Clouds instead of file folders, PDFs instead of printouts and emails instead of letters: more and more companies in Germany are eliminating paper and transitioning to digital solutions. However, anyone who wants to future-proof their business processes must approach this task carefully and in a structured manner.

In this article, you will learn whether German enterprises are legally required to digitise their accounting and how widespread online administrative workflows are across the country. We also outline step by step how you can modernise bookkeeping and highlight the advantages and disadvantages of paperless accounting in practice.

What's in this article?

• Digitised accounting in Germany: Status quo
  
• Is digital accounting mandatory for companies in Germany?
  
• What are the pros and cons of digital accounting?
  
• How can companies in Germany digitise their accounting?
  

Digitised accounting in Germany: Status quo

Fifteen percent of companies in Germany now operate entirely paper-free. This figure is from a representative study published in 2024 by the digital association Bitkom, which surveyed more than 1,100 organisations. By way of comparison, in 2022, only 8% of enterprises in the country reported having eliminated paper. Other findings from the study include:

• 24% of German companies process around a quarter of their administrative workflows on paper (2022: 34%)
  
• 38% of German companies process around half of their administrative workflows on paper (2022: 33%)
  
• 14% of German companies process around three-quarters of their administrative workflows on paper (2022: 18%)
  
• 6% of German companies process almost all of their administrative workflows on paper (2022: 4%)
  

Less paper consumption means fewer file folders. Unsurprisingly, half of the respondents reported a reduction in filing cabinets over the past five years. Benefits of this shift have contributed to the fact that nearly every enterprise in the country is now fundamentally open to digitising their business processes. In 2024, 96% reported openness, up from 89% in 2022.

The study "Digitization in Accounting 2024/2025” by the auditing and consulting firm KPMG reaches similar conclusions. Of the 261 companies surveyed, 68% report fully or partially adopting paperless accounting. Twelve percent are currently implementing the transition, and 11% have concrete plans to do so. There are also notable differences in the homogenisation of the system landscape, which can involve, for instance, the standardisation of enterprise resource planning (ERP) systems.

Is digital accounting mandatory for companies in Germany?

There is no fundamental legal obligation for companies in Germany to digitise their accounting. Nevertheless, various legal requirements mean that moving primary workflows online, particularly in accounting, is becoming unavoidable in many cases.

Mandatory electronic invoicing

Starting 1 January 2025, enterprises in the country are required to receive and process electronic invoices for domestic business-to-business (B2B) transactions. Over the next few years, the scope of mandatory e-invoicing is expected to expand, and by 2028, billing documents could be issued exclusively in electronic form.

In the public sector, e-invoicing has been in force since 2020. Companies that work with public contracting authorities must now submit invoices in structured formats, such as ZUGFeRD or XRechnung (see Sections 3 and 11[3] of the E-Invoicing Regulation).

Compliance with GoBD

The principles for the proper management and storage of books, records and documents in electronic form (GoBD) govern the core principles of digital accounting for companies in Germany. They outline how tax-relevant data is to be collected, processed and archived. Among the provisions, the GoBD mandates that electronic accounting records be stored in an unalterable format to prevent manipulation. Achieving this compliance calls for reliable tools and a robust IT infrastructure.

Enterprises are also expected to retain bookkeeping information thoroughly and transparently, ensuring it is accessible and verifiable at all times throughout the entire retention period. The statutory period is 6, 8 or 10 years, depending on the type of document, as per Section 147(3) of the German Fiscal Code (AO).

Preparation of procedural documentation

Beyond technical criteria, companies are expected to prepare procedural documentation. These materials need to encompass all digital accounting processes and procedures, describing how data is collected, processed and archived. It demonstrates to the tax office that the organisation complies with the GoBD and maintains accurate bookkeeping practices.

Compliance with GDPR

The General Data Protection Regulation (GDPR) has governed the protection of personal information in the European Union and Germany since 2018. Among its rules, it requires companies to implement organisational and technical security measures to protect data from unauthorised access by third parties. Personal info must, for example, be transmitted in encrypted form and kept on secure servers.

What are the pros and cons of digital accounting?

Digitised accounting offers numerous advantages. Enterprises in Germany aiming to modernise their bookkeeping also need to be aware of the downsides that might accompany such a change.

Advantages of digitised accounting

• Saved time: A major benefit of digital accounting is the considerable time savings achieved through process automation. Bookkeeping software handles tasks including creating invoices, managing receipts and preparing annual financial statements, thereby reducing manual work and speeding up administrative tasks.

• Error reduction: The automated processing of billing documents and receipts largely removes manual input errors. The use of AI in accounting further improves data quality and reduces the extent of auditing.

• Data availability: Companies that upgrade their accounting are able to view records, documents and transactions in real time at any time and from any location. This enables faster access, easier processing and transparent monitoring of financial activity. With instant access to information, teams make quicker, better-informed decisions and respond faster to changes or requests. AI-driven tools add new possibilities for analysis and interpretation. Collaboration with tax advisors, auditors and other partners becomes smoother as well.

• Saved space: Transitioning to digital systems removes the need for physical archives. Key records are kept on secure cloud services or central servers, reclaiming office space that file cabinets and shelves once consumed.

• Long-term cost savings: Digital workflows reduce outlays in the long term. Companies save not only on paper, toner and printer hardware, but also on the expense of storing and archiving files. Eliminating archive rooms and areas for paper storage has a positive effect on rental costs. In addition, automation reduces staffing effort in accounting, thereby lowering overall personnel expenses.

• Legal safeguards: For accountants, digitisation is a legal expectation in certain areas, notably regarding e-invoicing in the B2B sector. Compliance under GoBD is easier to achieve via modern platforms. Automatic software updates also validate that administrative processes are always up to date with the latest tax rules.

Disadvantages of digital accounting

• High initial investment: Companies in Germany that want to digitise their accounting need to first invest in software and IT infrastructure. This poses a budgetary challenge, especially for small businesses and startups. Employee training entails further expenses as well.

• Security risks: Information kept online is a target for cyberattacks. For this reason, enterprises must protect their IT infrastructure adequately. Measures such as encryption and routine backups are key.

• Dependence on technology: With increasing digitisation, dependence on technology also grows. If systems fail or technical problems arise, the entire bookkeeping flow risks disruption.

How can companies in Germany digitise their accounting?

The transition from traditional paper-based accounting to digital workflows can be complex and requires a systematic approach to planning and implementation. Here are the most integral steps for successfully modernising bookkeeping:

Involve tax advisors early on

Involving tax professionals early in the planning phase is important. Seek their guidance on all applicable regulations and compliance obligations. Early coordination is particularly valuable for interpreting fiscal rules and avoiding errors. Advisors can also recommend suitable accounting software that aligns with the organisation's needs and train your team on how to operate it effectively.

Select qualified personnel

Assemble a qualified team to lead the digitisation of accounting. If you, as the company leader, are managing the project yourself, appoint a core team of two to three employees to oversee its implementation. Maintain close communication with a trusted tax expert.

Purchase of the necessary hardware

Appropriate hardware is needed to move bookkeeping online. Alongside the core IT infrastructure and powerful computers, purchase a good document scanner for capturing paper records. Using a cloud repository or a central server for secure storage of accounting data is advisable.

Select appropriate accounting software

Choosing the right platform is central to the success of the transition. Confirm that the software is GoBD-compliant and covers all the necessary functions. Check whether it facilitates simple integration to popular tax consulting programs, such as DATEV. Determine in advance whether there are any potential follow-up expenses for maintenance, updates and support.

Stripe Revenue Recognition enables companies to record their revenues on an accrual basis automatically. However, the tool not only assists in assigning payments to the correct delivery periods, but also facilitates monthly and annual financial statements, especially for recurring payments such as subscriptions. The software ensures accurate reporting and supports compliance with international standards, including Accounting Standards Codification (ASC) 606 and International Financial Reporting Standard (IFRS) 15.

Awareness-raising and training for employees

Digitisation brings about significant changes for accountants. It is therefore important that you inform your employees at an early stage. Take any concerns seriously and clearly explain the benefits of paperless bookkeeping. Training courses help staff become familiar with new workflows.

Tax compliance audit

Ask a tax professional to run a tax compliance audit after the transition to verify that the new processes comply with the GoBD requirements. Implement adjustments as needed to keep records aligned with applicable law.