Starting a Cooperative in Finland

The Finances of the Cooperative

Knowledge of economic activities is one of the essential requirements for a cooperative to succeed. If the founding members are without sufficient knowledge, we recommend selecting an external firm of accountants or an accountancy office to take care of the bookkeeping and accounting.

1. Incorporation of a Cooperative

Already before the actual incorporation of the cooperative, it is advisable to search accounting firms, in order to ensure that the early data are reported correctly to the Trade Register. The financial year lasts 12 months, but it does not have to be calendar year. The first financial year can be between 6 and 18 months long. You must remember that by filing the incorporation form, the cooperative is registered in different databases of the tax authorities according to the cooperative’s needs (prepayment tax, value-added tax, employer register).  More information:

The right to sign may be assigned to one or more persons. It is worthwhile to remember that different authorities’ sites (Tax Office, Patent and Register Office) are easier to use if only one person in the cooperative is authorized to sign. The rules can stipulate that the chairperson of the board and the managing director can both sign alone in the cooperative’s name. Another solution is to stipulate in the rules that only one person has the right to sign, and the board of directors then assigns by its decision any other persons authorized. After the cooperative is registered and received the business ID (Y-tunnus), you have to apply a ID, with which you report data to different authorities. The accountant firms of the cooperative can be authorized to submit tax declarations and Incomes Register reports. More information:

It is advisable that the cooperative chooses one person who takes care from the very beginning of all financial management and acts as a contact person for the accounting firm. 

2. Opening of a bank account

The cooperative has to have a bank account. The Anti-Money Laundering Act requires the banks to analyze more extensively the background and the creditworthiness of the owner’s of a bank account. It is useful to grant the access right to two persons; the financial clerk and an alternate (e.g. chairperson of the board of directors or managing director). It is worthwhile to apply for a debit and credit card for the cooperative.

3. Early-stage financing

After opening the bank account for the cooperative, you start to collect the members’ contributions and other payments stipulated in the rules. The early-stage financing of the cooperative is usually based on these or on loans granted by the members.  You may have also applied for start-up grants or loans.  This kind of financing covers the incorporation and early-stage costs, like purchase of telephones and other equipment, software, premises, filings for registers, costs of accountants and insurances.  

4. Payroll system

A cooperative can pay remuneration for work:

  1. as a salary, if the employee has an employment relationship. The cooperative takes care of the statutory non-wage labor costs (pension schemes, other statutory insurance fees and health insurance contributions paid to the tax authority);
  2. as a salary, if the employee works as an entrepreneur in the cooperative (less than 3 members).  The employee must have an entrepreneur pension scheme. The accident insurance is voluntary, but the health insurance contribution is paid to the tax authority;
  3. as a remuneration for work, if the employee has no employment relationship with the cooperative. The employee takes care of all statutory insurances’ fees and contributions;
  4. by invoice, in which case the employee invoices through an entity files in the tax prepayment register. This entity can be a cooperative, a limited company, a sole trader, an invoicing service or an association.

Characteristics of an employment relationship and an agency relationship have been discussed in the tax guidance:

Here is an example of payroll calculations (the percentages are from 2020)

Paid annual leave 9 %9.00
Taxable revenue109.00
tax retention 20 %-21.80
Pension scheme retention TYEL-7.15
unemployment insurance contribution retention 1.25 %-1.36
To be paid78.05

Non-wage labor costs paid by the employer according to the total revenue

Gross salary109.00
Employer’s pension scheme contribution TYEL 18.15 %19.78
Health insurance contribution 1.34 %1.46
Statutory insurance fees ca. 1.5 %1.64
Total salary+other costs131.88

The Finnish Parliament lays down yearly the social insurance contributions i.e. statutory non-labor wage costs. Updated information is available at the pension insurers’ sites or at

In consequence, the cooperative has to sell work at the minimum price of €131.88 (plus the VAT to be added), in order to be pay a net salary of €78.21 for the employee.

5. Incomes register

In the beginning of 2019 Finland introduced Incomes Register. It is a national database grouping all income data of people living in Finland. Employers file the salaries paid and different contributions, Kela and other authorities report the benefits paid starting from 2021. It is essential that the data reported is correct, because the employer has on obligation to rectify any inaccurate data for 10 years.

The tax authorities, pension and other insurance companies, and authorities and other actors, like Kela and unemployment funds, will search every income earners’ data. The employers must report employees’ payroll data in 5 days from the payment date, and the health insurance fee must be reported before the 5th day of the next month. For more information:

6. Accounting

Cooperatives are classified as micro-enterprises if only one of the following limits is exceeded:

  1. Turnover of €700,000;
  2. Balance sheet total €300,000;
  3. More than 10 employees on average.

The financial statements and the cooperative’s tax declaration are always submitted for each financial year.

All costs and revenues, loans, salaries and money transfers are allocated or recorded in the accounting and all supporting documents (= receipts and invoices) have to be originals. When an invoice or a receipt has been digitalized and saved into the software, it becomes an original document, and the paper document can be destroyed.

The two most important accounting reports are the profit-and-loss statement and the balance sheet. The first will summarize the revenue and the expenditure during a specific period of calculation, and the result of the cooperative during the same period, which can be positive (the cooperative generated surplus) or negative (the cooperative made a loss). The balance sheet always indicates the asset position on a specific day, i.e. how much the cooperative has investments, assets, stocks, accounts receivable, money, as well as capital and debts.

In its financial statements, the cooperative must use either expense classification “by nature” or “by function.” In general, accounting software uses classification by nature for the loss-and-profit statement.



Variation in stocks of finished goods and work in progress

Capitalized production

Other operating results

Materials and services

Expenditure on materials, equipment and goods

External services

Staff costs

Wages and salaries

Pension contributions

Other statutory non-wage labor costs

Depreciation and value write-downs

Other operating costs


Financial revenues and costs



Income taxes

Other necessary taxes


The turnover consists of the cooperative sales without value added tax. When invoicing, the cooperative adds that VAT in its sales invoices according to the Value Added Tax Act.

Other operating results are different kinds of subsidies, lease income and other extraordinary results not explicitly being part of the cooperative’s line of business.

The purchases include all goods and product purchase in order to generate the results, and the changes in stocks. The purchases also include subcontracting related to sales.

Staff costs include, beside wages and salaries, all statutory non-wage labor costs (pension contributions and other insurance fees).

Depreciations are entries of expenditure for factors of production purchased for a long term (buildings, lands, real estate, machinery, equipment etc.). First, the purchase is carried on the corresponding account in the balance sheet. Once activated, this purchase price is reduced with a write-down called depreciation in the profit-and-loss statement of the accounting. The Act on the Taxation of Business Income (EVL) stipulates the maximal depreciation values for each asset item. Purchases of machinery and equipment can be written down during their period of utilization as expenditure with the procedure of declining-balance depreciation, which means that in the end of each year, 25 % of the book value existing at the end of previous year is carried as costs in the accounting. Small purchases of machinery and equipment (less than €850 or used less than 3 years) can be recorded as costs directly during the current year.

Other operating costs are other staff costs (like occupational health services), rents, telecommunication costs, travel costs, marketing and PR costs, plus administrative costs.


The balance sheets indicates where the assets of the cooperative come from and where they are committed on a certain date.

Non-current assetsCapital and reserves
– Intangible assets– Cooperative share capital
– Tangible assets– Other reserves (e.g. legal reserve)
– InvestmentsRetained earnings/loss
Profit (loss) for the financial year
Operating capitalCreditors
– Stocks– Non-current liabilities
– Debtors / short and long-term assets– Current liabilities
Financial securities
Cash at bank and in hand

The non-current assets show how much money is committed in tangible (e.g. machinery) and intangible (e.g. IT licenses) goods. The cooperative can also have investments, e.g. ownerships of other cooperatives or businesses.

The operating capital groups the value of the stocks, i.e. value of the inventory, and receivables and long-term assets. Additionally, it shows the value of financial securities and the balance of the bank account and the money in cash.

The capital, reserves and liabilities side of the balance sheet is composted of capital and reserves and creditors. Capital and reserves covers the contributions (share capital) and profit from the current and previous financial years. Creditors mean the debt of the cooperative liable to other parties. Long-term debts are the ones that mature in more than one year, short-term debts cover trade creditors, tax in default and holiday pay debt.

7. Electronic financial management

There are numerous software in the market for financial management. Some of them are sold only to accounting firms, other are sold directly to end users. More and more cooperatives rely totally or partly on electronic financial management.

The Act on online invoices entered into force in the beginning of April 2020; according to its provisions, business entities can refuse to receive invoices on paper. In this case the invoicing entity must send their client an online invoice. Most financial software include the invoicing functionality. Online invoices are also easy to send through different web services available.

Modern financial software is based on the supposition that a cooperative only accepts online invoices, which are integrated automatically into the system. Invoices on paper and sent via e-mail are to be scanned into the software. After this stage, most software have the possibility to send all invoices automatically to the bank for payment, so there is no need to pay them separately on your online bank. The account statements are also directly fetched from your bank by such electronic financial software.

Cooperatives can have debit or credit cards. All software provides different ways to accept receipts. They are either photographed or scanned and then stored into various applications, from which they are extracted to be attached to different accounting events and are saved in electronic archives in the software.

The treasurer of the cooperative has traditionally taken care of the payment of invoices and salaries. Today, as software robots do this automatically, it is essential to verify that every invoice has an inspector and an authorizer. This is how the cooperative avoids the emergence of “delicate tasks” which increase the likelihood of irregularities.

What are the duties left for the accountant? Firstly, he or she ensures that all purchase invoices and receipts entered into the software are according to the Accounting Act and are related to professional activities, in order to be deductible in taxation. The accountant verifies sales invoices, value added tax and movement to accounts. Every month, the accountant registers the wages and salaries and non-wage labor costs and sees that the reports to the Incomes Register are correct; verifies the accuracy of individual cost pool and project reporting, sends the periodical financial documents to the contact person in the cooperative (profit and loss account, balance, general ledger, cost pool report). The accountant submits the VAT declaration to the tax authorities.

8. Financial statements and tax declaration

At the end of the financial year, the accountant draws up the financial statements which have to fairly present the cooperative’s financial position and the results of its operations for the year ended. The financial statements have to attribute the revenues and expenditures of the financial year, which means that the bookkeeping is changed to an accrual-based accounting. Besides the profit-and-loss account and the balance sheet, notes to the financial statements are drawn. Micro and small companies have some facilitations concerning the representation of the notes. (Cf. PMA)

The Financial Statements have to be finalized before the date mentioned in the cooperative’s rules. The board of directors in power will sign the Financial statements and will suggest a proposition for the general meeting to decide on the production of the profit/surplus. Then follows the financial or performance auditing stipulated by the rules. The audited accounts are then presented to the general meeting of the cooperative, which will consolidate the final accounts and decide what to do with the result.

The tax declaration of the cooperative must be submitted at the latest 4 months after the end of the financial year. As annexes to the declaration, the profit and loss account, the balance sheet and the notes are sent, and the tax authority will convey them to the Patent and Registration Office. The financial statements will have to be registered at the latest six months after drawing up.

9. Budget

Budgets will permit the evaluation of different business plans as to their realism, during incorporation and at early stages.

The budget is also the most relevant tool for the board of directors when following the finances of the cooperative during the financial year. It is advisable to build the cooperative budget in accordance with the chart of accounts (profit and loss statement) used in accounting.

The annual budget is a calculation structured in the same way as the profit and loss statement and permitting the anticipation of the yearly revenue (= net sales or turnover) and the business expenditures. A budget is always an estimation based on certain hypotheses. If the default values change during the year, the annual budget must be rectified, leading to a new, adjusted budget.

An annual budget can be calculated in the following way: First you calculate the structural costs per year (salaries with non-wage labor costs, rent, communication, marketing, financial management, other operating costs etc.). Then you estimate the turnover and the variable costs due to sales (salaries with side expenditure, purchases etc.).

Different calculations are also necessary when bidding. For pricing purposes, you will have to calculate the actual price of certain services or goods are, plus the other expenses related to this product. After deducting the expenses, the sales price must generate a margin for the cooperative permitting it to pay general costs, like rents, marketing costs, financial services and communication costs. It is advisable to generate a surplus, which strengthens the capital of the cooperative and permits the preparation of the unexpected situations and expenses. Many cooperatives have decided that their invoicing must generate a margin of 5 to 15 % to cover the general costs. The actual percentage depends on the line of business and cost structure and the targeted surplus. And of course, the prices must be competitive compared to other actors in the same sector.

Annex: Cooperative budget example (.xlsx)

10. Cost center calculations

In cooperatives operating in various sectors and with lots of staff, it is advisable to organize the accounting according to cost centers and/or projects. Every sales and purchase invoice, as well as salaries and other expenditures, are recorded not only on different accounts for the bookkeeping but also on definite cost centers, which can be separate for each employee, team or sector.

Thanks to cost centers, the cooperative can create easily reports in accordance with the loss-and-profit account showing the revenue and the expenses of each cost center and the amount of margin generated for the cooperative. Different cost centers can have different target margin percentages. If an employee works more for the cooperative than some others, the margin of his or her invoicing can be smaller than for others. The board of directors will decide on such percentages when budgeting. We advise to present them tot he general meeting, although acceptance of the budget is not part of its legal duties.

More often than not, financers demand reports per cost centers in order to verify that the subsidies have been used for the purpose they were granted for.

11. Cash flow statement

A cash flow statement ensures that the cooperative’s moneys are sufficient to the foreseeable payments: purchase invoices, corporate tax, value added tax, retention ja social security contributions, contributions to the pension scheme, and other operating costs.

The cash flow statement is done in Excel, entering the amounts received on bank account or in cash (sales invoices) and the memorandums of costs, taxes and other payments to be made. The statement can be calculated daily, weekly or monthly.

12. Tax Matters in the Cooperative

Every cooperative pays the same percentage of tax of their economic outcome i.e. surplus as limited companies: 20 %. The Tax Administration will define tax prepayments for the cooperative on the basis of the taxes accrued during previous taxation years, but especially in the start-up period, if the cooperative does not intend to make surplus, it is recommended to apply for a modification of prepayments. See Income Tax Act

As an entity practicing professional activities, the cooperative is submitted to Value Added Tax Act. Finland applies four different VAT rates: 24%, 14%, 10 % and 0%. Additionally, certain products and services are fully exempted from VAT. The general rate is 24%, generally used for all services and sales of goods. The law stipulates lower rates for certain products; for instance food is taxed 14% and taxi fees, 10%. We recommend strongly that you study before incorporation a cooperative the rates it should use when selling different products. See Law on value added tax

13. Division of duties with an accounting firm

It pays to take some time for the choice of an accounting firm. Different firms have various specializations, most of them specialize in certain legal forms. 

It is recommendable to assess how much financial knowledge the board of directors and the treasurer of the cooperative have, and which tasks should be outsourced to professionals.

Please find attached a list to discuss with a firm of accountant concerning different tasks and duties.

Appendix: Division of duties with a firm of accountants (.xlsx)

Text by Merja Hiltunen, Idekoop Osuuskunta