In its simplest form, a business audit in Canada is defined as a systematic assessment of a company’s financial resources - these include the thorough examination of various financial statements, purchase transaction records and inventory. The Canadian Revenue Agency (CRA) conducts such audits on a random basis. So for business owners like you, the best way to keep out of trouble is to be prepared. Here are some small business accounting tips to help you stay on top of an unexpected business audit:
Prepare Your Records
Rebuild your records by making sure that everything is in place. If there are missing receipts, generate new ones. A seamless financial record will keep the CRA from asking too many questions which may caught you off guard. Moving your business finances to the cloud can create a huge impact on your record-keeping initiatives. Choose the best software for your SME to keep everything in order.
Manage Your Expectations
Do not expect a tax audit to go as smoothly as you want it to be. Most likely, there will be several bumps in the road. But as long as you can manage your expectations, you’ll be fine. At this point, managing your expectations means negotiating tax issues with the auditor instead of trying to deny that the discrepancy indeed exists.
Do Your Research
Business owners in their startup phase may still be too new in the industry to have a tight grasp of business audits. If your business is at this phase, the ideal approach is to learn as much as you can about business audits. This will help you know what to expect and how to keep your financial records at par with the standards of the tax office.
Know The Standards
What are the current standards set by the tax office? How far are you from complying with these standards? A vague familiarity with these things will be vital to surviving a business audit. More specifically, you should have a clear idea of the new rules and standards applied to your business, just so you can keep your enterprise away from trouble.
File An Appeal, If Necessary
Check the auditor’s report. If you agree with the final assessment, then that’s it. If you don’t, you can call up the auditor to discuss the results. You can take this further if you want to by filing an appeal with the CRA.
The rule of thumb in surviving a business audit is to convince the auditor that you have reported all of your records and that you were entitled to all the deductions and exemptions that your business availed. To that end, the key to a successful business audit is to keep your books organized and all your pertinent financial documents accurate.