A Lack of Documentation can Cost You!

A Lack of Documentation can Cost You!

I met with a number of clients in the last couple of months who are very tech savvy and utilize a lot of the current technology available in running their businesses. Some deposit their customer checks by taking pictures of them with their phones. Others track their auto mileage by using the GPS app on the phones. Almost all pay their bills via online banking or with a debit card.

While this may seem cutting edge cool and very convenient, it could come back to haunt you later if you don’t fortify your business recordkeeping by performing a few additional procedures. Mileage logs should be downloaded and stored in a digital format on a local computer no less frequently than once a month. You need to document the business purpose of every single debit card transaction by making notes on a copy of your printed or online bank statement. You may have to prove to the tax authorities later the business purpose of those expenditures.

I have spoken with Accountants who have terminated their cloud software subscriptions and were unable to access vital records that were stored in their cloud application’s files. I have also spoken to business owners whose phones were lost or damaged and rendered unusable. All the information stored on their phones was no longer accessible. When you utilize your devices to run your business, you still need to assure that all business transactions are supported by some form of documentation and, if your device is lost or damaged, you can still access the information.

When a business owner comes into my office to have their income taxes prepared, I want to see reports, spreadsheets and summaries. For many types of transactions, such as the purchase of large depreciable items, I also want to see the receipts. I need to scan them into my digital file cabinet as support for how I prepare their income tax returns. If the majority of your business records reside in the cloud or on your telephone, I will recommend you print them out or e-mail them to me. This will help minimize the cost of my services to you. The more time a Tax Preparer spends accumulating your support documentation, the higher your fee will be.

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