A backlog in bookkeeping is more common than many people think, and it can be resolved. The key is to start quickly and proceed in the right order. Here’s how to get from a first overview to the handover to the tax advisor, without mountains of paper and without panic.
How backlogs build up
Hardly any business owner intentionally neglects their bookkeeping. Usually, one thing leads to another: a busy year with a heavy workload, an illness, an employee who handled the bookkeeping and left, or a tax advisor who ended the engagement. One month turns into three, and three into a year.
The longer the backlog lasts, the harder it is to get started. Receipts are scattered, bank statements are missing, and the tax office is sending reminders. The good news: catching up always follows the same steps. Once you know them, the mountain of work is far less daunting.
What happens if you do nothing
The tax office won’t wait indefinitely. If you fail to file your tax returns, you’ll first receive reminders; then a late-filing penalty and a coercive fine may follow. If returns are still not filed, the tax office will estimate the taxable income. Estimates rarely work in your favor, and the estimated tax is still due.
You can file an objection to an estimated tax assessment within one month. The most effective course of action is to submit the missing tax return; the assessment will then generally be amended based on the actual figures. Once the deadline has passed, it becomes significantly more difficult.
A backlog also has consequences beyond the tax office. Banks require current reports for loans, corporations must publish their annual financial statements or risk a fine, and without current figures, you lose track of your own liquidity and results.
If tax returns have not been filed for a long time or have understated income, criminal law issues may also arise. This is not a task for a bookkeeping firm. In this case, speak confidentially with a tax advisor or an attorney specializing in tax law before submitting any documents to the tax office.
Step 1: Taking stock
The first step is to get an honest overview. This usually takes just one or two meetings and clarifies what really needs to be done.
- Open periods: Which months and years have not been posted?
- Mail from the tax office: Collect estimated assessments, reminders, deadline notices, and enforcement notices. We pass them on to the tax advisor without reviewing them; they evaluate them and determine which financial statements and tax returns are missing
- Tax account: the tax advisor reviews the account statement from the tax office with open and paid amounts
- Accounts and payment methods: Which bank accounts, credit cards, cash registers, and payment services were used during the period?
- Receipts: Where are they kept? Digitally, in your inbox, in a folder, or in a shoebox?
- Employees: Were wages processed and notifications submitted?
This review shows the scope. Only then can we reliably say how long the catch-up will take and what it will cost.
Step 2: Obtain bank statements and receipts
Bank statements are the basis of any catch-up. Every bank transaction must be posted, and ideally each transaction has a receipt. Many banks make transaction history available electronically only for a limited period; older statements can usually be reordered, sometimes for a fee. Ask for them early, as this can take time.
Missing invoices are often easier to obtain than you might think. Many suppliers, such as telecommunications providers, energy suppliers, mail-order companies, or fuel card providers, have customer portals where old invoices are stored. Payment services and marketplaces offer reports for past periods that you can download.
If a receipt is permanently missing, a self-generated receipt can document the entry: with the date, amount, payee, reason for the payment, and your signature. However, a self-generated receipt is not enough for input VAT, which may only be deducted with a proper invoice. For larger amounts, it is therefore worth requesting a copy of the invoice from the supplier.
Cash books, daily closings, and payroll records are also required if there was a cash register or employees during the period. If they are missing, we’ll work with you and your tax advisor to determine how to document the gap.
Step 3: The right order
As a rule, we work chronologically, starting with the oldest open year. The reason is simple: Each year begins with the closing balances from the previous year. If you start with the most recent year, you’ll have to adjust everything again later.
However, there are exceptions. If there are estimated assessments for a year with an open objection period, or if the tax office has set a deadline, that year comes first. We decide the order together with your tax advisor.
Equally important: We start with the current month immediately. While we’re catching up on past years, we’re already posting entries for the current months as usual. This prevents the backlog from growing further and ensures the catch-up process has a definite end.
Step 4: Post and reconcile
Now it’s time to post, month by month and account by account. At the end of each month, the balance of every bank account must match the bank statement down to the cent. Cash, payment services, and credit cards are reconciled in the same way. Open invoices to customers and from suppliers are matched, and private payments are separated from business payments. Closing and opening entries are not part of the catch-up; the tax advisor handles them with the annual financial statements.
Anything missing during posting goes on a list. Instead of writing to you receipt by receipt, we collect the questions and send them in one batch, sorted by month. You answer them in one go or upload the missing receipts to the client portal.
If you had employees, payroll is also part of the catch-up. Missing payroll runs and notifications are completed retroactively so that payroll accounts, contributions, and wage tax are correct.
Step 5: Handover to the tax advisor
Once a year’s books have been posted and reconciled, we hand them over to the tax advisor. They prepare the annual financial statements and tax returns and determine which filings still need to be submitted or corrected. Because the figures have been reconciled, they can work without lengthy follow-up questions.
Then we move on to the next year until the backlog is completely cleared. If you don’t have a tax advisor yet or your previous one has ended the engagement, we’ll put you in touch with one, free and with no obligation: Find a tax advisor.
How long does it take, and how much does it cost?
The duration depends less on the number of years than on the condition of the receipts. A year with complete bank statements and digital invoices is posted quickly. A year in which receipts have to be tracked down and statements reordered takes longer. After the review, our backlog check, we give you a timeline and a fixed price per month we post. Your cooperation also matters: the faster you answer questions, the faster a year is done.
You can find more about how we work on the Catch-up bookkeeping page. There, you can also request a review directly.
How to keep things in order afterward
After the cleanup, things shouldn’t get that far again. You can achieve this with a set monthly routine that takes very little time:
- Digital receipts right away: a photo from your phone or forwarding by email, straight to the client portal
- Bank statements every month: download them as a file from online banking and upload them to the client portal
- Fixed deadline: receipts by the 5th of the following month so the month is posted on time
- List of missing receipts: work through it once a month instead of letting it pile up
- Monthly report: read it briefly and ask about anything unusual
With this routine, ongoing bookkeeping takes just a few minutes a month, and the next annual financial statements hold no surprises.
This article is for general informational purposes only and does not constitute tax or legal advice in specific cases. A tax advisor is responsible for tax-related questions.