When the bank balance, the e-invoices on rs.ge and the records in your accounting software tell three different stories, the problem is bigger than a few late entries. It means the company no longer has a reliable answer to basic questions: how much cash it holds, who owes what to whom, and how much tax is actually due. This is where accounting recovery services come in - a structured process that restores the accuracy of the financial picture, assesses tax exposure and gives management information it can act on.

In Georgia, accounting gaps usually build up gradually. It may start with a few unclosed months or an incomplete document archive. Over time, the problem spreads to the income statement, inventory, payroll liabilities, balances with counterparties, monthly tax returns and the annual financial statements filed with SARAS. The goal of recovery is not just to "close" past periods - it is to produce data that is transparent, supported and verifiable.

Why accounting recovery matters especially in Georgia

Every Georgian company carries two separate reporting obligations, and both depend on the quality of its books:

■     Financial reporting to SARAS. Under the Law of Georgia on Accounting, Reporting and Auditing, entities file annual financial statements with the Service for Accounting, Reporting and Auditing Supervision (SARAS) via reportal.ge, no later than 1 October of the year following the reporting period. The applicable framework depends on the entity's size category: public interest entities and Category I use full IFRS, Categories II and III use IFRS for SMEs, and Category IV uses the simplified standard issued by SARAS.

■     Tax reporting to the Revenue Service. Monthly returns (VAT, personal income tax withheld, profit tax under the Estonian model and others), together with electronic tax invoices and waybills on rs.ge.

The two streams have to agree. If revenue reported to SARAS does not match declared turnover, or balance sheet figures contradict tax data, that can trigger questions from the tax authority and the regulator alike. Late financial reporting can lead to a warning and/or a fine - for example GEL 1,000 for a Category III entity and GEL 500 for Category IV - and the fine doubles if the statements are still not filed within the additional period granted.

Foreign-owned companies are not exempt, and a company with little or no activity still has to file.

When does a business need accounting recovery?

The need most often arises when something changes in the finance function: an accountant leaves without a proper handover, the books migrate to a new system (for example from Excel to ORIS, FINA, 1C or Odoo), or the business has simply outgrown its processes. A very common Georgian scenario: operations run normally and tax returns go out on time, but the accounting software is updated late, partially or inconsistently.

Warning signs:

■     Bank balances do not match statements - especially foreign-currency accounts where FX differences have not been revalued at the National Bank of Georgia official rate;

■     Input VAT claimed does not match invoices confirmed on rs.ge, or some invoices remain unconfirmed;

■     Inventory balances do not reflect reality - waybills, warehouse records and physical counts contradict each other;

■     Balances with the founder or director are unclear - personal and company spending are mixed, or loans exist without proper documentation;

■     Receivables are "stuck" - amounts due from customers have sat on the balance sheet for a long time, and nobody knows whether they are collectible.

Recovery is particularly advisable before a tax audit, a statutory or voluntary financial audit, a bank loan or investor due diligence, a business sale, or participation in state co-financing programmes (such as "Produce in Georgia" or Rural Development Agency projects), where the accuracy of financial data and the use of funds are checked directly.

What accounting recovery services include

Recovery does not start with mechanically keying in entries. It starts with a diagnostic of where things stand: which periods are affected, what documents exist, and what information is available in banking systems, the company's rs.ge account, contracts, payroll records and returns already filed.

1. Initial diagnostic and work plan

Specialists review the chart of accounts, prior-period turnover, balances and supporting documents, and compare the accounting data with amounts declared on rs.ge and statements previously filed with SARAS. This shows how deep the intervention needs to be: some companies need a few months reconciled, others need several years of transactions reclassified.

The result is a work plan covering priority periods, responsible people, required documents, checkpoints and expected outputs. When setting priorities, the tax statute of limitations matters: in Georgia it is generally three years, counted from the end of the relevant calendar year (and longer where a taxpayer has opted for an extended loss carry-forward). Older periods still cannot be ignored, though - their closing balances are the opening balances of today's financial statements.

2. Gathering source documents and classifying transactions

The quality of recovery depends directly on the quality of source documents. In Georgian practice, these include:

■     contracts and acceptance acts (delivery and acceptance certificates);

■     electronic tax invoices and waybills recorded on rs.ge;

■     bank statements for every account and currency;

■     cash documents and cash register Z-reports;

■     customs declarations for imports and exports;

■     employment contracts, payroll sheets and pension contribution data.

If documentation is incomplete, recovery is still possible, but the approach becomes more cautious: cross-checking sources, obtaining reconciliation statements from counterparties, written explanations from management and support for every conclusion. A missing document should never be replaced by an unsupported assumption - in a tax audit, an undocumented expense may be treated as unrelated to economic activity, which under the Estonian model is itself a taxable profit distribution.

3. Reconciliation, adjustments and financial statements

Next comes reconciliation of key balances:

■     Bank accounts - against statements, with correct FX revaluation;

■     Receivables and payables - against counterparty data and reconciliation statements;

■     VAT - input VAT, VAT payable and the balance on the company's rs.ge tax account card;

■     Inventory and fixed assets - against registers and stock-count results;

■     Loans, interest, prepayments, accruals and equity movements - as needed.

Reconciliation is followed by supported adjustments. The aim is to reflect the real economic position, not simply to make technical differences disappear. A well-executed recovery leaves a clear audit trail: what changed, why, which document or calculation supports the change, and how it affected the financial statements. The final output is a set of financial statements prepared under the framework required for the entity's category, ready for SARAS, a bank, an investor or an auditor.

Tax issues in the recovery process

Financial and tax accounting are closely linked, but their rules are not always identical. Recovery must assess whether taxes charged reflect actual transactions and the requirements of the Tax Code of Georgia. Areas that deserve particular attention:

■     Profit tax under the Estonian model - not only dividends are taxed, but also expenses unrelated to economic activity, free-of-charge supplies and representation expenses above the limit. Recovery often uncovers exactly these "hidden" taxable items;

■     VAT - the timing of the registration obligation, support for input VAT and completeness of tax invoices;

■     Payroll - personal income tax withheld at source and funded pension contributions;

■     Payments to non-residents - withholding tax and the basis for applying double tax treaties;

■     Related-party transactions - transfer pricing rules and documentation of loans and balances with founders.

If errors are found in returns already filed, the right course depends on the nature of the error, the period, materiality and the statute of limitations. Sometimes an amended return on rs.ge is required; sometimes it is enough to record the difference properly in the current period. The decision should weigh not only the additional tax, but also late-payment interest (0.05% per day), possible penalties, audit risk and reputational consequences. As a rule, an error corrected voluntarily and promptly costs far less than one discovered during an audit.

Recovery is not only about fixing the past

If the books are restored but the root cause is left in place, the problem will return within months. That is why the final phase of any recovery project should strengthen processes:

■     rules for receiving and approving documents (including timely confirmation of invoices on rs.ge);

■     a clear allocation of responsibilities;

■     a month-end close calendar aligned with tax filing deadlines;

■     monthly bank and VAT reconciliations;

■     a regular reporting pack for management.

Financial control does not have to mean bureaucracy. For a small owner-managed company, simple procedures and month-end discipline may be enough. A growing business or a group of several entities may need an authority matrix, automated workflows and consolidation rules.

What management should get at the end

On completion, management should have:

■     reconciled and confirmed balances;

■     adjustments backed by documents;

■     an assessment of the tax position and, where needed, amended returns;

■     financial statements under the correct framework, ready to file with SARAS;

■     working papers and explanations for every restored period.

This material makes audits easier, speeds up responses to the Revenue Service, helps onboard a new accountant and supports comparative analysis. A well-organised archive reduces dependence on individual employees and preserves the company's institutional knowledge.

Frequently asked questions

How long does accounting recovery take?

It depends on the number of periods, transaction volume and the availability of documents. Reconciling a few months can take a few weeks; a multi-year recovery can take several months. A realistic timeline is set after the diagnostic.

Can the books be restored if some documents are lost?

Yes. Information can be rebuilt from bank statements, rs.ge data, counterparty reconciliation statements and other sources. Whatever cannot be supported is recorded separately and its tax risk assessed.

Do past tax returns always need to be amended?

Not always. The decision depends on materiality, the period and the statute of limitations, based on an assessment of expected sanctions and risk.

Does a small (Category IV) company have to file financial statements?

Yes. Category IV entities also file annual financial statements on reportal.ge, using the simplified standard. Tax returns do not replace this obligation.

How to choose a professional partner

Accounting recovery takes more than data entry. The provider should be able to assess financial reporting standards, Georgian tax legislation, documentary evidence and internal controls as one picture. Confidentiality, a clearly phased work plan and regular communication with management matter just as much.

AGIC has served Georgian and international companies since 2007 across audit, accounting, tax and advisory. The advantage of a multidisciplinary team is that accounting issues can be reviewed from audit, tax and advisory perspectives when needed - particularly valuable for companies that want not only to tidy up historical records, but also to raise the quality of their reporting and financial management.

Conclusion

Recovery projects often start when the problem is already visible - a tax audit notice has arrived, the bank has asked for financial statements, or the SARAS deadline is approaching. A timely independent assessment lets a company fix errors while they are still manageable and turn its financial information back into a management tool.

Bank balances don't reconcile, tax returns show discrepancies, or SARAS statements are due? Contact us for an initial assessment - agic.ge

This article is for general information only and does not constitute specific tax or legal advice. Information is current as of November 2026.