Canadian companies need to prepare for audits
October 10, 2012
Most small business owners go about their days trying to keep order in the office and turn a profit. They often verify that various figures are correct in the log books, like expenses and revenues, then move on to the next transaction. Sometimes mistakes are made - numbers are transposed or a decimal point is off. But even if everything is right, a company may be audited from time to time.
Unless a business has adequately prepared for this possibility, the results can be damaging. Not only could the firm be found to be noncompliant with tax regulations or other laws, but operations could be suspended until the situation is resolved. The company could be closed permanently or otherwise restricted in a serious case.
As such, leaders need to take preemptive steps to ensure their enterprise is doing everything by the books and recording figures correctly.
Canadian tax audits can hurt businesses
According to the Financial Post, because of the country's current economic situation, Canadian business leaders that face an audit are often strained financially because of rising legal costs. Though the source explained those disputing tax charges under $25,000 can go an informal route in a small claims court, they often represent themselves rather than hiring an attorney, which can prove tough.
Owners are encouraged to communicate with their auditor to find out exactly what years they're looking for information from, and what sort of data they are trying to uncover, Financial Post reported. Experts suggest speaking with a tax lawyer or accountant to get to the heart of the matter.
To avoid such audits, Canadian enterprise owners need to make sure they're following best practices at all times to avoid a review being necessary in the first place.
Software can be of help
While some steps like making sure to hire honest employees, educating workers about the financial processes necessary to run a company, and investing in the latest technology can certainly help prepare a business for an audit or preemptively avoid one, there is often a favored route. Many leaders find that if they simply use accounting software, many of their troubles are solved.
Not only do these programs ensure every necessary piece of information is being recorded and present administrators with real time results, but they provide a running history of the company's finances over the business' life cycle. This can be particularly pertinent when an audit occurs - owners don't have to spend time and money having someone go through unorganized files for the information they need.