BWA is the abbreviation for “Business Evaluation” and this gives the entrepreneur information about the company’s earnings position in the current financial year.
As a rule, the BWA refers to the ongoing data that is recorded in the financial accounting. In the course of a financial year, the BWA provides the company with information about the cost and revenue situation and thus the entrepreneur has an overview of the profit situation.
In contrast to the balance sheet, which is only drawn up after a few months with a time delay, the BWA can provide the entrepreneur with figures on the current situation of the company.
How did the BWA come about?
At the end of the 1960s, a BWA was created by DATEV in Germany for the first time and published as the so-called DATEV Standard BWA No. 1. This BWA often serves as a decision-making basis for small and medium-sized companies. For credit institutions, this BWA is the essential information tool for carrying out a credit assessment in accordance with Section 18 KWG as part of the creditworthiness check.
DATEV as a trendsetter has meanwhile created a large number of additional evaluations around the standard BWA, such as:
- Controlling report
- Cash flow statement
- Industry-specific BWA for tax consultants, lawyers, opticians, car dealers and many more
These DATEV-BWAs were taken over one-to-one from other accounting providers.
The economic importance of the business evaluation
The economic and microeconomic significance of the BWA is very diverse, because DATEV and the tax consultancy sector alone print out over 2.5 million evaluations per month and companies as well as the financial authorities and banks have to rely on their informative value.
However, the requirements for the informative and evaluation capability of the BWA have changed significantly in recent years and have increased. So has to be a BWA
- Be neutral in terms of legal form
- Be compatible with an industry comparison (DATEV company comparison)
- Map size-neutral
- Allow integrated presentations with the accounting and statistical data of the company
- Be standardizable
Further essential quality criteria are:
- Time series
- time plans
- Year-on-year comparisons and
- Graphic representations
The structure of the BWA is not just a question of the accounts, but a clear business statement.
What exactly does a BWA say?
With the “mess of numbers” on the individual pages of the BWA, different accounting facts are reproduced. If this “mess of numbers” is broken down into its individual components, then the BWA makes precise statements about the following company values and facts:
- Capital assets
- Current assets
- Profit or loss
To put it in a nutshell, the BWA gives the current status of the items mentioned and more. Because at DATEV-BWA, the current monthly overview is compared to the same month with the previous year and this represents an extrapolation for the months of the current year already booked and at the same time a comparison to the previous year. These comparisons make it immediately clear whether the result has improved or worsened compared to the previous year.
Who may or can create a BWA?
Basically, every entrepreneur is allowed to create his own BWA, because this is automatically ejected by the majority of accounting software such as sevDesk. You can find a BWA template in the templates section of our website. So if you do your accounting yourself, you can also create your BWA yourself or hand the whole thing over to the tax advisor. Which costs are incurred for this varies from tax advisor to tax advisor and must be asked, but usually an average amount for online accounting of 40 euros for a monthly or quarterly BWA or 120 euros for an annual BWA is required.
The benefit of the BWA depends on the accounting behavior of the accountant
However, the benefit of a BWA is very much dependent on the accounting behavior of the accountant. If the accruals are not made during the year, monthly depreciation is not posted and / or stocks are not determined and recorded, the informative value of the BWA is low. In addition, the standard BWA 01 is not suitable for many companies, because it is based on the “trading company” business model. The other business models are not adequately represented and this can best be demonstrated using the example of e-commerce (eShops). Because this rapidly growing business segment is not sufficiently taken into account by the BWA 01. Internet costs, costs for the website and costs for returns are relevant to business in this area, and space costs only play a subordinate role here.
Summary: The BWA is an important basis for decision-making
Anyone who has their bookkeeping done externally should always insist on the BWA being handed over. Only then is it possible to identify the company’s development in the current year and to carry out monthly comparisons. Only in this way is it possible to prevent any emerging crises at an early stage and then counteract them accordingly.
Furthermore, the BWA also represents an important decision-making basis for operational decisions. Sales can improve through new products – but the BWA shows whether it is even possible to finance the introduction. In addition, the BWA gives the tax advisor information about how the company is developing and then advises or advises against specific decisions.