Records and business
Accurate records of expenses are vital for business and without them, your accounting will never make sense. Nothing will be accurate. This will only lead to problems and much frustration down the road. Consider the following scenario:
At the till or restaurant, you make a note of keeping the slip for your accountant to put into the books. Days go by and your wallet gets more and more full of these seemingly useless pieces of paper. Having had enough of lugging 1423 slips in your wallet, you do one of 2 things.
- You dump them all on your accountant’s desk and tell them to sort it out. You tell them that they are legitimate business expenses for entertaining business associates and clients. This, unfortunately, is almost always impossible as they are mainly personal expenses in that pile and because of the paper and the printing of them, they fade quickly.
- You turn your wallet upside down into file 13 (the bin).
Either way, the result is the same. Come to the end of the month, quarter or year, you will have an inflated profit due to the lack of expenses being recorded throughout the period. You naturally will ask the accountant why they have not put in the expenses, to which they will say that they recovered what they can and the rest was personal. This is never believed, of course.
The inflated profit might be one problem but there may be a more pressing issue on the horizon. SARS may want to verify some data that was submitted by your company. This is routine and harmless IF you have the supporting documents! When you don’t have those documents, there is going to be a more pressing issue, this may include a friendly visit from some SARS employees. NOT NICE!
It is only a little bit of discipline from you to make sure that you do not experience these issues. If you spend money, keep the slip or take a photo of the slip to make records of your expenses and send it to your accountant so they can record it and keep them safe.
This is a common mistake made by businesses but can be overcome easily. Read more about accounting mistakes made by businesses here.