Most people who run their own business must keep accounts. Accounts form the basis for most statutory statements which you have to submit to the public authorities. It is therefore important to have good routines right from the start. Up-to-date accounts are also one of your most important management tools.
If you run a small sole proprietorship, you might be exempt from accounting obligations under certain circumstances. This mainly concerns those with an annual income of less than NOK 50,000 who are not registered in the VAT Register. If this applies to you, you must still document all your income and expenses and retain this documentation in accordance with the applicable bookkeeping rules.
You can prepare your accounts yourself, but if you are not familiar with the relevant regulations, you should consider asking an accounting to do it for you. Alternatively, you could ask an accountant to help you during your start-up phase.
Most sole proprietorships are subject to the bookkeeping obligation only. All private limited companies are also subject to the accounting obligation. In simple terms, this means that enterprises that are subject to the accounting obligation must submit annual accounts to the Register of Company Accounts, as well as a tax return and an income statement to the Norwegian Tax Administration.
Do not mix your business finances with your personal finances
Open a separate bank account for your business. Pay all your business expenses from your business account. It is important to maintain a systematic divide between your personal finances and your business finances. It can be both expensive and time-consuming to sort out your finances afterwards once your business finances and your personal finances have become mixed up.
If you decide to keep your own accounts, you must first choose an accounting system. Accounting systems must be systematic and clear. For example, they must be constructed in a way which enables you to extract reports for submission to the public authorities.
For a few hundred kroner a month, you can now get access to good online accounting software with a lot of built-in help and automated guidance. Many systems consist of separate modules, so you only have to pay for what you need. For example, if you don't have any employees, you will not need the payroll functions. Search online and contact a few suppliers before you decide.
If your business have fewer than 600 vouchers a year, you are permitted to use a spreadsheet for your bookkeeping. However, using a manual spreadsheet will mean you will need a greater knowledge of how your bookkeeping must be carried out and it will be easier to make mistakes. The Norwegian Accounting Standards Board has prepared a standard for the use of text processing and accounting programs for bookkeeping purposes (NBS 6). It can be a good idea to familiarise yourself with this standard before you decide to keep your accounts in a spreadsheet.
You must have a system for storing and safeguarding your vouchers. We usually systematise according to different types of vouchers.
Examples of voucher types:
Outgoing invoices (sales documentation)
Cash book balancing (in connection with cash sales)
Incoming invoices (purchase documentation)
There are many ways in which you can systematise vouchers. Needs will vary from business to business. You must consider what would be most appropriate for you. On the vouchers, you must add a reference to the item in the accounts under which the voucher has been posted. Modern technology also offers many different ways of systematising vouchers, and in most cases, you will be able to discard your paper vouchers if you scan them and store them electronically. If you have an accountant, discuss with them how you should systematise your vouchers.
For many small businesses, it is sufficient to systematise vouchers in a folder with partitions in order to separate different types of vouchers. If you store the vouchers electronically, you might consider saving the different types of vouchers in individual files.
Make a habit of sorting vouchers as soon as you receive them. In this way, you will be able to keep them organised, making it easier for you or your accountant to post them. You should also remember that vouchers are valuable documents. An invoice or receipt for a purchase you have made for your business will help you reduce your tax basis.
Once your vouchers have been systematised, the accounting process will be simpler and less time-intensive. This will reduce the price you have to pay if you use an external accountant.
How should the customer pay?
Will you issue an invoice, or should the customer pay when the goods or service is delivered (cash sales)? Different requirements apply concerning documentation depending on whether you make a cash sale or issue an invoice. It is therefore important that you determine what your needs are as soon as possible so that you are ready to issue invoices or receive cash payments when you start trading.
If you make cash sales, you must have a cash register or a software program which fulfils the requirements set out in the bookkeeping rules. As of 1 January 2019, anyone who uses a cash register system must ensure that the system comes with a product declaration. Cash sales are sales where the buyer pays for goods or services on delivery. Cash payments include payments made by cash, credit/cash card and various payment applications (for example Vipps).
The Norwegian Bookkeeping Regulations specifies clear requirements regarding the information that you must include in invoices. Invoices must, among other things, contain an invoice number which is automatically assigned by a program. Alternatively, you must arrange for invoices to be printed by a printing firm. The invoices should contain consecutive invoice numbers in addition to the name, address and organisation number of your business.
What happens when the customer doesn't pay?
The sooner you send out a reminder, the better your chances of receiving the money. It is important that you follow the formal rules linked to reminders and debt collection in order for your claim to be valid. For example, if you want to charge a reminder fee, you cannot do so until at least 14 days after the due date.
If you are registered for VAT, you must submit tax returns for VAT to the relevant authority every other month (per period).
When you have been VAT-registered for one year, you can apply to submit returns annually if your turnover is less than NOK 1 million. The due date for the application for annual VAT returns is 1 February.
Withdrawals to the holder/owner
For holders/owners, there are various ways of withdrawing funds from a business, depending on the organisation form.
In a sole proprietorships, you can decide how much or little you want to withdraw for your own use. You will be taxed on the profit that the business generates anyway.
In the case of limited companies, as owner you will be employed by the business in the same way as other employees. The company will have the employer responsibility for you. You will receive your salary at the same time as you accrue pension credits along with sick pay and unemployment benefit rights (welfare rights).
As owner, you can opt not to be an employee of the business. Payments from limited companies to owners can also take place in the form of dividends. However, you will not accrue welfare rights on the dividends that are paid.
For many founders, the big change in accounting routines comes on the day they employ someone. You must comply with many different regulations in connection with appointments and salary payments. At this point, many people decide to outsource their accounts to an accountant or let the accountant do the payroll runs.
If you make substantial investments in your business, you may need to depreciate these investments over time. You need to consider whether the investment should be depreciated or if the investment can be recorded as an expense immediately. For tax purposes, there are clear rules regarding when an investment must be depreciated: when it is intended to be used for more than three years and has a cost price exceeding NOK 15,000 including VAT.
When you depreciate an asset, it means in practice that you recognise the fall in value of the asset as a deduction as it is used and becomes worn. You are, according to the Norwegian Accounting Act, required to follow a reasonable depreciation schedule.
At the end of your financial year, you must close your accounts. Before you close them, you must ensure that you have included all expenses and income which should be included in the period. This is called 'accrual'. If you trade commodities, you must carry out a stock count to ensure that the cost of goods is correct for the period.
You must document all balance sheet items of importance. In other words, you must show what lies behind each individual balance in your balance sheet. For example, the balance in your accounts must correspond with the account statement from your bank.
All taxable businesses must submit a tax return. Sole proprietorships and partners in shared liability partnerships must submit form RF-1030 'Tax return for self-employed persons etc.'. Private limited companies, cooperatives and other non-personal taxpayers must submit form RF-1028 'Tax return for corporations' (available in Norwegian only) .
In addition to submitting a tax return to the Norwegian Tax Administration, everyone who is required to prepare annual accounts must also submit their accounts to the Register of Company Accounts. The final deadline for submission is 31 July for businesses whose financial year ends on 31 December.
Do I need to have an auditor?
Whether or not you need an auditor will depend, among other things, on your form of incorporation and the size of the turnover. Sole proprietorships are normally only subject to the bookkeeping obligation and do not need to have an auditor. Private limited liability companies can choose not to have an auditor when the turnover is less than NOK 6 million. For other companies with an accounting obligation, it is generally mandatory to have an auditor when the turnover exceeds NOK 5 million.
Want to find out more?
The Norwegian Tax Administration arranges courses specifically for new business start-ups. These courses are held nationwide and are free of charge. On these courses, you can learn more about: Accounts, advance tax, tax returns, deduction entitlements, VAT, tax returns for VAT and electronic submission.