Income-Expense Accounting: How to Do It Right

As a freelancer in Germany, you face an important decision: How do you handle your accounting? For most self-employed professionals, the answer is income-expense accounting, known in German as Einnahmen-Überschuss-Rechnung or EÜR. This simplified accounting method is not only legally permitted, but also practical and understandable – exactly what you need to focus on your business instead of drowning in complex chart of accounts.

The EÜR is based on a simple principle: You compare your income to your expenses. The result is your profit or loss. No double-entry bookkeeping, no complex accounts, no accounting degree required. This simplicity makes it the perfect choice for freelancers and small business owners who prefer to invest their time in their business rather than in accounting.

What Makes EÜR Special

Income-expense accounting is regulated in §4 Abs. 3 of the German Income Tax Act and is available to all freelancers, regardless of their revenue. For business owners, it applies as long as revenue is under 600,000 EUR per year or profit is under 60,000 EUR per year. This means: The vast majority of freelancers in Germany can and should use EÜR.

The biggest advantage lies in simplicity. While double-entry bookkeeping requires complex chart of accounts, debit and credit entries, and a deep understanding of accounting principles, EÜR works intuitively. You record what comes in and what goes out – that’s it. This clarity makes it possible even for beginners to handle their own accounting without constantly consulting a tax advisor.

But simplicity doesn’t mean unprofessional. A properly maintained EÜR meets all legal requirements and gives you a clear overview of your finances. You can see at a glance how much you earn, how much you spend, and how much profit you make. This transparency is not only important for tax returns, but also for informed business decisions.

What You Need to Document

The basic rule is simple: Everything related to your self-employed activity must be recorded. For income, this means: Every invoice you issue, every payment you receive, every source of income you have. It doesn’t matter whether it’s 50 EUR or 5,000 EUR – everything counts. Cash payments must also be recorded, even though they’re sometimes easy to overlook.

For expenses, it’s similar, but with an important limitation: Only business-related expenses count. This means you must distinguish between personal and business expenses. A new laptop for work? Business. A new laptop for the kids? Personal. This distinction is sometimes not entirely clear, especially if you work from home, but it’s important for accurate accounting.

Typical business expenses include office supplies and equipment, software and subscriptions, professional services such as tax advisors or lawyers, travel costs for business trips, marketing and advertising, insurance, rent for home office or office, internet and phone (at least the business portion), training, and business meals. The list is long, but the principle remains the same: If it’s for your business, it’s deductible.

Practical Implementation

The question many freelancers ask is: How do I get started? The good news is that it’s easier today than ever before. You essentially have three options: Excel or Google Sheets for manual recording, specialized accounting software for automation, or a tax advisor for complete takeover.

Excel or Google Sheets are cheap or even free and offer maximum flexibility. You can create your own spreadsheets, use your own formulas, and customize everything exactly as you want. The downside is that everything is manual – you have to enter every transaction yourself, perform every calculation yourself, and make sure everything is correct yourself. This is time-consuming and error-prone, especially if you have many transactions.

Specialized accounting software like Solobooks automates many of these processes. You can scan receipts via app, automatically import bank data, and the software automatically categorizes your expenses. Invoices are created professionally, VAT is calculated automatically, and at the end of the year you have all the data for your tax return. The effort reduces from hours per week to minutes.

A tax advisor takes care of everything for you, but that costs accordingly. For most freelancers, a combination of software and occasional consultation is the best solution: The software handles the daily work, the tax advisor helps with the tax return or complex questions.

Organizing and Storing Receipts

One of the most important aspects of EÜR is receipt organization. Every expense must be documented with a receipt – this is legally required. The good news is that digital receipts are now fully accepted. You no longer need to print everything and collect it in folders. Scanned receipts, PDF invoices, photos of receipts – everything is allowed, as long as it’s readable and complete.

The retention requirement is 10 years from the end of the tax year. That sounds long, but with digital storage it’s no problem. Modern accounting software automatically stores all receipts and organizes them by year and category. You never have to search for a receipt again – the software finds it immediately.

Organization is crucial. A chaotic pile of receipts at year-end makes tax returns a nightmare. It’s better to record and categorize receipts immediately upon receipt. This takes only seconds if you do it regularly, but saves hours at year-end. Accounting software makes this particularly easy: You scan the receipt with the app, the software automatically recognizes amount, date, and merchant, and you just need to confirm the category.

The Monthly Routine

Successful EÜR maintenance is based on regularity. The best strategy is to develop a routine. Some freelancers do it daily – they record new invoices and receipts immediately as they come in. Others prefer a weekly routine, where they take time once a week to record everything.

The frequency depends on your business. If you have many transactions, a daily or weekly routine makes sense. If you only occasionally issue invoices and have expenses, a monthly routine might be enough. What’s important is that you find a routine that works for you and that you can maintain long-term.

At the end of each month, you should create a brief overview: How much did you earn? How much did you spend? What’s the surplus? This monthly overview not only gives you a good overview, but also makes year-end much easier. If you’re up to date every month, you only need to summarize the months at year-end.

Common Mistakes to Avoid

The most common mistake freelancers make with EÜR is procrastination. Receipts accumulate, invoices aren’t recorded, and at year-end you’re facing a mountain of paper and don’t know where to start. The solution is simple: Don’t procrastinate. Record everything immediately as it comes in. It takes only seconds if you do it regularly.

Another common mistake is mixing personal and business expenses. Especially if you work from home, the line is sometimes blurred. A separate business account can help here – all business income and expenses go through this account, personal finances remain separate. This makes assignment much easier and prevents errors.

Small income is sometimes forgotten, especially cash payments. But even small amounts must be recorded. Tax liability makes no distinction between large and small income. A systematic approach helps ensure nothing is forgotten.

Throwing away receipts is a mistake that can become expensive. During a tax audit, you must be able to present all receipts. If receipts are missing, expenses cannot be recognized, which can lead to tax back payments. The solution: Store everything digitally. Modern accounting software does this automatically – you scan the receipt once, and it’s stored and organized forever.

Preparing for Tax Returns

At the end of the year, you need to prepare your EÜR data for the tax return. This means you summarize all income and expenses and enter them in the EÜR attachment of your tax return. The categories in the EÜR attachment essentially correspond to the categories you should also use in your accounting.

If you use accounting software, this step is particularly easy. The software prepares all data and creates an export that you can directly import into your tax return. Or you pass the data to your tax advisor, who then creates the tax return for you. In both cases, you save time and avoid errors.

Receipts should be organized and easily findable. During a tax audit, you must be able to present all receipts. Digital storage makes this easy – you can store all receipts sorted by year and category and find them immediately when needed.

Using Modern Tools

Accounting has changed dramatically in recent years. What used to take hours per week can now be done in minutes. Modern accounting software like Solobooks automates most processes: Receipts are scanned via app and automatically categorized, bank data is imported and transactions automatically assigned, invoices are created professionally with all mandatory information, and at the end you have all data for the tax return.

This automation not only saves time, but also reduces errors. Human errors in entry or calculation are eliminated. The software automatically validates whether all mandatory information is present, whether amounts are correct, and whether categories make sense.

But perhaps the biggest change is clarity. While Excel spreadsheets quickly become confusing, modern accounting software offers clear dashboards, charts, and evaluations. You can see at a glance how your business is developing, which expense categories are largest, and how your profit is developing over time. These insights help not only with tax returns, but also with informed business decisions.

Finding the Right Balance

EÜR is not the only accounting method, but for most freelancers it’s the right choice. It offers the perfect balance between simplicity and completeness. It meets all legal requirements without being unnecessarily complex.

The question is not whether you should use EÜR – most freelancers can and should. The question is how you maintain it. Manually with Excel? With specialized software? With a tax advisor? The answer depends on your needs, your budget, and your time.

For most freelancers, modern accounting software is the best solution. It offers the automation that saves time, the clarity that helps, and the professionalism you need – at a price that’s affordable. Tools like Solobooks are specifically developed for freelancers and understand the needs of self-employed professionals. They make EÜR maintenance not only easier, but also more pleasant.

A System for Long-Term Success

Income-expense accounting is more than just an accounting method – it’s a system that helps you understand and control your business. If you do it right, it gives you not only the data for tax returns, but also the insights you need to make informed business decisions.

The investment in the right tools and routines pays off long-term. Time you invest today in setting up a good system, you’ll save many times over later. And the clarity about your finances helps you not only with tax returns, but also in running your business successfully.

In the end, it’s not about maintaining perfect accounting – it’s about having a system that works for you and that you can maintain long-term. EÜR makes this possible, and modern tools make it easy.

Need Help?

If you have questions about income-expense accounting or need help setting up your accounting, we’re here to help. Contact us by email at support@solobooks.de, chat with us in the app, or visit our Help Center for more guides.

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Last updated: October 15, 2025