“Milk book” accounting: legally permitted, but often insufficient in practice

In theory, small businesses, associations or foundations with low turnover or no obligation to register in the commercial register are allowed to keep their finances in a greatly simplified manner: they only need to record income, expenditure and assets. But in practice, this is hardly worthwhile. Why?

1. Tax offices and banks want more: Tax authorities often request information on depreciation, receivables or provisions in order to calculate profits correctly. Banks usually require a complete balance sheet for loans; a milk book accounting system is not sufficient.
2. Greater clarity, less risk: A simple cash flow statement such as the milk book calculation does not show, for example, whether a company is truly profitable or whether liquidity bottlenecks are imminent. Minimal double-entry bookkeeping provides greater clarity and often saves on taxes in the end because everything is clearly documented.
3. Subsequent effort is more expensive: If you need more detailed documents later on, e.g. for a tax audit, you often pay more for the rework than simple bookkeeping would have cost from the outset.

Conclusion: Although the milk book method saves time in the short term, it can have tax disadvantages or become a problem in financing discussions. Lean but complete accounting is usually the better choice, even for small businesses.