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Filing Annual Financial Statements in Estonia: A Guide for Business Owners

In Estonia, the task of filing annual financial statements can be daunting for many small business owners. However, with the right knowledge and approach, you can complete this task without the need for an accountant. This article outlines the circumstances under which you can file these statements yourself, the benefits of doing so, and a step-by-step guide to ensure you do it correctly.

When Can You File Your Own Annual Financial Statements?

In Estonia, it is legally permissible for business owners to file their own annual financial statements if they possess a basic understanding of accounting principles, particularly double-entry bookkeeping. According to the Estonian Accounting Act (§ 15), companies must prepare annual financial statements and the management board (Commercial Code: § 334.  Approval of annual report and submission to commercial register) needs to submit them to the Commercial Register. While hiring an accountant is a common practice, it is not mandatory if the owner/manager feels confident in managing the accounting tasks.

The Simplicity of the Process

Filing your financial statements may seem intimidating initially, but it becomes straightforward after the first time. The Estonian government has created a user-friendly online environment for generating and submitting these reports, which is available in both Estonian and English. This bilingual interface simplifies the process for non-Estonian speakers.

Benefits of Filing Your Own Financial Statements

The primary advantage of filing your own financial statements is cost savings. Professional accounting services can be expensive, especially for small businesses. By handling this task yourself, you save money that can be reinvested into the growth of your business. However, if you need assistance, one viable option is to complete the reports yourself and then have a professional accountant review them before submission.

Basic Accounting Knowledge Required

To successfully file your annual financial statements, you need a basic understanding of double-entry bookkeeping, where each financial transaction to be recorded in at least two accounts, ensuring that the accounting equation (Assets = Liabilities + Equity) remains balanced.

It is important to note that the helpline of Commercial Register can assist or advise on technical issues but not with the accounting process itself. Therefore, having a fundamental grasp of accounting principles is essential.

Basic Steps to Filing Your Annual Financial Statements

The process of filing annual financial statements can be broken down into three main parts:

1. Profit and Loss Statement and Balance Sheet:
   • Profit and Loss Statement: Summarize your company’s revenues, costs, and expenses during the financial year.
   • Balance Sheet: Outline your company’s assets, liabilities, and equity as of the end of the financial period.
2. Notes:
   • Provide detailed explanations of the numbers in your financial statements. These notes help clarify accounting policies and provide additional context.
3. Profit Distribution or Loss Coverage Proposal:
   • Indicate how profits will be distributed or how losses will be covered.

Practical Advice for Filing

1. Start Early: Avoid last-minute submissions. Accountants can become very busy as deadlines approach.
2. Organize Your Data: Download all financial data into a spreadsheet for the relevant period and ensure cash totals are accurate as of the end date, and all transactions are recorded.
3. Reconcile Transactions: Cross-reference your invoices and receipts with bank statements to ensure accuracy.
4. Backup and Documentation: Scan and backup all documents. Proper organization is crucial in case the tax office requests evidence.
5. Address Missing Receipts: Ensure all expenses are documented. Unproven expenses are not deductible and can pose tax risks.
6. Education: Consider enrolling in an online course to learn the basics of accounting and invest into accounting software. This investment can pay off by making the process smoother and less stressful.

Conclusion

Filing your own annual financial statements in Estonia is achievable with a bit of preparation and basic accounting knowledge. While the initial process may seem challenging, the benefits, including significant cost savings, make it worthwhile. Remember to give yourself plenty of time, stay organized, and seek professional review if necessary. For additional guidance, step-by-step tutorials is available here.

By taking these steps, you can confidently manage your company’s financial reporting and ensure compliance with Estonian laws.