What is procedural documentation?
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Companies and self-employed persons are obliged to create procedural documentation. However, it is often unclear,
- what exactly procedural documentation is,
- which components it contains,
- how it is created
- and what legal and operational purpose it fulfills.
The legal basis in particular often poses challenges.
What is procedural documentation?
Procedural documentation ensures that the digital management of your documents meets the legal requirements for proper business management. For auditors, it serves as a comprehensive manual for your company that describes all tax-relevant processes, data and filing systems in detail.
The main aim is to ensure that an expert third party can quickly understand and check the internal procedures and processes. In addition, well-structured procedural documentation offers every company advantages that go beyond the legal requirements.
Is procedural documentation mandatory?
Explanation of the GoBD process documentation
Who has to create procedural documentation at all? And is this required by law?
The clear answer: Yes, every person required to keep accounts and records is legally obliged to do so in accordance with the GoBD. This applies to all entrepreneurs and freelancers in Germany. While the design of the documentation can be handled flexibly, it must still be structured in such a way that a tax auditor can understand it within a reasonable period of time.
What does GoBD or “GoBD compliant” mean?
GoBD stands for “Principles for the proper keeping and storage of books, records and documents in electronic form and for data access”. These principles, which were laid down by the Federal Ministry of Finance, define the requirements for IT-supported accounting in companies. The GoBD came into force in 2015.
Being GoBD-compliant therefore means that the bookkeeping and storage of tax-relevant documents meets the requirements of the GoBD.
What role does audit-proof archiving play?
Audit-proof archivingAs digitization progresses, business documents are increasingly being archived digitally instead of physically. A central requirement for digital archiving is the protection of
- from unauthorized access,
- Change
- and deletion of the documents.
If these requirements are not met, the essential guidelines of the GoBD cannot be complied with.
A document management system that enables audit-proof archiving therefore offers support in achieving GoBD compliance. “Audit-proof” means that the archived documents are stored unalterably for a specified period of time. Audit-proof archiving therefore creates the necessary conditions for legally compliant procedural documentation in the company.
What are the penalties?
Without procedural documentation, there is a risk that your bookkeeping will be classified as inadequate. Even if procedural documentation is available but has formal and factual deficiencies, this can lead to problems during a tax audit. In the worst case, there is a risk of a tax assessment. It is therefore highly recommended to create proper and thorough procedural documentation. This also offers advantages for companies.
Advantages of procedural documentation at a glance
The advantages for companies are manifold and affect various areas of business operations. Process documentation is therefore not only useful from a legal perspective, but also contributes significantly to the stability and further development of a company.
Legal security
Proper procedural documentation ensures that a company meets the legal requirements, especially with regard to the GoBD.
Process optimization
Inefficient processes can be identified and optimized through the detailed documentation of workflows. This leads to increased efficiency and productivity in the company.
Transparency and traceability
All relevant processes and their interrelationships are recorded clearly and comprehensibly. This facilitates the understanding and traceability of workflows for all employees.
Knowledge retention
Company knowledge is systematically recorded and is retained even in the event of personnel changes. New employees can familiarize themselves more quickly as they have access to comprehensive documentation.
Audit security
All necessary documents are available quickly and in full in the event of tax audits by the tax authorities or internal audits. This reduces the risk of complaints and the resulting penalties or tax assessments.
Quality assurance
The standardized documentation of processes ensures compliance with quality standards. Deviations can be identified and rectified more quickly.
Risk minimization
Clearly defined and documented processes help to identify and minimize risks. Potential sources of error are recognized and can be addressed preventively.
Efficient communication
Comprehensive procedural documentation facilitates internal communication, as all employees have access to the same level of information. This promotes a uniform way of working and reduces misunderstandings.
How does a document management system (DMS) support procedural documentation?
A digital document management system with the option of audit-proof archiving sets the course for legally compliant procedural documentation. Overall, a DMS supports the creation and maintenance process by ensuring order, security and efficiency.
The most important DMS functions at a glance
All documents are stored and managed centrally, which makes access and administration much easier. This ensures that important documents are not lost and are always available.
A DMS offers the option of archiving documents in an audit-proof manner. This means that documents can no longer be changed once they have been stored. For many types of documents (contracts, invoices, etc.), there is a need for audit-proof archiving in order to comply with legal requirements.
A DMS logs all changes and access to documents. This means that it is always possible to trace who made which changes and when, which increases transparency.
A DMS makes it possible to set up user rights and roles so that only authorized persons have access to certain documents. Sensitive information is thus protected from unauthorized access.
With powerful search functions, documents can be found quickly and easily. This is particularly important when documents need to be available quickly for inspections or internal audits.
A DMS helps with the standardization and documentation of processes, which increases the consistency and quality of work.
Through the long-term storage and management of documents, a DMS ensures that all legal retention periods are adhered to.
Significant cost savings can be achieved by reducing paper consumption and storage costs as well as increasing efficiency in administration.
Process documentation
Consulting
Companies should obtain qualified initial advice from a tax advisor or alternatively from the relevant internal contacts (authorized signatory, accounting, legal department, etc.), as they have the relevant legal expertise.
As a supplement, the DMS provider can offer assistance and explain how the software can support implementation in the company if they have the relevant know-how. This knowledge makes it much easier to create legally compliant procedural documentation.
Process documentation
Sample
There is no universally valid template for the preparation. The requirements vary depending on the company, industry and legal framework. However, various freely accessible checklists containing the most important building blocks can be helpful in the preparation process – these are generally similar in the following points:
- Field of application
- Technical system solution and migration
- Logical solution
- Processes
- IT infrastructure
- Data security and availability
- Other relevant documentation and content
- Retention of procedural documentation
- Internal control system (ICS)
One particularly important aspect is the internal control system (ICS), which is expressly required by the GoBD. Among other things, it includes the provision of process documentation as part of the data security concept and plays a key role in procedural documentation. Whether the ICS tasks are carried out manually or with the help of a software solution is up to the company.
Conclusion
The procedural documentation is mandatory for companies and self-employed persons, as they must comply with the legal requirements of the GoBD. At the same time, however, they also benefit from the operational advantages that arise from the documentation.
Overall, procedural documentation contributes to legal security, process optimization, transparency, audit security and risk minimization. A document management system (DMS) supports audit-proof archiving and facilitates the creation and maintenance of procedural documentation through central storage, traceability and efficient access controls.
Qualified advice, ideally from a tax consultant or internal experts, supplemented by the technical support of a DMS, makes the legally compliant creation and use of procedural documentation considerably easier and is therefore strongly recommended.
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