What is an Annual Financial Statement and Why Should You Leave It to a Professional?

An annual financial statement is far more than just a tick on your year-end to-do list. For many entrepreneurs, it’s a necessity – for smart decision-makers, it’s a tool. In this article, you’ll learn why it’s worth not DIY-ing your financial statements, what risks come with errors, and where the real added value of professional support lies. No technical jargon, just clear answers – compact, honest, and to the point.

What does an annual financial statement actually give me?

The obligation to prepare annual financial statements may seem like a bureaucratic hurdle at first glance. But if you look closer, you’ll quickly realize: it’s far more than just a legal requirement. The annual financial statement creates order, gives you an overview, and brings the necessary clarity to your company figures. Especially in times of economic uncertainty, it’s crucial to know where you really stand financially. Not just for the tax office or investors, but above all for yourself. Whether you’re making new investments, taking out a loan, or simply want to plan better – without precise figures, it gets difficult.

A properly prepared annual financial statement is therefore also an important management tool. It shows you in black and white what’s working well – and where you might need to make adjustments. Stakeholders like banks or business partners place enormous value on current and comprehensible annual figures. And anyone hoping for new cooperations or funding can score points with a transparent financial statement. No wonder the question “what is an annual financial statement?” is asked more often than you’d think – because it’s the pivotal point for many entrepreneurial decisions. And anyone who works sloppily here wastes great potential.

Balance Sheet, P&L, Notes – Sounds Complicated? It Is

If you’re wondering what exactly goes into an annual financial statement, you quickly reach the moment where many entrepreneurs mentally check out. Balance sheet, profit and loss statement, notes, management report… Sounds dry – but it’s essential. Especially if you’re dealing with it for the first time. Because these components aren’t just blocks of numbers, but provide structured information about your company’s asset, financial, and earnings position.

The balance sheet shows at a glance what your company owns and how it’s financed. The profit and loss statement is about revenues and expenses – i.e., what really remains at the bottom line. The notes explain the figures, and when it comes to the management report, it gets particularly interesting: here management must assess how the company has developed, what opportunities and risks exist, and how it’s strategically positioned. This isn’t only required for corporations, but also an important framework for

you as an entrepreneur. Without specialized knowledge or appropriate experience, however, it’s hardly possible to fulfill these requirements error-free – and that’s exactly where external help becomes real relief.

Errors in the Financial Statement? That Can Get Really Expensive

It sounds banal, but especially when preparing annual financial statements, the devil is in the details. A wrong valuation, a report submitted too late, or an overlooked paragraph can quickly have unpleasant consequences. And no – these can’t simply be cleared up with a nice call to the tax office. Administrative fines of €2,500 to €25,000 are not uncommon when deadlines are missed or information is missing. Anyone who completely ignores the annual financial statement risks fines of up to €50,000 according to § 334 HGB – that’s not only expensive but also unnecessary reputational damage.

It gets even more serious when criminal consequences threaten – for example, through violations of § 283b StGB. Here it’s about deliberate false statements or violations of the obligation to maintain proper bookkeeping. Even if this sounds like an “extreme case” to many – in practice, it’s often small negligences that trigger such proceedings. Therefore, the rule applies: a financial statement is nothing you just do on the side. Without clear structure, deadline control, and expertise, things quickly become confusing – and expensive.

Why 80% of All Companies Outsource Annual Financial Statements – And Rightly So

According to current surveys, more than 80% of companies obligated to prepare balance sheets in Germany rely on external support for annual financial statements. The question therefore doesn’t arise without reason: if the majority of entrepreneurs commission professionals with this – why should you try it alone? In Germany, there are around 89,000 licensed tax advisors, distributed across 53,000 firms. Together they generate around €19 billion in annual revenue – a clear signal that professional support isn’t luxury, but standard.

So if you’re wondering what an annual financial statement costs at a tax advisor, you should also factor in what it could cost you to do it wrong. Besides legal certainty, professional approach also gives you access to modern tools, planning security, and often additional business consulting. And the best part: you don’t have to struggle with GoB, HGB, or e-balance in detail. That’s exactly why so many entrepreneurs decide on outsourcing – because it saves them not only work but also nerves.

Do It Yourself or Delegate? The Three Decisive Questions

Before you bury yourself in hour-long Excel tables and legal texts, ask yourself three simple questions: Do I have the necessary expertise? Do I have the time for it? And am I ready to bear the risk of an error? If you hesitate at any of these questions, that’s already a clear sign. Because especially annual financial statements are no field for half-baked solutions. The regulations around e-balance, accounting options, or tax valuation approaches are not only complex but also dynamic – they change regularly.

Many entrepreneurs underestimate not only the technical effort but also the time factor. A professional annual financial statement takes several weeks even at the firm – how is someone supposed to manage that independently alongside running business? Sure – there are online tools, template forms, and PDFs. But they don’t replace the experience, intuition, and legal security that a tax advisor offers you. And yes – e-balance sounds modern, but without knowledge of commercial and tax law, it’s not intuitive to master.

GoB, HGB, IFRS – Who’s Supposed to Keep Track of All That?

Ever tried working through the various accounting standards? If you’ve had to fight through abbreviations like GoB (Principles of Proper Bookkeeping), HGB (Commercial Code), and IFRS (International Financial Reporting Standards), you know how quickly you can lose overview. Especially for companies with international connections, it gets really complex.

Different valuation methods, divergent structuring requirements, accounting policy leeway – this isn’t terrain for trial and error. If you’re active in a GmbH, AG, or even as a growing sole proprietor, you can’t avoid these topics. The e-balance must be transmitted according to clear technical specifications, including XBRL taxonomy, and anyone who sets a wrong checkmark there will get mail from the tax office in case of doubt. Tax advisors and auditors specialize in exactly such details. They know where flexibility is allowed – and where not. Especially if you rely on security and professionalism, you should leave the technical jargon to the professionals.

Professional Financial Statement = Less Stress + More Planning Security

If you’ve ever tried to do a complex tax return yourself, you can perhaps roughly imagine how much more demanding a complete annual financial statement is. It’s not just about numbers, but also about deadlines, legal details, disclosure obligations, and communication with the tax office. And that runs today – surprise – almost completely digitally. Without access to current software and tools that enable e-balance-compliant evaluations, for example, the whole thing is hardly manageable.

A professional tax advisor offers you not only accuracy but also reliable processes and deadline management. You know early when which documents are needed, get realistic timelines, and can go through the closing phase structurally – without constantly having to “put out fires.” Often this also includes hints for optimizing tax payments, tips for liquidity management, and strategic assessments. In short: you get more than just numbers – you get peace, clarity, and focus.

What a Tax Advisor Can Do Better Than Google & Excel?

Search engines are practical, no question. But they don’t replace experience. And certainly not solid training in tax law. If you think you could just quickly google “what is an annual financial statement” and get started, you’ll realize pretty quickly: that’s not only tedious but risky. Excel tables and online guides don’t help you make legally secure decisions or reliably meet deadlines.

A tax advisor, however, knows not only the law but also the practice. He knows what valuation scope exists, which deadline extensions can be applied for, and how tax structuring possibilities can be concretely used. So you don’t just get a technically correct e-balance, but a partner who has your back – also with follow-up questions from the tax office or with business decisions. If you want to play it safe, there’s no way around professional support.

You want clarity, security, and a reliable partner by your side? Then don’t let your annual financial statement become a burden – but an opportunity. ETX Legal guides you professionally, efficiently, and legally securely through every closing phase. Write to us directly – we’ll take care of the rest.

Maciej Szewczyk

Maciej Szewczyk is an IT consultant, innovation manager and sworn translator for German, specialising in Polish and German tax law.