Why correct accounting is essential for business success in Norway

Norway offers an appealing business environment that continues to attract a growing number of international companies. However, Norway's distinctive accounting and tax regulations can challenge newcomers entering the market. Differences in reporting requirements and handling of international transactions and tax rules can pose significant barriers. Therefore, it is crucial for companies looking to establish or operate in Norway to understand the complex accounting requirements and regulations. Let's look at why correct accounting is important for foreign companies in Norway – and how you can ensure that the accounts are kept accurately so that you succeed.

What is accounting, and what does it include?

An accounting system systematically presents a company's financial activities over a specific fiscal year. It provides a clear picture of the company's financial situation and includes several important components:

• The income statement shows the company's income, expenses, and profit (profit or loss). It helps determine the company's profitability.
• The balance sheet provides an overview of the company's assets, liabilities, and equity at a specific point in time. It provides insight into the company's financial strength and liquidity, i.e., its ability to meet short-term and long-term obligations.

Also read: Do the right things when doing business in Norway.

What can be inferred from an accounting statement?

An accounting statement provides valuable information that makes it possible to make informed decisions. 
Some of the key insights one can glean include:

• Financial health: Analyzing the income statement quickly reveals whether the company is profitable, which is crucial for investors, lenders, and owners.
• Liquidity: The balance sheet provides information on whether the company has enough resources to cover its short-term liabilities. For foreign companies that establish operations in Norway, it is important to ensure that the business has sufficient liquidity to meet local obligations such as tax and wages.
• Debt and financing: The financial statements also show the company's debt-to-income ratio, which may indicate whether the financing structure needs to be adjusted. This is especially important for international companies with different currencies and interest rates.

Why is it important to keep accurate accounting?

In Norway, it is a legal requirement that companies comply with the Accounting Act and the Bookkeeping Act. By keeping correct accounts, you ensure that your company complies with the regulations and thus reduce the risk of fines, fees, and, in the worst case, legal consequences in the event of deviations. Accounting is, therefore, more than just a number; it is about ensuring that your business is running smoothly – protecting shareholders and ensuring stable and profitable operations and growth.

• In Norway, it is required by law to keep accurate accounts.
• An accounting provides financial overview and control.
• Financial statements provide credibility and trust and help ensure that external parties such as investors, creditors, shareholders, and customers can correctly assess the company's financial situation.
• Correct accounting contributes to fair taxation.
• Auditing and controlling the accounts becomes efficient and minimizes the risk of errors.

Who can keep accounts in Norway?

In Norway, different people and actors can keep accounts, but there are certain rules and requirements for who can keep accounts for other companies. Suppose you have an external party to keep accounts for your company in Norway. In that case, it is required that the party you choose has authorization and is approved by the Financial Supervisory Authority of Norway.

Challenges with accounting for foreign companies in Norway

As a foreign player in Norway, it can be challenging to comply with all the laws and regulations of keeping accounts. The differences between the standard you are used to and the Norwegian accounting standard can present challenges, and ensuring everything is done correctly can be difficult.

As keeping accurate accounts is required by law, violations of accounting regulations can lead to economic loss, become expensive, and, in serious cases, result in legal sanctions. The ripple effect of this, in turn, can be a loss of reputation and trust.

Therefore, you may want to purchase these services remotely. In this way, you secure this part of your operations, you can focus on other business activities, and you avoid costly and, in the worst case, devastating mistakes.

Also read: Key steps for starting business activities in Norway.

What should you consider when choosing an accountant?

Many accounting and auditing firms in Norway assist companies with financial reporting and compliance. However, for international companies that will operate in Norway, there may be several requirements and legal processes in areas such as company law, labor law, contract law, and ethical guidelines, in addition to accounting. Since these processes are often intricately linked to accounting, it may be an idea to seek assistance from a comprehensive solution provider. Then, you get one partner to deal with, who simultaneously gets to know the company and its operations well, which makes compliance with Norwegian regulations easier and more efficient.

Do you need help keeping correct accounts?

Accurate accounting is not just a requirement; it is a critical factor for success in the Norwegian market, closely followed by the proper execution of other laws and regulations in Norway. By choosing a company with experience in international and Norwegian law and accounting, you optimize operations and reduce the risk of violations of the Accounting Act.

We have experience helping international companies operating in Norway from A to Z. Our experts can assist with everything from establishing local subsidiaries to guiding accounting for multinational companies branches. We also help companies ensure that their reporting meets Norwegian requirements.

• Accounting consulting: We help adapt to local accounting standards, set up internal control systems, and ensure compliance with all applicable laws.
• Tax advice: Tax planning and correct value-added tax (VAT) handling are essential to avoid costly mistakes.
• Legal assistance: We also offer a comprehensive review of your contracts, employment contracts, and other business agreements to ensure that they comply with Norwegian law.