Light entrepreneur and accounting

For many people, accounting is a term that makes their hair stand on end. As a light entrepreneur, it is possible to avoid the challenges of accounting by taking advantage of the help offered by invoicing services.

Light entrepreneur refers to a form of business where a person invoices his/her clients for work done through a billing service. At the same time, the billing service takes care of the entrepreneur's tax affairs and also the accounting.

A light entrepreneur is not required to keep accounts if he or she does not have his or her own business ID number. Why? Because the light entrepreneur invoices the billing service of his choice with a y-identifier, which means that the invoices are part of the billing service's accounting.

The invoicing service companies process the wages paid to the light entrepreneur on behalf of the light entrepreneur in the Tax Administration's register of earnings. In this case, it is sufficient for the light entrepreneur to check the accuracy of the information on his tax return.

Light self-employed persons with a business ID are obliged to keep accounts. We'll tell you more about this below, so keep scrolling!

What is accounting?

All monetary transactions of the business are recorded in the accounts. Both income and expenditure. Light entrepreneurs don't have to do this themselves, the invoicing service will do it for them.

Accounting provides information for the entrepreneur. It shows how profitable the business is. In addition, it can also be used to make other calculations: cash flow statements and forecasts, budgets, customer profitability calculations and many others.

For accounting purposes, you will need supporting documents relating to the purchases and sales of your business, i.e. copies (or originals) of invoices or receipts. The supporting documents can be fully electronic and must be kept for six years after the end of the accounting period. The accounting period is usually 12 months.

Entrepreneurs can take care of their own accounting or hire an accountancy firm to help them. It is also possible to become a light entrepreneur and outsource the accounting to an invoicing service company, which also takes care of other entrepreneurial responsibilities.

Light entrepreneur and accounting

Did you sweat when you read the last paragraph? Accounting - for all its benefits - is perceived as a somewhat compulsory evil and a resource eater. That's why outsourcing it is a good option.

The accounts of a light entrepreneur can be compared to those of an ordinary employee. The light entrepreneur does not have to worry about receipts or tax, but the invoicing service is responsible for this. Only the personal tax affairs of the light entrepreneur are to be taken care of.

All businesses with a business ID are obliged to keep accounts. This does not mean, however, that a light entrepreneur with a business ID number Y should keep his own records. The reason is that a light entrepreneur is not a formal term. Even if you have your own business ID, as a customer of a billing service, a ”light entrepreneur” is officially acting as a sole trader.

In this case, the invoicing service company will handle your accounts just as a regular accounting firm would. Invoicing services make accounting convenient, as all paperwork is handled digitally in one service.

A light entrepreneur is entitled to tax deductions

We have already told you that a light entrepreneur does not have to worry about the tax issues that belong to companies. Personal ones, however.

As a light entrepreneur, you are entitled to claim tax deductions from your personal tax. A tax deduction refers to expenses deducted from taxable income. In simple terms, the taxable amount is reduced, so the light entrepreneur pays less tax.

As a light entrepreneur is not a formal term, for tax purposes he or she is a private individual who receives wages and pays withholding tax on them. The income earned as a light entrepreneur is added to the income from full-time work, among other things.

A light entrepreneur can claim a tax deduction for, among other things, these expenses:

Travel expenses

The business trip can be invoiced to the customer or, alternatively, you can claim a tax deduction. As light entrepreneurship is mostly a job on the go, business travel by a light entrepreneur is largely considered to be temporary. The travel costs incurred as a result of a temporary business trip are deductible without any deductible and without a ceiling.

Expenses are deducted according to the cost of the vehicle used. If you use your own car, the deduction is €0.30 per kilometre without further explanation.

Tools, equipment and workroom

Whether it's a new computer, a desk chair or a stack of envelopes, anything that counts as tools and supplies is tax deductible. Maintenance and repair of equipment is also deductible. If you have worked from home, you can deduct this from your tax bill too.

YEL insurance and health insurance contribution

As a light entrepreneur, you may be obliged to pay a YEL contribution, i.e. self-employed persons' pension insurance. The YEL insurance is usually obtained by the light entrepreneur through his/her billing service and is tax deductible.

YEL insurance can be purchased through Kevyesti.fi. YEL insurance is compulsory for light entrepreneurs if they are aged between 18 and 67, their annual income from their business activity is at least EUR 8 575.45 (2023 figure) and their business activity continues for at least four months.

The health insurance premium only applies to light entrepreneurs with YEL insurance and is tax deductible.

Education and training expenditure

It is possible to claim a tax deduction for study and training expenses. This includes both courses and professional literature. Expenses must be paid in person to be tax deductible.

Accounting is very useful, even if you don't do it yourself

While it may seem like a relief to have your accounting handled by a billing service, it's still good to be aware of the financial flows of your business and the issues involved. Not only because many things, such as tax deductions, have to be claimed independently, but because accounting is the best source of how a light entrepreneur's business works.

Accounting allows you to delve deeper into your business data. It is the door to the history of the business and its future. Accounting allows you to generate reports and summaries that can be used to calculate the profitability of your operations.

At the same time, accounting is the door to the future. Regular and recurring issues can emerge from the data, which can be expected to continue in the same way in the future. Equally, the data can tell you which areas are stagnating and which are going well. Data compiled from the accounts is the perfect tool for making decisions. It leaves no room for guesswork.

Light entrepreneurship gives more freedom

As light entrepreneurship is popular, especially among new entrepreneurs, accounting is an excellent way to learn more about financial management and business. At Kevyesti.fi, we make sure you focus on what you do best. Billing service for a fair fee, gives you the freedom to get on with your work and build new client relationships.

Contact us and we'll help you get started on your journey as a light entrepreneur. We'll be with you all the way, and we'll be your trusted partner. Registration is free, and you only pay a service fee when you make a sale.