What to keep–the supporting documents behind the receipts.

Sailing Crop

 

Say what?Sad smile  Layers of paper to prove your existence to the governments.  And now even more!  More paper to prove the you needed the additional training, supplies etc. But what do they consist of?

When I was on the board of directors for a local non profit I came to the realization that “ data = funding “.  The more data that you have the more likely you are to receive or keep funds attached to the data.  This concept is not limited to NPO’s.  It works for any business, organization or even government.  And most certainly for the auditors when they come to overview your books, business and other write-offs.

For the number savvy it is easy, a computer program of accounting is a good place to start.  It will track your invoices and expenses. However, it dose not track the why of some of the more ethereal expense like travel – why did you need to go? To you when it is happening, it is an easy to validate.  Two years on however, some of the data can be misplaced.  The receipts can be small or large yet when you really need them, they have vanished!  Auditors find that if you can not validate an expense, then you really did not need it for business.  They only look at the presented data and they can only look at though their own meager experience.  The only way an auditor can look at the data with your eyes is to include a detailed account of the data.  It can put it into context better then begging.

If you consider your business like a ship, then you would be close to what is required to keep.  A log!  For some, the log is the same as the appointment book or desktop calendar.  it is a running detailed account of what you did to earn your money.  This log needs to included who you had lunch with and what you discussed – this is so you can write off your business meal.  The last bit of detail for this log is the place, time and amount spent.  This may be your proof along with the original receipt that it was a valid business expenses . My current experience with our government and it’s auditors  is  that we should not be spending money to make money in any fashion that we can not prove in three different formats.

  • The first is the original receipt.  To this receipt add additional detail like the product or person involved.    Some retailers only give a code for the product and if this is the case, write in what it was – a pen, paper, shelf etc..  For a meal include the initials of the client or contractor involved – don’t forget to include the tip.  For travel, ensure that the start and end destinations are clear along with additional charges like airport fees and taxes. 
  • The second is the additional information required to prove that you needed the cost of the expense for business.  This can included conference material as your reason for travel – print it and keep a copy of it with your travel expenses.  The same goes for professional development – keep a detailed account of the course including materials required.  If not, the auditor will assume it is a personal expense. Do like wise for all expenditures that are outside of the normal pens and pencils of business.
  • The Third is the log.  Keep a detailed account of where you where, how you got there, how many miles or KM you drove, what you did there, who you saw including what you discussed in point form and their phone number.  The more data the better you will fare in an audit.

Good luck in your business is usually made by long hours and detail in the small things. Keep up the good work.

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7 thoughts on “What to keep–the supporting documents behind the receipts.

    • Your welcome. I have been doing this for 25 years and the bar keeps going up on what is needed to prove our innocence with our governments. Taxation is the only venue in which you are guilty until you can prove otherwise.

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