Creating a BWA yourself: which figure goes in which line

Creating a BWA – the German „betriebswirtschaftliche Auswertung", a short-term business analysis – is not accounting wizardry. It is sorting work followed by addition. You need two piles: the invoices you have issued and the expenses you have paid. And you need a fixed order: add up income, separate materials from everything else, sort the remaining costs into six to eight blocks, calculate depreciation pro rata, move one-off items to the bottom. What comes out is called the „preliminary result". The difficult part is not the arithmetic but the allocation: the VAT payment to the tax office, for instance, does not belong in the BWA at all, nor does the repayment of your loan – the interest on it does, but right at the bottom.

This article provides general information and does not replace tax or legal advice.

Contents

1. The framework: a BWA as a calculation chain
2. What a finished BWA looks like: all positions at a glance
3. Step 1: Set the period and the method
4. Step 2: Add up income – and what does not belong there
5. Step 3: Sort expenses into clusters – the allocation table
6. Step 4: Calculate depreciation
7. Step 5: Move one-off items to the bottom
8. Step 6: Add it all up – the complete example
9. Step 7: Percentage columns and prior-year comparison
10. Four checks before you hand the BWA over
11. Why your result will never match the tax assessment
12. Who asks for a BWA – and what the recipients read into it
13. The success overview in Easy Invoice – and what it does not contain
14. Frequently asked questions

The framework: a BWA as a calculation chain

BWA stands for „betriebswirtschaftliche Auswertung", a business analysis. The term does not come from any statute but from the practice of German tax advisors – the most widespread format is DATEV's standard BWA no. 01, which is called „kurzfristige Erfolgsrechnung", short-term income statement. There is no obligation to produce one, no prescribed format and no recipient at the tax office. You are allowed to build it yourself.

And it is always the same chain. Once you understand these nine lines, you have the principle:

   Revenue                          (everything from your actual work, net)
 + Changes in inventory             (finished work not yet invoiced)
 = Total output
 − Cost of materials                (materials and subcontracted services)
 = Gross profit
 − Cost blocks                      (premises, vehicles, staff, advertising,
                                     insurance, depreciation, other)
 = Operating result
 + neutral income − neutral expenses  (one-off items, interest)
 = Preliminary result

Two dividing lines carry the entire meaning, and they are exactly where people get sloppy when doing it themselves:

• The first dividing line is the cost of materials. Materials and subcontracted services are separated from all other costs because they grow with revenue: twice the order means twice the material, but not twice the rent. That is why gross profit shows what is left of every euro of revenue after materials – and whether that is deteriorating.
• The second dividing line is at the bottom, before the neutral items. Everything one-off and unrelated to the business is kept out of the operating result. Otherwise a month in which you sold your old van looks like a good trading month.

As a continuous example I will use an electrical business without employees, period 1 January to 30 September.

What a finished BWA looks like: all positions at a glance

Before you start calculating, here is the destination – the list of positions that end up on the sheet. The same overview also works the other way round: if somebody hands you a BWA, you can read it from top to bottom with it.

So where is the profit? In the last line. But the word „preliminary" in front of it is meant seriously: this figure is not yet the profit you will be taxed on. Why that is, and how big the difference typically is, is explained further down in the section on the tax assessment.

You do not need every line. If you have no employees, staff costs stay empty; if you sell a pure service, you have no cost of materials. An empty line is not a mistake – a missing one is: if a trading business submits a BWA with no cost of materials at all, every reader notices immediately.

Some BWAs carry an additional line for taxes below the operating result. That is where trade tax appears – which is paid, but is expressly not a deductible business expense (section 4 (5b) of the German Income Tax Act). As a sole trader the first €24,500 of trade income are exempt anyway (section 11 (1) of the German Trade Tax Act).

Step 1: Set the period and the method

Have four things ready before you start: all outgoing invoices for the period, all incoming invoices and till receipts, the bank statements for the business account, and a list of your larger purchases from recent years with price and date. Almost everyone forgets the last list – without it, the depreciation goes missing later on.

The period: from 1 January to the last month that is fully complete. Not the single month, but cumulative – with banks, „current BWA" almost always means this cumulative view. Write the period in large letters at the top of the sheet; a BWA without a date is the most common reason for a query.

The method: you have to choose one of two views and stick to it.

Both are defensible. What does not work is mixing them – income by invoice date and expenses by bank debit. Note your choice on the sheet. If you determine your profit on a cash basis, the payment view is usually the more natural one; how that method of determining profit works is explained in our article on doing your tax return as a self-employed person.

Step 2: Add up income – and what does not belong there

Add up all outgoing invoices for the period, net – that is, excluding VAT. Deduct credit notes and cancellations.

In the example:

Four things regularly end up in this line by mistake:

• VAT. It is a pass-through item, not income. Anyone adding up gross amounts inflates their revenue by 19 per cent. (As a small business under the German VAT exemption you do not have this problem – gross and net are identical, see writing an invoice without VAT.)
• Loans paid out. In the bank account it looks like money, but it is debt, not revenue.
• Private contributions. If you put your own money in, that is not income.
• Sales of business assets. The old van belongs at the bottom under neutral income, not in revenue.

The line changes in inventory above only concerns those who have finished or partly finished work in stock – for service providers and small trade businesses it usually stays empty. Without a stocktake you cannot fill it properly anyway. In the example: €0, so total output is also €116,000.

Step 3: Sort expenses into clusters – the allocation table

This is the part that determines the quality of your BWA. Take your expense receipts and give each of them an allocation. Not „business expense" – but one of these blocks:

And this does not belong in the BWA at all:

The practical trick: write this allocation down as a list once, and note it in the top right corner of every receipt on your first pass. Next month you will only be sorting instead of deciding all over again. If you file your incoming invoices digitally anyway, assign the category as you record them – our article on managing incoming invoices explains how to do that systematically.

In the example this produces:

Step 4: Calculate depreciation

Anything that cost more than €800 net and lasts longer than a year may not be deducted in one go but has to be spread over its useful life. The calculation is simple:

net purchase price ÷ useful life in years        = depreciation per year
depreciation per year ÷ 12 × months in period    = your share for the BWA

You are not free to choose the useful life – the German Federal Ministry of Finance publishes a depreciation table for that. A few values from it:

In the example there are two purchases:

Two special cases that come up often:

• Between €250 and €1,000 net you may alternatively put the items into a pooled asset and release that evenly over five years (section 6 (2a) Income Tax Act). You have to decide uniformly for a whole year – not device by device.
• If you do not know exactly during the year, estimate and write „estimated" next to it. A labelled estimate is far better than an empty line: without depreciation your result systematically looks too good, and that is precisely what readers who see many BWAs look for.

Step 5: Move one-off items to the bottom

Now go through everything once more and pull out whatever has nothing to do with your actual trade or does not repeat. It moves below the operating result:

• sale of the old van: €3,000 neutral income
• interest on the vehicle loan: €1,100 neutral expense
• also belonging here: insurance payouts, refunds relating to previous years, interest received

Why bother? Because otherwise the operating result is no longer comparable. The question every reader of your BWA asks is: „Does the business carry itself out of ongoing trade?" A vehicle sale does not answer that question.

Step 6: Add it all up – the complete example

Now simply work through the chain from the top:

That is the BWA. Nine months, one sheet, and every figure can be traced back to the pile of receipts.

Step 7: Percentage columns and prior-year comparison

The absolute figures are only half the analysis. Two additions turn it into a management tool – and they are also what experienced readers look at first.

The percentage column relates every line to total output:

position ÷ total output × 100 = share in per cent

The prior-year comparison puts the same period of the previous year alongside:

And suddenly the actual news is on the sheet: revenue is up by 14 per cent, but proportionally less gross profit is left than last year. Materials and subcontracted services have grown faster than prices. In absolute figures the year looked good; in percentages you can see that three percentage points of margin have been lost – on total output of €116,000 that is around €3,800.

There is no universally valid target for these ratios – a trading business looks completely different from a service provider. Your benchmark is your own previous year.

That is what a BWA is for. Not the bank.

Four checks before you hand the BWA over

1. Cross-check the bank account: does your revenue roughly match the money received plus the invoices still outstanding? Big deviations usually mean one invoice recorded twice or one forgotten.
2. Go through the empty lines: is there a €0 anywhere that should hold a figure? A trade business without cost of materials, a business with a vehicle but no vehicle costs – that stands out immediately.
3. Extrapolate: result ÷ months × 12. In the example: 42,950 ÷ 9 × 12 = around €57,300 for the year. Does that order of magnitude fit your tax prepayments? If not, either the BWA is wrong – or your prepayment should be adjusted.
4. Have it recalculated: every subtotal has to follow from the lines above it. A result that cannot be recalculated is the most common reason why a self-prepared analysis comes back.

Why your result will never match the tax assessment

The €42,950 from the example are not the profit you will eventually be taxed on. That is not an error but built in – the word „preliminary" is there for a reason. Four causes:

• Private shares are still missing. If you use the company car 20 per cent privately, around €1,370 of the €6,850 vehicle costs do not belong in the business. The same applies to phone and internet.
• Stock is not recorded. Material still lying in the store has been paid for but not consumed.
• Accruals are missing. The insurance premium for twelve months, paid in January, sits entirely inside this period under the payment view.
• Timing shifts. A December invoice paid in January belongs to the following year under cash-basis accounting.

With the private-share correction the example would be closer to €41,300 than €42,950. If your tax advisor arrives at a different figure later, that is the normal case – not a point of dispute.

Who asks for a BWA – and what the recipients read into it

Hardly anybody builds a BWA voluntarily. Usually somebody has called:

The bank before a loan or lease. There is in fact no statutory duty of disclosure here: section 18 of the German Banking Act only applies once the loan exceeds €1.5 million in total – and it names annual financial statements, not BWAs. The bank asks for a practical reason: your last annual accounts are twelve to eighteen months old, while it has to decide about payments starting next month. The BWA closes that gap. Which is why cumulative figures and the prior-year comparison are expected – a single month without any comparison does not answer the question.

The health insurance fund. If you are voluntarily insured in the statutory system and self-employed as your main occupation, your fund initially sets your contributions provisionally under section 240 (4a) of the German Social Code Book V and settles up later on the basis of your income tax assessment. During that phase the BWA is the usual means of substantiating reduced income. Important: anyone who fails to submit a tax assessment for three years is finally assessed at the contribution ceiling – that is, at the maximum.

Leasing companies, landlords and funding bodies ask for the same reason. In all these cases, clarify in advance which period is meant and whether a self-prepared analysis is accepted.

How often is it worth it? For the one-off occasion, one will do. For yourself, only repetition shows anything – monthly is ideal, quarterly the minimum. A single BWA says little; three in a row show whether your materials ratio is running away from you.

One call is worth making first: ask your tax advisor whether the BWA is already included in your ongoing bookkeeping. Anyone who hands over their bookkeeping anyway has very often paid for it long ago – it simply is not sent out automatically. What they need from you is described in our article on preparatory bookkeeping.

The success overview in Easy Invoice – and what it does not contain

If you record invoices and expenses in a program anyway, the sorting work from step 3 is already done – the analysis is then built from the categories you assigned when recording.

In Easy Invoice you will find it under Reports → Success overview. It is not called „BWA" there, because that is a term from the tax advisor world, but it follows exactly the chain above: revenue, total output, cost of materials, gross profit, cost blocks, operating result, neutral items, preliminary result. On top of that there is the monthly trend and the comparison with the same period before, which you would otherwise have to add by hand. You can export the result as an Excel file or as a PDF.

What is not in there is worth knowing before you rely on it: staff costs and depreciation are not recorded, and neither are goods in stock or self-built assets. The lines exist but stay empty. For self-employed people without employees that is workable – you add the depreciation from step 4 by hand. Anyone paying wages or running larger machinery still needs the BWA from their tax advisor's bookkeeping.

Frequently asked questions

Can I really create a BWA myself for free? Yes. You do not need a program for it – a spreadsheet with the lines from the framework is enough, and setting it up takes one to two hours. After that the ongoing effort depends only on how neatly your receipts are sorted.

Does the BWA have to come from a tax advisor? No. Neither a signature nor a particular sender is prescribed. Some banks ask of their own accord for an analysis „from the bookkeeping" – in that case ask first, before you put work into it.

Doesn't a self-built analysis look unprofessional? Not if the period, the method, the prior-year comparison and a comprehensible structure are there. What does stand out is something else: round figures without decimals, missing cost blocks, and subtotals that cannot be recalculated.

Do I have to send the BWA to the tax office? Not on your own initiative. The tax office receives the cash-basis profit statement or the annual accounts at year-end. During a tax audit, however, the auditor may request access to your accounting data – our article on the GoBD rules explains what is expected then.

BWA and cash-basis profit statement – are they the same thing? No. The cash-basis statement is the annual calculation for the tax office with a fixed form structure. The BWA is the voluntary interim status that you may structure however it serves you.

What do I do if the BWA shows a loss? Do not dress anything up. An explained loss is better at the bank than a polished profit that collapses at the year-end. Add two sentences of explanation – a one-off purchase, a postponed major order, illness. That is exactly what the neutral lines are for.

What if clients do not pay – does that show in the BWA? Under the invoice-date view the revenue is in there even though the money is not. That is why banks additionally ask for a list of outstanding invoices. How to stay on top of that systematically is described in Client not paying – what to do?.