It happens without warning and has already given many people a rude awakening: the cash register inspection. However, businesses that handle large amounts of cash and keep proper records of their procedures have nothing to fear from it.

Gerd Achilles, a tax auditor and author, appeared as a guest on the live talk show „hsp live at 11“ and discussed with hsp Managing Director Paul Liese the subject of tax audits in general, cash register inspections in particular, and the Benefits of process documentation from.

A recent court ruling has been handed down on precisely this issue: in April of this year, the Münster Finance Court ruled on the consequences of shortcomings in cash management. The case was brought by the operator of a Greek snack bar, who, during a tax audit, was accused of failing to record cash transactions properly. Consequently, the auditor rejected the records and made additional assessments. The court has now ruled that the entire set of accounts cannot be rejected on the basis of minor, formal shortcomings. „I fear that the ruling sends the wrong signal,“ says Gerd Achilles in his assessment. „But the case could also have backfired,“ warns the tax inspector, addressing all those who might feel complacent as a result of the ruling. After all, even documentation that is formally correct can be factually incorrect and can then be refuted by the tax inspector. The Federal Fiscal Court also makes it clear that the shortcomings must be assessed on a case-by-case basis.

Tax firms provide thorough preparation for the cash register audit

Thorough preparation is therefore essential. Tax consultancy firms representing businesses that handle large amounts of cash should therefore train their clients – that is, business owners and staff – to make the cash audit process less stressful. How should clients behave during a cash audit? What might be requested during the audit? What data and documentation should be available on site? Is there an auditor’s access function in the till system so that the tax inspectors can check the till themselves? „We often face the problem that the business owner isn’t even on the premises,“ says Gerd Achilles, speaking from personal experience. That is precisely why it is crucial that staff are properly briefed, know where specific records are located, and understand which data may actually be disclosed. „In doctors“ surgeries, patient names have even been disclosed in the past – that mustn’t happen, of course,” reports the expert. 

In principle, it is possible to refuse a cash audit, but the tax inspector strongly advises against this. „Putting up a barrier rarely achieves much, especially if the audit is only being carried out to select suitable cases,“ explains Gerd Achilles. „The auditor isn’t going to carry out several cash register inspections until they finally catch the business owner out.“ Auditors could therefore quickly lose patience and, instead of the Cash Register Review carry out a full tax audit.

With the right preparation, companies not only ensure safety for themselves and their staff, but also create a positive audit atmosphere. „If the auditor gets the impression that nothing is being concealed, that’s already a very good sign,“ says Gerd Achilles. The owner of a golf club, for example, is very strict about complying with the regulations in this regard: Whilst it used to be common practice at her bar for guests to simply leave the money for their last round on the counter, a sign now explicitly states that this should not be done due to the requirement to issue receipts.

Procedural documentation: Far more than just preparation for a tax audit

Procedural documentation provides precisely this kind of thorough preparation – and, in essence, offers more benefits to companies than it does to the tax authorities. „As far as the tax authorities are concerned, I see procedural documentation more as an afterthought,“ says Gerd Achilles. „Many companies believe they are doing it for the tax authorities, but that is by no means the case.“ Rather, procedural documentation offers great potential for the companies themselves: cost savings, optimisation of operational processes, closing gaps in cash flow calculations, preventing data manipulation by staff, and facilitating knowledge transfer to help new employees settle in more easily – all of this is made possible by procedural – or rather, process – documentation, which always includes an internal control system (ICS). 

The tax consultancy firm also benefits from the documentation, as it gains better insights into the business – which in turn enables it to provide better advice. Ultimately, tax inspectors can also use process documentation to prioritise their audit focus. „This leads to a more efficient tax audit and cash register inspection,“ notes Gerd Achilles, using an example to illustrate the importance of proper documentation, including the internal control system: In a restaurant, the tax inspector discovered that some waiters were only entering food items into the till, always settling the bill for drinks at the table first – and pocketing the money themselves. „There was a pattern to it, and the business owner didn’t notice a thing.“

It is also important not only to draw up procedural documentation, but also to adhere to it. What is set out in writing must correspond to reality – otherwise the documentation is of no use either during a tax audit or to the company itself. 

Tax advisers should visit businesses themselves

In order to obtain a usable To produce process documentation, however, companies need support from tax consultancy firms. „It’s difficult to manage that on your own,“ says the expert. There are also many template documents circulating on the internet, some of which are good but cannot be used on their own. „Anyone who takes a sample procedural documentation template and simply puts their name on it might as well not bother,“ says Gerd Achilles in no uncertain terms. Whilst such templates may serve as a guide, drawing up procedural documentation requires an analysis of a company’s individual processes – and these are not the same everywhere. This is a time-consuming process, which is why it is essential to seek the help of specialists, namely tax advisers. 

The expert advises tax firms to carry out on-site inspections at every business. „The problem is often that things run smoothly at the back end, but go wrong at the front end. It’s not the tax adviser who makes the mistakes; it’s the business owner or the staff at the till,“ explains Gerd Achilles. In the case of bakeries, for example, the tax auditor has often found that they distinguish between only two product groups: baked goods and drinks. Or that scrambled eggs were always recorded as takeaway sales. This ultimately leads to incorrect accounting, which then becomes apparent during a till audit and can cause problems. However, with proper procedural documentation, this does not happen; discrepancies and shortcomings are spotted whilst the documentation is being drawn up. So why wait for the audit when you can rectify errors in advance?