Keeping your accounts: usefulness and examples of balance sheet, income statement and notes to the accounts
Keeping accounts is an obligation for some companies. But since a well-kept bookkeeping is also part and parcel of your company's success and good development, it is only natural it should be done with rigor and meticulousness. So, which companies are concerned by the obligation to keep accounts? In what way can it really help you ensure the continuity of your business? We tell you everything!
Keeping accounts: which companies are concerned?
Legal entities that have the legal status of a public limited company (AG / Inc. /plc) or a limited liability company (GmbH / LLC / Ltd) are obliged to keep accounts. But they are not the only ones: limited partnerships, cooperative societies, associations and foundations are also legally obliged to keep accounts.
If you own a sole proprietorship or are a partnership (general and limited partnership) and had a turnover of more than CHF 500'000.- in your last financial year, you are also subject to the bookkeeping obligation. However, if you are a sole proprietorship or a partnership and did not generate more than CHF 500'000.- in turnover, you will still have to keep simplified accounts: these list the income, expenses and assets of your company.
Keeping accounts: why is it essential?
A company that holds rigorous accounts keeps a clear picture of its financial inflows and outflows. Accounting is therefore an essential tool for keeping control of the situation, allowing you to accurately analyze the evolution of your business on a day-to-day basis.
Accounting contributes to the success and sustainability of your business by enabling you to understand every financial movement. In this sense, it is also a true pillar to help you make better decisions: informed decisions that contribute to the growth of your company and take into account your financial health at all times.
By keeping your accounts on a daily basis, you opt for greater serenity in your management. Accounting is also a performance tool that allows you to anticipate and forecast the future, thanks to drafting dashboards or forecasts.
In addition, keeping an accounting system helps you to secure your financial arrangements and report to partners on the management of your company. Bookkeeping is evidence of your company's good health and helps reassure investors and credit institutions.
Moreover, in the legal field, accounting is an admissible means of proof in the event of disputes between merchants.
It is important to note that all accounting documents and the various reports related to your company's accounting must be kept for a minimum period of ten years.
More than a legal obligation, keeping your company's accounts is therefore essential to your growth: but beware, since the stakes weighing on your accounting are high, rigor will be the order of the day!
The essential elements for keeping the accounts
Before we talk about your options for financial management, let's take stock of what needs to be done when we talk about the "duty to keep an account".
Every company that carries out accounting must count and list the elements of its patrimonial situation in an inventory. This document makes it possible to check the existence and value of the assets and liabilities owned by your company. It must be sufficiently detailed and thorough, as it is the document that will justify the elements of the balance sheet.
It groups together your tangible and intangible fixed assets, your stocks, your debts, your receivables, your financial fixed assets... Nothing should be omitted from this document: it serves as a solid basis for drawing up your balance sheet.
The balance sheet, income statement and notes to the accounts
The balance sheet is an essential document for drawing up your accounts: it enables you to present your company's assets and liabilities at a given time.
Your balance sheet must therefore be dated, and it lists:
- what you own (this is the "assets" column of the balance sheet)
- where the money your business has available comes from (this is the "liabilities" column of the balance sheet). This includes your loans, the capital invested...
The total of your assets must always be equal to the total of the elements listed in the liabilities: indeed, all the money you have at your disposal must be used (put in a bank account, invested in equipment, in real estate...).
You must then prepare your income statement. This is an accounting summary document, which allows you to view all of your company's income and expenses over a given period of time in a comprehensive and accurate manner. It is indeed this document that helps you see whether, over your fiscal year, you have made profits or losses.
Finally, the note to the accounts is a document that should help you understand the income statement and the balance sheet. It provides, among other things:
- information and comments on specific items in the balance sheet and income statement
- information on the accounting principles applied
- liabilities and comments on assets pledged as collateral for liabilities
- information on claims
- the amortization terms and conditions...
This is a comprehensive document, which must be rigorously drafted.
These documents will help you take stock of your company's precise state of health: it is indeed this state of affairs that will guide you in your future decision-making.
- Is it necessary to make more investments in a given position?
- Is it necessary to limit expenses on some particular item?
- What level of profitability can you achieve?
All these questions are clarified by establishing a clear accounting system. So, in order to succeed in supporting the growth of your business, let's take stock of the options available to you in order to keep your accounts.
How do you keep your books?
Keeping your accounts in-house
The first option is to keep your accounting in-house. If you have, or if a member of your team has, significant accounting skills, this solution (although time-consuming) may be interesting.
But beware: if you choose to do all your accounting yourself, there are many rules to follow:
Rule n°1: you must keep a receipt for each transaction you make.
Rule 2: To make it easier for you to prepare your official documents, file them in chronological order of date of payment or collection.
Rule n°3: Keep a cash book, a post office book or a bank book: update it daily (or weekly, depending on the volume of transactions carried out by your company). It allows you to closely observe the evolution of your receipts and make more reliable decisions.
Rule n°4: Record each accounting operation by noting: the nature of the operation, the date, the amount and the balance of the day.
Keeping your accounting in-house can take a lot of time, and requires great rigor: if you don't think you are able to do it yourself, it is strongly advised to opt for outsourcing this part.
Outsourcing your accounting
Reasons for outsourcing your accounts
Updating your accounting system means filing all your accounting documents with no exception, on a daily basis: nothing must be forgotten, and you must make no mistakes. As we have seen, all bank movements and invoices must be listed in order to make accurate and precise tax returns.
Beyond the legal obligation, the good keeping of your accounting system also allows you to limit the financial risks linked to your decisions:
- The functioning of your company
- The decisions that need to be made in order to generate more margin.
Remember, small decisions taken poorly might greatly damage your business. Keeping your accounts will allow you to detect your mistakes and timely correct them!
So, in order to both save time and ensure exemplary account keeping, more and more companies are opting to use external players to monitor their accounting.
Option n°1: Calling on a professional accountant
The first option you have if you wish to call on outside support is to entrust your accounting to an accountant, or a chartered accountant. The latter will provide you with financial advice, declare social security charges, draw up pay slips, take care of the administrative organization, set up management charts, draw up annual budgets, and deploy tools for analyzing your business and its profitability.
You can choose to deliver all or part of your accounting to him. The only downside is the high cost.
Indeed, the expenses involved when you want to outsource your accounting to an outside accounting firm can be significant, and may not be appropriate for a small business just starting out. In this sense, the second option available to you is to entrust your accounting to an online tool.
Option 2: Accounting with an online tool: how does it work?
Every year, online accounting is winning over the hearts of more and more businesses. The idea? To simplify your accounting as much as possible, saving you a lot of time and money!
All you have to do is scan your documents, often with the help of an application, and a team will take care of all the monthly accounting, VAT statements, annual closing and tax declaration for you.
To give you a clear view of your business, some companies produce a monthly balance sheet and profit and loss account for you, allowing you to stay in constant contact with your finances: to make the right decisions and support the development of your business, this is the key!
In terms of price, here again, this solution is interesting: count on average CHF 400.- per month for a meticulous and daily follow-up. Please note that the price varies according to the size of your structure: in this sense, if you are self-employed, you will be able to find solutions at around CHF 250.- per month!
Example of Balance Sheet, Income Statement and Notes to the Accounts