Back-office: Managing Your Estonian Company

Back-office: Managing Your Estonian Company
Congrats! You’ve got an e-Residency, set your company up, and learned about accounting and taxation processes in Estonia. In fact, it was a starter – your company requires constant check-ups and maintenance activity. You should take care of your banking, invoicing, and other corporate processes.

How to Automate Invoicing Process for Estonian Company

All companies need invoices. Firstly, you won’t be able to receive money for products or services without it. But most importantly, an invoice is a key document for your accounting.

Accurate invoice management provides a company with a full picture of sales, taxes, relations with customers. As a result, proper invoice management can help you make decisions based on these insights briefly and in time. It can also protect your company in the case of an unexpected audit or governmental inspection — just keep your invoices accurately stored, accounted for, and don't forget to pay attention to the wise words of your accountant.

An invoice is basically a written message that transforms the fact of sending or receiving money into Accounting books. It’s a primary document that describes the goods or services that the money was received or spent for.

Βy world standards invoices should contain:
  • invoice number
  • date of issue and date due to
  • name and contact of counterparties
  • a line detailing all products or services
  • cost per unit, the total amount of money owed, applied taxes, and tax rates
  • the place of service (i.e. a jurisdiction)

A type and a place of service, as well client data in some cases can affect the tax rates, thus it’s very important to complete these fields in the document.

The other fields help to record precisely your sales and income. Again, for taxes and accounting. However, the whole invoicing process is done not just for the sake of bookkeeping but also to structure the processes of your company correctly.

An invoice number, for example, is not a random sequential code. You should not put as simply number invoices '1', '2', '3', etc. as this can be confusing further as numbers reach double or triple figures. Rather, you’d better have an invoicing system. Normally, a number might refer to the year, the name of the agreement, and then a longer sequential number comes.

How to Organize Invoice Management

When we agreed that invoices are vital for business, let’s talk about how tο properly organize the invoicing process in your company. The main solutions have already been covered in our blog:

  1. To learn the requirements and carefully do invoices manually — here is the guide
  2. To set up your own invoicing system — guide on setting up invoicing system using Typeform and Zapier

Or simply join Enty’s Control Panel and forget about doing things manually. Issue invoices, send them to your clients plus synchronize with invoices with accounting and other business processes.

All templates on Enty are created by professional accountants and verified by lawyers. VAT is applied automatically when needed.

But most importantly, if you purchase Enty’s accounting subscription, accounting and tax reports are created automatically based on your invoices. Just mark an invoice as paid and the data will be automatically reflected in reports. And yes, it will take you about 1-2 minutes to issue and send an invoice :)

Explore more in Enty’s articles:
Why Invoice is So Important for Correct Accounting
How to Automate Invoicing Process for Estonian Company: Invoicing on Enty

How to Create Contracts for Your Estonian Company

Contracts are vital for business. Each company operates with a pile of different agreements: sale contracts between a company and customers, service contracts with counterparties, and other corporate docs. Contracts legitimize partnerships and can be used for confirmation of certain service delivery or completed sale.

Importance of Contracts for a Company

A contract is a legal agreement binding two or more parties and creating mutual legal obligations. Contracts legitimize partnerships and can be used for confirmation of certain service delivery or completed sale.

There are many purposes that contracts serve. For starters, contracts are the main source of revenue and relationship building for an organization.

Contracts may seem scary for a beginner but they can be as simple as a plain-language document that outlines the general business between a company and the client. There are several things that contracts provide for a company:

  • Minimize a chance of misunderstanding between the parties by outlining the terms of the business relationship and scope of the work
  • Specify rights and duties of both parties
  • Protect parties legally
  • Outline terms of payment
  • Minimize risks

Which Contracts Companies in Estonia Need

There is no exact list, as each company has its own needs. But for simple cooperation with a counterparty, a contract workflow depends on the type of your business and corporate needs:
  • For an online B2C business, only three main types of documents will probably be enough — Privacy Policy, Cookie Policy, and Terms and Conditions;
  • A B2B company will have to operate with several contract types;

Any type of company that requires to hire someone will require an Employment Contract and might require a Non-Disclosure Agreement

Which Types of Contracts You Can Create With Enty

The first beta version includes 2 types of contracts:
  • Privacy Policy
  • Terms of Use

More types of contracts will be added soon as well.
Learn more about contracts in this article.

Payroll: How to Manage It Efficiently

When you think about HR, the first thing that might come to your mind is recruiting. In fact, HR also consists of training, career planning, performance evaluation, compensation and benefit calculations. And out all of them payroll is perhaps the most complex process related to HR.

Payroll is the process of calculation, formalization, and payout of employees' salaries. Starting from tracking working hours and counting net salary, ending with tax reporting.

Key Parts of Payroll

A payroll report is a key document in payroll management. This report consists of various data. Payroll report reflects legal information about a company and a certain employee: names, addresses, contact data, and so forth. Besides, there are highlighted payment periods and the number of hours worked by an employee. Also, the payroll report indicates information about the gross and net amount paid which include: regular payments, bonuses, and various reimbursements.

Calculate your employees' salary

The data above will let you calculate your employees' net pay. For this task, you can use net salary calculators for your country that can be easily googled (for Estonian company you can use our Estonian Social Tax and Salary Calculator).
Gross and Net Pay Formulas:

Gross pay = Hourly rate x Total hours worked in the period + Reimbursements + Bonuses + One-time pays

Net pay = Gross pay — All tax withholdings and deductions

Hiring an Employee or a Contractor

Choosing a proper framework of relations with an employee will help you to build an effective workforce that moves forward your business.

Once you have a company in Estonia there are several conditions to be considered in the recruitment as whether a candidate is an Estonian tax resident or not, whether they come from EEA or a third country, etc.
Helpful Resources:
Now you know a lot about the business processes of an Estonian company. Further is the last section about Estonian Startup and Digital Nomad visas (in case you want to go physical). Let's go!

Automate Your Company's Back-office Processes Right Now!

This handbook is created by Enty – a control panel of your company that lets you take care of Invoicing, Accounting, Contract Management, HR, Banking, and Corporate Secretarial Services

Get rid from daily business issues with our Control Panel right now!