German debtor/creditor accounting and automatic accounts

ERPNext Accounting
1

Problem

In Germany we cannot legally do our accounting in ERPNext. For this reason we regularly export data from ERPNext to our tax consultant. After some discussion with our tax cosultant, we noted some things that are different in the german accounting software and habit:

  1. Many accounts have an “automatic” feature. For example, Booking revenue against “Revenue 19%” means that tax will get deducted and booked to the correct tax account automatically, in the background. The tax consultant expexts to see the automatic accounts (because it makes his work easier) and doesn’t want to see our separate GL entries against tax accounts.

  2. Customers and suppliers have a personal account, numbered by a naming series. These accounts get created automatically but are not part of either Balance Sheet or Profit and Loss Statement. For example, customers get numbered 10000, 10001, 10002, … , and suppliers get numbered 70001, 70002, 70003, … .

  3. There are subsidiary ledgers for payables and receivables. The balance of the subsidiary ledgers appears in the balance sheet as collective “paybale” and “receivable” accounts. Debtors in credit and creditors in debit will appear in a collective account on the opposite side of the balance sheet.

Solution

I think this could be achieved like this:

  • Add a data field “Account Number” to Customer and Supplier.

  • Specify the naming series for customers and suppliers in Accounts Settings.

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  • Generate the “Account Number” number automatically for each new Customer / Supplier but allow the Accounts Manager to edit it.

  • Add a link field “Tax Account” to Account that points to another Account of type “Tax”. The other account must always get booked at the same time as the original account, with the specfied rate.

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  • Create Finance Books for debtors and creditors.

  • When an Invoice gets submitted, record:

    • Journal Entry in Finance Book: "10000 - Customer XYZ" against "4400 - Revenue 19% VAT"
    • GL Entry: "1200 - Receivable" against "4200 - Revenue"
    • GL Entry: "1200 - Receivable" against "3806 - VAT 19%"

  • Export only the Finance Books to the tax consultant.

Motivation

It will probably take years before ERPNext can be used as a fully compliant german accounting software. Until then we need an interface to the tax consultant. The tax consultant expects different data than what gets produced by ERPNext and results would be hard to compare. With similiar functionality it would be easier to bring the two together and to pick up german companies in their reality.

@nabinhait, @FHammer I would be interested in your thoughts on this.

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Hi, @rmeyer !

Basically, I agree with your comments and considerations.

I can only confirm that there are still significant deltas in ERPNext to meet the requirements of German financial accounting. This also raises the question of whether it makes sense to support a complete accounting in ERPNext or whether a coupled solution with a separate financial accounting system is not even the better permanent solution.

In the process of the interfaces I built to Datev, I went a slightly different way. This is because I can say from the experience of various companies that 2 separate number ranges for ERP and financial accounting can lead to considerable confusion. The debtors and creditors I have created generally have the same number as in Datev. For this I have set the corresponding ERPNext number ranges beforehand. If the possibility of manual assignment in ERPNext is possible, changes, duplications etc. could of course also occur as errors, which cannot be the case with a uniform number.

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On the subject of tax: I think an “automatic” posting of tax is problematic. Rounding differences often occur, especially for documents with multiple items and detailed amounts as well as different tax rates. This can lead to different amounts on the invoice and financial account, which can then lead to severe irritation with customers and suppliers in the case of reminders or payments etc. Therefore, a detailed transfer and posting of the amounts from ERPNext is definitely the better way.

Stay healthy + regards Fred

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