I've kept all my bank, and credit card statements for my small business. Why is my bookkeeper saying that isn't enough? It shows all the transactions. I don't even deal with cash.
When it comes to claiming expenses and deductions on your tax return, you MUST have proof. In the case of an audit, you will need to provide receipts to back up your claims. No receipt = no deduction. So why isn't a bank statement enough?
Bank and credit cards statements are merely summaries of money, in and out. The statements do not show what was purchased, or provide enough detail for an auditor to make a final ruling. Ultimately, any expense without a receipt will be disregarded by the auditor.
PROADVISOR TIP: Be sure to get the maximum tax credits due by staying organized and keeping the right documents in order!
The best way to keep source documents organized:
Keep a small receipt holder in your car: Keep this for loose receipts/invoices when your out and about. Remove the accumulated receipts/invoices each week or month and file them in your main filing system.
Keep a banker box or accordion style folder: Label a section for each month and file receipts/invoices by date. It is a good idea to have a section for each of the following as well:
- Bank statements - Separated by account
- Credit card statements - Separated by account
- Payroll - Separated by Employee
- Tax - Payroll, Sales, and Income Tax
Keep Loan documents, and Asset purchase receipts, as well as supporting correspondence (such as emails) in an easily accessible file.
Create an email address or folder for emailed receipts: A dedicated email address for receipts is a good idea if purchases are made by multiple parties.
Good Reasons to Stay Organized for 2020:
- Possible lost deductions: It is likely important receipts will go missing or get destroyed if not filed promptly.
- Reduce the cost of organizing a year of documents: When you hand a bookkeeper a box of receipts, consider the additional cost of getting organized last minute. Is it worth the hourly rate for someone else to do it?
- Eliminate last-minute panic: Filing late, means paying more than you need to in penalties, and a rushed job, no matter how carefully done is more likely to incur errors.
- Stay on top of your finances: Up-to-date and organized books are the key to making solid business decisions.
ProStrata-G Certified Quickbooks ProAdvisors can help you get started or get caught up on your bookkeeping. Call today to book an appointment. Don't forget! We come to you! www.prostratag.ca or 204-505-1344.
