the old information must not simply be overwritten in the process. This is because the procedural documentation must comply with GoBD requirements, which also include the criterion of immutability.
An opportunity for entrepreneurs
Procedural documentation, process documentation or a business manual – whichever term business owners choose, the main thing is that they use it. „Once you’ve got it sorted, it runs smoothly; then it’s a self-perpetuating process,“ says Andrea Köchling. The positive pressure exerted by the tax authorities in this regard is therefore intended to benefit the business owner: it is not only the tax authorities who have an interest in a swift and efficient tax audit. Furthermore, the documentation safeguards data and knowledge, sets out processes and procedures and optimises them; it ensures clarity and traceability, and enables rapid adaptation to new situations
Tax advisers would therefore be well advised to recommend that their clients keep a record of their procedures – and ultimately stand to benefit from this themselves. After all, the documentation helps them get to know their clients better and enables them to decide, when taking on new clients, whether the client is actually a good fit for them. Or, as the pandemic example demonstrates once again: many advisers now have a vested interest in clients sending digitised supporting documents to the practice. Establishing this process with the client and setting it out in writing is already the first step towards procedural documentation – so getting started is easy.
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