DO I NEED TO KEEP EVERY RECEIPT FOR MY BOOKKEEPER?
You might not know this, but receipt keeping isn’t for your bookkeeper. It’s for you, and for the CRA. Receipts help you to manage your business and its progress. Records will help you to understand how your business is running, and what changes you need to make to ensure efficiency and maximize your profitability. Receipt and record keeping can teach you the strengths and weaknesses, and ultimately be the breakthrough you need to achieve your business goals. Understanding the ins and outs of your business and being able to pinpoint its strengths and weaknesses will give you the confidence to succeed and do more for your business than you ever could have imagined. PROOF OF PURCHASE & PROOF OF PAYMENT You might think that your credit card and bank statements are sufficient for your records, but unfortunately they’re not. Simply having an expense from a gas station doesn’t necessarily mean that you purchased fuel for your vehicle for your business trip. The CRA needs to see that this purchase was a business expense, and not you purchasing a snack or lottery tickets. During an audit, the CRA will request to see two things; First is your proof of purchase, these are your receipts. These include the details of the transaction, the amount, quantity or the value of any money or goods exchanged, the date of the transaction, and a signature of authorization. This helps the CRA to verify that these individual receipts are tied to valid business expenses. Second is your proof of payment, these are your credit card or bank statements. These show things like your name or your company’s name, and corresponding account numbers. These are third party source documents, and they provide the auditor with verification of the transaction from an outside third party, which helps to curate an excellent audit trail. In Canada and the United States, neither are considered legitimate business receipts individually, for the purpose of tax deduction. It’s necessary for the auditor to verify your individual receipts with the transactions of your statements, and verify that that the expenses on your statements were for the business by matching with a corresponding itemized receipt. SUBMITTING RECEIPTS TO YOUR BOOKKEEPER Dropping off the last 6 months worth of receipts to your bookkeeper in a plastic shopping bag is a sure fire catalyst for your bookkeeper’s next mental breakdown. We understand that receipt and record keeping can seem tedious and unnecessary, even on the best of days, but we’re here to help your business succeed. Help us, help you. So let’s go over the many different ways to store and organize your receipts and statements, to help you succeed in your record keeping in a way that works seamlessly in your day to day.
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Michelle GibsonAfter over 30 years in business management roles, I want to help other businesses grow and succeed. If I can keep one small business from making common mistakes, I will have helped them immensely! Archives
October 2021
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