You have set up a backup system to your computer and trust that it works to keep you protected from losing any of your bookkeeping data. Doesn’t it feel great to have that in place?
So what about the other backup?
When I talk to clients about backing up their data this is where their mind goes right away. I’m very pleased when they tell me that their computer backups are in place (when they are). But the backup I find myself talking about these days is “proof in numbers”.
Entrepreneurs worry about filing their personal, corporate and sales taxes on time so C.R.A. (Canada Revenue Agency) won’t come knocking on their door. Filing on time will certainly help reduce the chance of that wolf coming to your door (the C.R.A. Auditor), but it’s not necessarily what will let you sleep well at night.
What will keep you awake at night, or at least it should, is the lack of documentation and proof behind the numbers.
I’m talking about receipts for purchases, invoices for sales and documents for deposits that don’t relate to your sales. Working from bank statements and credit card statements are NOT your proof in the pudding. Sure it shows you purchased items and deposited money. But the lack of details is the problem. According to C.R.A you are responsible for accounting and financial documents include the documents to support these transactions.
Notice it states “documents to support these transactions”. This means receipts, invoices, etc. documentation that shows the details of the transactions etc.
I have been through a few audits with a couple clients and we always sailed through them easily, because I ALWAYS backup the transactions with receipts or documentation that provides details for the transactions.
Backup, backup, backup. This is more than just a digital backup of your accounting data.
How do you protect yourself?
- Ensure you have receipts with details – where details are lacking, make notes on the back of the receipt.
- Ask restaurants for the receipts that show the taxes (quite often you only get the POS receipts).
- Create a simple filing system to store your receipts until you have recorded them in your bookkeeping program. (Sign up for my Let’s Get Organized Together workshop)
- Have steps in place that ensure documents are acquired for each transaction – make sure your employees know what is necessary.
- Scan a copy of the receipts (with the details) and attach it to the transactions in Quickbooks Online.
Stay up to date with Canada Revenue Agency guidelines by joining my Facebook Bookkeeping Accountability Group