Procedural documentation

Who is obliged to keep procedural documentation?

Every entrepreneur who uses a data processing system (e.g. merchandise management system, cash register system, accounting or invoicing software, digital document storage) is now obliged to keep procedural documentation. The widespread assumption that only cash-intensive businesses are obliged to keep procedural documentation because of their cash register system is wrong. The circle of obligated companies is actually much larger!

What is procedural documentation?

In its letter dated 28 November 2019 “Principles for the proper keeping and storage of books, records and documents in electronic form and for data access”, the Federal Ministry of Finance specified the requirements for procedural documentation in more detail. 

According to this, it must be possible to submit a clearly structured procedural documentation for each data processing system used, from which the content, structure and results of the data processing system can be seen completely and comprehensibly. The scope of this description is determined by the recipient horizon. The procedural documentation must be comprehensible and verifiable for an expert third party (tax official) within a reasonable period of time.

What can happen if I do not have proper procedural documentation?

If there is no procedural documentation, in the worst case, this finding alone can lead to the rejection of your entire accounting. As a consequence, you will then have to deal with additional estimates from the tax office. In the absence of procedural documentation, the tax authorities regularly attempt to estimate a safety margin of 1-5% of the total turnover.

Our recommendation

We take a holistic approach. As a rule, a company today does not just use a single data processing program. Many companies initially focus only on the process documentation for the digitalisation of documents (replacing scanning), forgetting the other data processing systems such as a cash register or merchandise management system. In these cases, the process documentation is incomplete, which poses the described risks. Our goal is therefore to look at the entire company and to link a uniform documentation with an integrated “internal control system” and, if necessary, also with a compliance system.