Why You Should Avoid the Digital Trap When It Comes to Bookkeeping
Posted on: 3 December 2019
More transactions than ever are taking place in the digital realm these days. In fact, many traders try to do away with paper transactions altogether and simply send invoices, receipts, statements or notices online instead. If you're a small business owner, you may think that this is a great idea, as it will certainly help to cut down on that mountain of paperwork that sits in the corner each month. Yet as annoying as this paper may be, it may nevertheless be essential, and you may run into problems if you try and eliminate it altogether. Why is this and what should you do instead?
Keeping the Proof
Essentially, this all comes down to proper record-keeping, especially with regard to the ATO. After all, this organisation may often require proof if you try and put forward a deduction that may significantly affect your tax return.
Statements Are Insufficient
For example, if you buy a significant asset for your company and feel that you need this particular product in order to operate and grow, then you may pay for it via credit card or some other digital means. You may see this transaction on your statement and may enter that statement into your accounting records, but this by itself will simply not be enough.
Instead, you should keep all of the records that you received from the vendor, even if they came in the form of a digital PDF. In an ideal world, you should print the PDF off and keep it with your paper accounts so that they can be referred to as and when needed for evidence.
Saving Those Records
Still, while this type of transaction may be relatively rare, you should also take steps to ensure that you keep smaller records as well. You should be particularly careful, as many vendors like to send receipts in the form of a PDF, which will often come as an email attachment.
Electronic Stability
Because electronic systems are potentially unreliable, are you sure that those records will still be traceable a year or more from now, if you are required to present them as proof to the ATO? If not, you should save them to a specific folder with a clear reference to what they're about and keep that folder updated and in as good a shape as possible.
It can be easy to fall into the trap and take the easy route due to the proliferation of digital records. You may get away with this for months and even years at a time, but you may learn the hard way that digital is not always the way to go if you are the subject of a tax audit.
Rather than worry about all of this, why not outsource all your bookkeeping to a professional? They will make sure everything is taken care of properly.
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