When should you actually register your company?

Do I really need a tax advisor?

Accountants are expensive and their job is difficult to understand. This is why many self-employed people are annoyed by the invoice that ends up in the mailbox after a visit to a tax advisor. In fact, you could do all of the administration yourself, including bookkeeping and tax returns, as well as calculating profits and annual financial statements. You are not obliged to use a tax advisor.

If I can do it myself, why should I outsource the work?

Whether you actually need a tax advisor depends on several factors. You yourself are an essential factor. What are your requirements for the quality of the accounting figures? Do you have enough knowledge to do the bookkeeping yourself? And do you actually have the time? In order to find an answer to the question of whether you need a tax advisor, we present the advantages and disadvantages, show possible alternatives and give tips to keep the bill as low as possible.

The advantages of working with a tax advisor

One of the greatest advantages of working with a tax advisor is that You spend your precious time doing the things you are really good at. And that is certainly not tax advice or accounting, but just managing the company and managing your own business. Apart from that, tax-relevant questions constantly arise in day-to-day business that you cannot answer yourself.

Advantage 1: optimal tax structuring

When it comes to optimal tax planning, no one can help you better than an experienced tax advisor. He will advise you and show you potential savings in terms of tax. The support of a tax advisor is particularly recommended in the pre-foundation and start-up phase. Then it becomes possible to develop the business in such a way that tax advantages are also taken into account. Optimal tax planning requires ideal knowledge of tax law. Anyone who wants to survive in the market in the long term cannot avoid a good tax advisor.

Advantage 2: Set up an early warning system - controlling with the support of the tax advisor

Regular bookkeeping is not enough to control a company. Rather, you have to work out and set up your individual controlling based on the business evaluations that result from the bookkeeping. Which metrics are important to you depends on the business. Especially at the beginning, when money is tight, tight liquidity planning for the near future - for example, the next week or the next month - is of vital importance. Let yourself be supported by a numerical expert such as a tax advisor, learn early on how to run your business effectively and, above all, how to react promptly if there is a need for action.

Advantage 3: reduce errors

A tax advisor is an expert and therefore very well versed in tax law. If you yourself do complex tasks with tax or social security consequences, such as payroll accounting, you are entering a terrain in which there is a great potential for error. If you hand over the tasks to a tax advisor, you build up effective protection against unexpected additional payments. Tax consultants carry out the assigned tasks in accordance with applicable law. However, should a mistake occur that is detrimental to you - for example, a hefty back payment or penalty payment - the tax advisor's financial loss insurance will cover the financial consequences. If the tax advisor makes a mistake because you have not provided him with all the necessary information or if you cause the accountant to make a booking that is critical, the tax advisor is on hand Not in responsibility. Such mistakes are on your cap.

The disadvantages of working with a tax advisor

Where there is light, there is also shadow and there are indeed some disadvantages that you have to weigh up in this context. However, the disadvantages are more or less a matter of opinion or it is in the eye of the beholder whether the disadvantages are really serious.

Disadvantage 1: The tax advisor knows more about your company than you do

Since the tax advisor has to work deeply into the matter in order to penetrate your business and to develop the resulting tax-relevant decisions and accounting processes, he knows very well about the business. This is not a bad thing in and of itself, but if you feel like you are losing control, you need to take action. A recommendation is therefore to meet regularly with the tax advisor and to discuss the most important aspects.

Since a tax advisor sometimes knows who a priest after confession, it is popularly said that trust in him is indispensable. If there is no basis of trust, fruitful cooperation is impossible. Because as a confidante, a tax consultant can use his expertise to get the best out of the business when it comes to tax issues.

Disadvantage 2: The costs are too high

Yes, a tax advisor costs money. But how much does it cost if you make a mistake? And how expensive would it be if you did all the work yourself? In order to determine whether the costs for a tax advisor are actually too high in your case, at least when it comes to a sub-area such as accounting, prepare the following invoice:

  • Set your imputed entrepreneur's wage. This is not the cost price, but the price you would calculate if you were to settle your time with a customer. In our example we bet 70.00 euros.

  • Now estimate how much time it would take you to do the bookkeeping, the closing, or the payroll. We estimate 4 hours for monthly bookkeeping.

  • Now multiply your hourly rate by the number of hours.

The following calculation results from the above points:

70 euros x 4 = 280 euros

Now the all-important question arises: Does your tax advisor bill more than € 280 for monthly bookkeeping? If so, it could be financially better at the moment if you do the bookkeeping yourself. In the long term, however, and taking into account the possibility that you can cause tax-relevant errors with expensive consequences when collecting the data, the cost aspect should be viewed more pragmatically.

Interim conclusion: there are more advantages to hiring a tax advisor. This also applies to the start-up phase.

What other options besides a tax advisor are there?

There are several alternatives that you can consider. One option is to get an accounting assistant for the bookkeeping and to have the bookkeeping checked by the tax office, for example every quarter or every six months.

You can also use accounting software that is made for entrepreneurs, not tax professionals. Read the latest reviews from relevant accounting software providers and decide for yourself whether you can handle the products and feel safe.

A third variant is that you can do the bookkeeping from your office directly on the tax consultant's server and have your work checked. A tax office employee will train you step by step and point out the corresponding individual difficulties in your accounting. In this way you will build up your own knowledge in your own company. You can also have this work done by one of your employees who has an affinity for accounting or maybe even a little experience.

How can tax consultant costs be saved?

As mentioned at the beginning, there is no legal obligation to entrust tax tasks to a specialist advisor. If you want to save costs you should think about a division of the tasks. Some tasks have more potential for errors, others less. So you can do things yourself that can do little harm if they go wrong. However, other tasks with far-reaching consequences are better off in professional hands. A division of the tasks between the tax office and an accountant or a freelance bookkeeping assistant also reduces costs.

Relatively simple tasks that are suitable for doing on your own

Depending on your legal form, the size of the company and the turnover, there are tasks that you could do yourself. These tasks are relatively simple:

  • Income tax return with only one type of income without any special features

  • Advance VAT return

  • Bookkeeping of current business transactions

Error-prone and quite complex, however, are the following tasks, which, by the way, are often not offered by standard accounting software:

  • Income tax return with several types of income and / or special features (divorce, sale of a property, etc.)

  • Posting interest and dividends

  • Business transactions with customers in third countries (not EU)

  • Balance sheet preparation

  • Payroll accounting

Of course, you can make the wages yourself if the same amount is billed every month. But there are always special features that require specialist knowledge. In any case, drawing up a balance sheet is not that easy and harbors a number of sources of error. If you are not required to draw up a balance sheet, it is sufficient to submit an income statement to the tax office. Think about whether you can meet the requirements, how much time you need for them and whether the effort is actually worthwhile. However, if you are not sure when reading this paragraph when a balance sheet and when a surplus income statement is to be drawn up, you are definitely in better hands with a tax advisor.

Further savings potential: work with the tax advisor

The less the tax office has to do for you, the lower the bill will be. Talk to the tax office and ask what you can do yourself to keep the work in the office as low as possible. For example, it is less time-consuming for the tax advisor to enter your accounting if you send all the documents in full in a single email instead of sending many emails that have to be opened and archived individually each time. The more precisely you prepare the documents for the tax advisor, the less time they will need to process them.

Last but not least, you can save costs by obtaining quotes from several tax advisors in advance and comparing them. If you hire a relatively inexpensive consultant right from the start, you will save a lot of money in the long run. But don't lose sight of the fact that quality and reliability have top priority. In practice, this means that you should seek the opinions of other clients for your preferred tax office regardless of the price structure.

Conclusion: From a certain point in time, tax consultants are the right decision from an economic point of view. In view of the consequences that errors can cause through self-made bookkeeping or annual financial statements, it is advisable to involve a tax advisor in good time.