As part of the preparation of annual financial statements, the question usually arises as to whether and, if so, to what extent provisions are to be made for outstanding invoices according to § 249 I HGB. It is regularly discussed whether account successors are to be booked. Just the right accrual very often leads to discussions. That is why a three-stage approach to solving these problems has emerged. Therefore, the monthly recurring costs must first be checked. Then queries are carried out with the invoice releasers and finally the non-periodic expenses are to be analyzed. We discuss this three-step in this article.

The principle of proper accounting requires that all expenses and income be included in the financial year when they were incurred. This principle is also called the principle of accruals and is laid down by law in § 252 I No. 5 HGB. Accordingly, provisions or liabilities are mandatory for deliveries and benefits received in the year for which no receipts are available by the balance sheet compilation date.

The provisions for outstanding invoices are systematically assigned to the provisions for uncertain liabilities according to § 249 I HGB. Therefore, they are included in the balance sheet under other provisions. On the other hand, if the occurrence and amount of the obligation are certain, a statement of liabilities from deliveries and services would in principle have to be made. Nevertheless, in practice, a provision for outstanding invoices is made.

If you want to form a secure provision for outstanding invoices before the beginning of the annual audit, you can proceed in three stages.

In every company there are costs that recur periodically. It must be ensured that all instalments of the last financial year are fully recorded. In the absence of any expenses, these are to be recorded by forming the provision for outstanding invoices. This includes, for example, types of costs such as rent, leases, leasing expenses, licence expenses, electricity costs, heating costs and insurance.

As part of the second step, invoice releasers should be asked to report the incoming invoices that are still missing in their area of responsibility to the accounts. However, two specific cases must be considered.

On the one hand, caution is advised for employee investments. It should be noted that provisions for expenses which are to be capitalized in future marketing years as acquisition costs or production costs of an economic good may not be made in accordance with § 5 IVb EStG. In addition, there is no possibility under commercial law to make a provision for future costs or production costs of fixed assets if the obligations are offset by an equivalent asset. Therefore, no provision for outstanding invoices may be made for these assets.

In addition, others, especially larger companies, record their receipt of goods using a clearing account. This is called the goods receipt and invoice receipt account. The facts are often booked separately, since goods receipt and invoice receipt usually fall apart in time. Nevertheless, this account balances over time. In addition, the settlement account is regularly reconciled. This occurs, for example, if the receipt of goods is already booked, but the invoice is not yet available. Consequently, the account has a balance at the balance sheet date. Then the balance is standardized among the liabilities from delivery and performance. Therefore, these outstanding invoices are already taken into account. Therefore, no provision for outstanding invoices may be booked for this purchase of materials.

Even if the first steps are carried out very scrupulously, it is impossible to identify all outstanding invoices by the balance sheet preparation date. Therefore, an experience-based estimate should also be made. For this purpose, non-periodic costs should be evaluated. Frequently, non-periodic accounts are created per cost type, which allows a cost-based (debit) booking in the provisioning. In order to compensate for special effects or fluctuations, a smoothing over the last five years is recommended. Thus, the largest account successors can be quickly recognized. Due to this, the bill releasers can then be addressed again.

You should start maintaining accounts well before the annual financial statements, preparing the cover letters to the invoice releasers and analysing non-periodic expenses. This allows you to reduce the workload in the main exam. Furthermore, outstanding invoices can be recognized more easily. This also makes it much easier to set aside provisions for outstanding invoices.